BizBahrain Magazine Sep-Oct 2019_compressed

Business Report | OBG
sewage project, announced in April
and May, followed by the inauguration
in mid-June of a 12-km, 220-KV power
line between the country’s northern
Seef District and Prince Salman City in
the north-west.
The line will help increase power
supply between key industrial and
residential areas, and forms part of a
broader $1.2bn power infrastructure
plan that foresees the construction of
15 220-KV substations and 48 66-KV
substations.
Projects central to long-term
economic plan
The launch and inauguration of
these projects aligns with government
efforts to place infrastructure
development at the centre of long-term
growth.
With the kingdom looking to
diversify its economy away from
hydrocarbons revenue as part of the
country’s development plan, Bahrain
Economic Vision 2030, new projects
are expected to provide significant
investment and employment
opportunities.
Bahrain has outlined a $32.5bn
infrastructure pipeline, which consists
of developments in transport, mixeduse
real estate, manufacturing, tourism
and health care.
Major projects include the $1.1bn
modernisation of Bahrain International
Airport and the construction of a
second causeway linking the country
to Saudi Arabia.
The pipeline will be financed by a
combination of $10bn in government
funding, $7.5bn in assistance from
regional partners Saudi Arabia, the
UAE and Kuwait through the Gulf
Development Fund, and $15bn from the
private sector.
In a positive sign for Bahrain and
its attractiveness as an investment
destination, foreign direct investment
increased by 6% last year to $1.5bn,
according to the UN’s “World
Investment Report 2019”, with the
largest slice of private investment
coming from Saudi Arabia, at $745m.
Meanwhile, the infrastructure
focus has translated into significant
growth in construction. According to
the Ministry of Finance and National
Economy, the sector, which makes up
7.3% of GDP, expanded by 5.6% last year.
This was far higher than the
broader non-oil sector’s 2.5% growth
and the 1.7% increase recorded by the
sector in 2017.
Growth prospects look strong amid
fiscal overhaul
The expansion of the construction
sector and plan to use infrastructure
development as a key driver of growth
has been underpinned by a positive
performance in the broader economy.
According to data published by
the Information and eGovernment
Authority, GDP expanded by 2.7% yearon-year
in the first quarter of 2019,
consisting of a 9.2% increase in the oil
sector and a 1.2% rise in non-oil GDP.
The figures, which are above last
year’s full-year growth rate of 1.8%,
are the first economic indicators to be
released since the kingdom approved
the details of its 2019 and 2020 budgets
in late February.
The fiscal overhaul includes a
series of spending cuts, revenueraising
measures, such as the
introduction of a 5% value-added tax on
January 1, and funding from regional
partners. It is designed to slash the
country’s deficit - calculated at 11.7% of
GDP last year - and return the budget to
surplus by 2022.
Despite the efforts to tighten public
spending, outlays for investment
projects were maintained over the twoyear
budgetary cycle at $1.8bn per year.
The approach appears to have been
received well internationally, with
ratings agency S&P Global predicting
average annual growth of 2.4% through
to 2022.
Oxford Business Group (OBG) is a global
publishing, research and consultancy
firm which publishes economic intelligence
on the markets of the Middle
East, Africa, Asia and Latin America. In
print and online, the critically acclaimed
economic and business reports have
become the leading source of business
intelligence on developing countries in
the regions they cover. OBG's monthly
economic updates provide up-to-date,
in-depth analysis on the issues that matter
for tens of thousands of subscribers
worldwide. OBG has been in Bahrain for
13 years and has recently published The
Report: Bahrain 2019.
For more information, visit www.oxfordbusinessgroup.com
or call us in Bahrain
at 1715 1582.
September-October 2019
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