MANAMA: Bahrain’s non-oil growth is set to remain resilient this year and the next with GCC investments keeping infrastructure spending levels elevated, according to analysis by National Bank of Kuwait (NBK).
In its latest economic update on Bahrain, Kuwait’s largest commercial lender says this would help offset oil sector weakness and keep overall growth close to a reasonable three per cent.
Oil sector output is seen remaining flat this year given Bahrain’s participation in the Opec/non-Opec oil production cut deal, now extended to the end of 2018.
In 2019, oil activity is expected to pick up and grow by 1.4pc as the production deal unwinds and on the back of a new 350,000 bpd offshore oil pipeline connecting to Saudi Arabia, the report said.
The new pipeline is part of the country’s plans to expand refinery capacity.
The country is looking into expanding output from its domestic field by tapping into unconventional gas.
To expand its energy mix, the nation is building its first liquefied natural gas (LNG) terminal.
It is expected to be completed next year and will allow the import of up to 800 million cubic feet of gas per day for domestic use.
There is talk that Saudi Aramco could link up the terminal with other GCC countries.
If so, this would in effect turn Bahrain into a hub for LNG imports for the region.
Bahrain is also reportedly in talks with Kuwait’s PIC about setting up a petrochemicals plant, added the report jointly authored by NBK economist Dana Al Fakir and head of macroeconomic research Daniel Kaye.
Non-oil sector growth, meanwhile, is projected to hold between 3pc and 3.5pc in 2018 and 2019, mainly on the back of elevated levels of infrastructure spending.
Over the past few quarters infrastructure spending has been bolstered by the allocation of funds under the Gulf Development Programme.
Key areas of project activity include the aluminium sector, an airport expansion, social housing, utilities, roads, renewable energy and telecoms.
There are also plans for a second causeway linking Bahrain and Saudi Arabia, connecting Bahrain to the GCC rail network.
Non-oil growth has also been supported by healthier gains in the financial services sector, which averaged an impressive 6.4pc YoY over the first three quarters of 2017, much higher than the 3.6pc YoY average recorded during the same period in 2016.
Similar trends are being witnessed across most other non-oil sub-sectors, including the transportation and communications and social and personal services sectors, which were up an average 7.7pc and 11.6pc, respectively, during the same period.
The pace of employment growth has been strong helped by solid economic growth including a pickup in activity in the construction sector.
In the second quarter last year, employment grew by 7pc, up from 6.6pc in the previous quarter.