Report: Bahrain’s GDP Set to Grow in 2022

Bahrain’s economy is forecast to see real GDP growth of 4.1% in 2022, says Emirates NBD, with the expected VAT increase also helping the country to fix its finances and increase non-oil revenues. In a new assessment, the Dubai government-owned bank notes that Bahrain’s economy grew 3.5% quarter-on-quarter (QoQ) and 5.7% year-on-year (YoY) in Q2-2021.
Quoting media reports, it says the kingdom’s oil sector contracted 2.4% YoY while the non-oil sectors grew 12.8% off the low Q2-2020 base, on the back of a recovery in the transport and hospitality sectors. For the full year of 2021, the bank has forecast GDP growth at 3.4% for Bahrain, following a contraction of 5.8% in 2020.

Currently being discussed between the government and parliament, the planned doubling of value added tax to 10%, is aimed at reducing Bahrain’s budget deficit and boosting state revenues, notes Emirates NBD, which is one of the largest banking groups in the Middle East in terms of assets. “As parliament works to approve the law, policymakers are looking at ways to protect people with low incomes should the change be made,” commented Emirates NBD head of macro strategy Shady Elborno.

Bahrain raised BD250m from VAT at 5% in 2019, but this declined to an estimated BD220m in 2020 due the pandemic. Emirates NBD has revised its 2022 budget deficit forecast for the kingdom down by 1.5pp to 4% of GDP on the assumption that parliament will approve the increase in the VAT rate. Bahrain’s Covid-19 dynamics continue to improve, with one measure ranking it as second globally for its coronavirus response and recovery in September, it notes.

In Nikkei’s Covid-19 Recovery Index, Bahrain scored 72%, only one point behind Malta, the top scorer, and ahead of the UAE (71%) and Saudi Arabia (70.5%). The index ranks 121 countries and regions based on infection management, vaccine rollouts and social mobility, with a higher ranking indicating faster recovery. Giving a further boost to the region’s economic prospects, Research and Markets is projecting a strong recovery for the GCC construction industry in 2021 and 2022, after a six-year slowdown triggered by the crash in oil prices in 2014 and deepened by the impact of Covid-19.

According to the publisher’s projects tracking database, about US$107 billion of planned construction and transport projects in the GCC are already at some stage of tendering. It is fair to assume that the majority of these will be awarded within the coming 18 months, notes the firm’s GCC Construction Outlook 2021 report. Boosted by government stimulus spending aimed at accelerating the post-Covid recovery, the region’s contractors, engineers and manufacturers can look to forward to a healthy increase in building and infrastructure projects in the coming two years.

And while the government support measures will boost construction activity in the coming year, the longer-term outlook is boosted by the region’s improving fiscal situation as oil prices recover and oil output caps are eased. With a US$1.9tn pipeline of future construction and transport infrastructure projects planned across the GCC, there is no shortage of potential project opportunities waiting to be unlocked, the report says.