The per capita GDP of Bahrain grew by an estimated 11.3 per cent in 2006, according to HSBC, reaching US$19,680, compared to US$17,685 the previous year. In its recently published “Gulf Economic Forecast,” the bank also estimated that the country’s annual economic growth rate reached 6.8 per cent in 2006, and predicted that level of growth would be nearly maintained this year, dropping slightly to six per cent.
HSBC said that the country’s non-oil economy has generated significant momentum and will drive growth over the next two years. While annual growth will slow to an average of 5.5 per cent between 2007-2008, the pace of increase remains significant and deceleration does not represent a change in the country’s fundamentally positive direction.
Describing Bahrain as the “positive story of an economy showing strong, broad-based growth,” HSBC said the country’s macroeconomic balances were very healthy and would remain robust. In particular, the bank pointed to encouraging job creation statistics, with the overwhelming majority of demand coming from the private sector. Sounding a cautionary note, however, the bank noted that the majority of new private-sector jobs have continued to go to expatriates.
Against this backdrop of broad-based growth, the bank believes that inflationary pressure will remain slight, falling from an estimated 3.2 percent in 2006 to 2.4 per cent this year, further falling to two per cent in 2008.
Simon Williams, HSBC’s Middle East Economist, said: “While Bahrain’s rate of economic growth will slow slightly in the next two years, that is in line with the trend across the wider Gulf region.”
According to the bank, all the economies of the Gulf will continue to grow in 2007, though at a slower rate as oil prices fall from last year’s record high and OPEC mandated oil production cuts take effect. In its report, HSBC said that the region’s governments will slowly and steadily push forward the reform process in order to create jobs and wealth for their rapidly growing populations.
“The strictures of World Trade Organization membership and bilateral Free Trade Agreements and the increasing levels of competition within the GCC itself are driving reforms,” said Williams.
“2006 was exceptional,” continued Williams, “and it was the breakthrough year. Collectively, the GDP of the Gulf states doubled in the past four years, and 2006 marked the peak of this boom. While we still feel positive about the outlook for the GCC, the boom of the last four years is set to slow.”
He added: “On a weighted basis, we estimate that real growth for GCC will stand at over 5% in 2007 and 2008. These years will see consolidation of gains that have already been made. The short-term future will see the GCC solidify the progress that has been made towards building economies that remain largely energy-based, but which have become far more diverse. The region has built a platform for growth that will continue for the remainder of the decade.”
In a country-by-country analysis, the bank singles out Qatar as being the region’s star performer, with the UAE offering the most attractive balance for investors, while prospects for Saudi Arabia remain strong, despite its exposure to international oil price trends.
“The GCC is now a fully fledged, dynamic emerging market,” said Williams. According to the bank’s estimates, the GCC economy is now roughly twice the size of that of countries such as Turkey, Argentina, South Africa and Poland – countries that have long commanded the attention of global investors.