MANAMA: Bahrain’s economic growth is seen accelerating to 3.5 per cent in 2022 boosted by the surge in energy prices, the World Bank said in a report.

Recovery of the kingdom’s non-oil economy is likely to continue thanks to the successful vaccination rollout and further relaxation of restrictions on movement, the international financial institution said in its Middle East and North Africa (Mena) region economic update.

Emerging from a pandemic-caused recession, Bahrain’s economy is gradually picking up as pandemic pressures fade, the non-oil economy recovers, and hydrocarbon production increases, it added.

The World Bank’s projection comes just days after the Finance and National Economy Ministry forecast real GDP growth of 4.1pc this year.

Titled “Reality Check: Forecasting Growth in the Middle East and North Africa in Times of Uncertainty”, the new report forecasts an uneven recovery as regional averages mask broad differences.

In GCC countries, buoyed by the increase in oil prices, GDP per capita is projected to grow by 4.5pc in 2022, but will not recover to pre-pandemic levels until 2023.

Citing official data which indicates that Bahrain’s GDP is estimated to have expanded by 2.6pc as of end-2021, after a nearly 5pc contraction in 2020, the World Bank said that the rebound was mainly underpinned by growth in non-hydrocarbons, aided by strong expansion in the transportation and communication sector – one of the hardest-hit by the pandemic – as well as increased agricultural and fishing activity.

However, the World Bank noted that over the medium-term, Bahrain’s non-oil economic activity will be dampened by fiscal consolidation.

The expansion of the Sitra oil refinery and development of the Khaleej Al Bahrain shale oil project will support the country’s growth outlook going forward, it added.

According to the World Bank, the kingdom’s fiscal deficit remains high as emergency crisis-spending persists but is expected to narrow gradually, even as it said the external balance will noticeably improve.

The debt to-GDP-ratio is expected to remain elevated during the forecast period to meet fiscal needs, it added.

Inflation is expected to increase to 2.5pc in 2022, fuelled by the doubling of VAT to 10pc and continued recovery in domestic demand.

The World Bank is expecting economies in the Mena region to grow by 5.2pc in 2022, the fastest rate since 2016, on the back of oil-price windfalls benefiting the region’s oil exporters.

But heightened uncertainty surrounds this forecast due to the war in Ukraine and ongoing threats from Covid-19 variants, it cautioned.

Tighter global monetary policy, the unpredictability of the course of the pandemic, ongoing supply chain disruptions and food price hikes too raise inflation risks for the entire region.

“The harsh reality is that no one is out of the woods yet. The threat of Covid-19 variants remains and the war in Ukraine has multiplied risks, particularly for the poor who bear the brunt of the increase in food and energy prices. A good dose of realism about the region’s growth prospects during these times of uncertainty is essential,” said World Bank vice-president for the Mena region Ferid Belhaj.

Copyright 2022 Al Hilal Publishing and Marketing Group Provided by SyndiGate Media Inc. (Syndigate.info).