Bahrain's non-oil economy grew by 4.7 percent in the first half of 2017, on top of a 4 percent increase recorded for the whole of last year, according to new figures produced by the country's Economic Development Board (EDB).

In a press release issued on Monday, the EDB said the increase in non-oil growth was "broad-based", but strong momentum was recorded in the hotels and restaurants, social and personal services and financial services sectors - all of which recorded year-on-year growth of over 7 percent.

Overall, real gross domestic product (GDP) growth figures for the kingdom increased to 3.4 percent during the six-month period, which was slightly ahead of the 3.2 percent achieved last year.

Bahrain EDB's chief economic advisor, Jarmo Kotilaine, was quoted as saying: “The fact that growth figures have once again surprised on the upsides attests to the exceptional strength of the countercyclical growth drivers in the Bahraini economy, notably the unprecedented project pipeline, led by major ventures such as the airport modernisation.

“However, growth is also increasingly benefiting from important structural reforms. During the first half of this year, initiatives such as pioneering crowdfunding regulations, a regulatory sandbox for fintech companies and a Cloud First policy (designed to help organisations take advantage of cloud technology), have dramatically improved Bahrain’s business environment."

He also highlighted a recent investment in the country by Amazon Web Services in September.

The airport expansion is one of a number of projects being carried out in Bahrain which has been supported by financial assistance from Gulf Cooperation Council member countries. About $10 billion in financial support was pledged to the country in the wake of the Arab Spring, and the country is seen as more vulnerable than other GCC states to lower oil revenues. According to an analysts' note produced by the National Bank of Kuwait on Monday, Bahrain has a breakeven oil price of $120 per barrel, and that despite some fiscal consolidation, its budget deficit is only likely to narrow slightly to 12 percent this year, from 13.5 percent last year.
 
Ratings agency Moody's downgraded Bahrain's long-term credit rating to B1 in July this year over concerns about the scale and the affordability of the kingdom's debt burden, according to Reuters.
 
A report produced earlier this month by BMI Research, a Fitch Group company, stated that, as of September this year, Bahrain's foreign reserves had fallen to as low as $3.4 billion, which is only enough to cover six months’ worth of imports.

The report said that Bahrain will need external assistance to avoid a fiscal crisis, but added that it expects "such assistance to be forthcoming" from Gulf allies, including Saudi Arabia, Kuwait and the United Arab Emirates.

It said that should assistance be provided, this would "continue to underpin investor confidence in Bahrain, helping it retain access to international debt markets".

Further reading:
Doubling down on debt SP forecasts, Gulf bonds growth
Bahrain bond yields edge up on report of aid request, no panic selling
Overview: Bahrain issues crowdfunding regulations
Bahrain welcomes first two entrants into regulatory sandbox
Region's largest FinTech hub set to open in Bahrain
 
© ZAWYA 2017