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Growing construction pipeline to bolster Bahrain's non-oil growth

Real-term expansion in Bahrain's construction sector has increased by more than 6%, which has fuelled forecasts of non-oil economic growth in the kingdom

Construction work like Bapco's modernisation drive has fulled talk of economic growth.
Construction work like Bapco's modernisation drive has fulled talk of economic growth.

A "rapid increase" in the number of construction projects tendered in 2018 will boost non-oil growth in Bahrain this year.

That is the opinion of the Bahrain Economic Development Board, which said a 6.7% expansion in the construction sector during the first three months of 2018 suggested non-oil economic growth could be on the cards.

Its Bahrain Economic Quarterly report said the accelerated pace of construction would underpin faster non-oil growth in Bahrain.

READ: Bahrain's Alba posts H1 profit hike of 46% despite global trade war

With a cumulative value of more than $5bn (BHD1.8bn), the pipeline of tendered projects in Bahrain will play a critical role in supporting non-oil growth in the kingdom.

Backed by the GCC Development Fund, Bahrain's pipeline of tendered construction work has increased significantly from the $4.2bn (BHD1.5bn) it had at the end of 2017. And chief economist at the Bahrain Economic Development Board, Dr Jarmo Kotilaine, said renewed building activity would have a positive knock-on effect for the economy.

"Renewed expansion in the construction sector and implementation of a large infrastructure project pipeline suggests growth is likely to accelerate over the course of the year, as a new phase of construction growth helps to support activity across the economy,” leading economist Kotilaine said.

The report noted that both public-private partnership (PPP) projects, as well as government-led works had built up a head of steam. Bahrain Petroleum Company's (BAPCO) modernisation project to increase oil refinery capacity at the Sitra complex from 267,000 to 360,000 barrels per day is the "largest investment in Bahrain’s history", the report said.

Work is also picking up to develop the Khaleej Al Bahrain Basin, located off the kingdom's west coast, which analysts have claimed could be the country's biggest oil discovery since the 1930s. Expect plenty of onshore and offshore construction work once this project kicks into gear.

The report notes that non-oil growth in Bahrain is set to increase by 4.3% in 2018. Construction, though, is not the only factor that has led to growth forecasts: the annual rate of bank loans in Bahrain increased by 2% in May 2017 to 11.2% in May 2018, with the majority of new loans heading to the private sector. Companies can also expect to benefit from a "favourable regional backdrop" with an improved oil price injecting "new liquidity" into the economy, according to the report.

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Construction Week - Issue 741
May 11, 2019