Bahrain’s economy is expected to grow by 2.8 percent this year, thanks to growth in the oil sector and stability of the non-oil sector, a report by the National Bank of Kuwait (NBK) said on Tuesday.
“Growth is expected to slow to 2.8 percent y/y in 2014, as oil sector growth undergoes a major correction and non-oil sector growth remains relatively weak”, the NBK weekly report on Gulf Cooperation Council (GCC) economies said.
“Economic growth continued to climb in 2013, when a steep recovery in oil production offset the slowdown in non-oil sector growth. Overall real GDP rose by 5.3 percent y/y in 2013, its fastest pace in four years,” it added.
Consumer price inflation in Bahrain has been on a downward trend since the beginning of the year, amid a significant slowdown in both food and housing prices. As a result, headline inflation is expected to slow from an annual average of 3.2 percent in 2013 to 2.5 percent in 2014.
According to the report, the budget deficit almost doubled to USD 1.1 billion in 2013, to 3.3 percent of GDP, even as spending rose at its slowest rate since 2009. The deficit is expected to widen to around 5 percent over the next two years, as current expenditures continue to rise and softening oil prices drive revenues lower.
On bank credit, the NBK report said “it appears to have bottomed out and has been gradually recovering since the end of last year”.
“Personal loans growth remains robust and in double digit territory since mid of last year. However, the growth in business loans (which make up a bulk of total retail banking) continued to decelerate in March, and was down by 1.8 percent y/y, its lowest growth rate in three years”.
The report expects money supply growth to strengthen in the medium term as demand picks up. It said that the banking sector remains weak: in March commercial banks assets fell again, by 1.4 percent year on year, amid ongoing deleveraging in the wholesale banking segment. As for the Bahrain stock market, the report said that it has been witnessing a rally since the start of this year. The Dow Jones Bahrain Index on average rose by 24 percent year on year, between January and May of this year, significantly better than last year’s performance. Furthermore, the index is edging towards its highest level in four years. The improvement in the stock market’s performance is indicative of some recovery in sentiments.
Source : KUNA Kuwait News agency
