How did Bahrain economy’s perform in 2013 and what is the outlook for 2014/15?
While the disruption to oil production in 2012 and subsequent normalisation in 2013 has added some noise to the headline GDP numbers, the underlying picture that has emerged is of a non-oil private sector recovery solidifying, putting the economy in a strong position for 2014 and beyond. Once again, our economy has demonstrated its maturity and resilience. We are projecting this to continue with the economy to be driven by growth in the non-oil sector of around 4.5 percent this year, followed by around 4 percent next year. We expect that the strong underlying performance of the economy will continue to be boosted by increased project spending.
What are EDB’s priorities for 2014?
EDB’s priority remains to attract value-add international investment into Bahrain. Our aim is to attract businesses that will help to create quality jobs for Bahrainis and support sustainable long-term economic growth. In 2012, Bahrain attracted a total of $891 million of FDI, a 14 percent increase on 2011, and in 2013, the EDB alone attracted $114 million of foreign investment into the country from North America, Europe and Asia — this will help to spur increased productivity and to create jobs in Bahrain.
With the government facing greater fiscal pressures than other GCC states, what measures are being taken to address subsidies, and high levels of state spending?
While there has been some increase in Bahrain’s debt-to-GDP ratio, it is important to place this in the context of an economy that has shown healthy growth in the past two years. This has been reflected in Bahrain’s ability to issue both short- and long-term debt from international markets. In July 2013, Bahrain carried out a conventional bond issue, which saw oversubscription rates of 500 percent for the $1.5 billion, 10-year sovereign bond. This followed an oversubscribed $1.5bn bond issue in June 2012. The issue in July last year came in at the lower end of guidance despite being raised amid turbulent conditions in the international bond markets. Likewise, the fact that CDS spreads are now back to pre-2011 levels reflects markets’ confidence in the Bahraini economy. Clearly, as with any economy, there is a need to adjust government spending over time to align with future revenues. However, it is important that Bahrain is able to make these adjustments gradually and from a position of relative strength with comfortable access to international capital markets.
What measures are being taken to stimulate the economy?
In the short-term, the strong underlying growth we have seen in the past two years will be supplemented by project spending — both from capital expenditure in the government’s budget and from the effect of the GCC development fund.
This will not only act as an immediate stimulus, but also help to put in place the infrastructure that will support long-term growth. For example, the development of the GCC railway and the investment in Bahrain International Airport will help to improve our already strong connectivity with our GCC neighbours, who account for approximately two fifths of our non-oil exports and strengthen one of the key attractions of Bahrain to international investors.
What is the EDB doing to attract FDI into Bahrain?
In terms of EDB’s focus, it is on what we call ‘smart FDI’. These are businesses that will create quality jobs for Bahrainis, fit with our economic profile and help to support long-term, sustainable growth. A good example of the types of businesses we would like to attract is Pinebridge Investments, which has established its Middle East office in Bahrain and created high-quality jobs in a sector where our long track record and investment in education and training mean that there are a large number of Bahrainis who are able to take advantage of the opportunities that this creates.
What is the current level of unemployment among Bahrainis and what is being done to alleviate this?
At the end of 2013, unemployment stood at 4.3 percent with the number of Bahrainis in employment growing by 3.9 percent in the course of the year. Our main focus on creating employment opportunities for Bahrainis is in providing the education and training that will enable them to compete and ensure Bahrainis provide the best value for businesses. A good example is the financial services sector, where two thirds of the workforce are Bahrainis. Investment in education and training has helped to create a virtuous cycle, where the qualified workforce in turn helps to attract the sort of businesses looking to establish a sizeable long-term presence in the region, and so require a skilled bilingual workforce.
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