Focus in 2013 remained on maintaining growth and the continuing process of further diversification of the economy – something Bahrain has a head-start on over many of its neighbours. However, ongoing security concerns have overshadowed performance in some sectors.
The Economic Development Board (EDB), Bahrain’s investment agency, remains bullish on growth prospects, forecasting 5.3% GDP expansion this year and 4% in 2014, up from 3.4% in 2012. The IMF is less sanguine, projecting 4.4% and 3.3% for 2013 and 2014, respectively. The economy received an important boost this year from the return of the Abu Sa’afa oil field to production, after maintenance delays caused output to dip 13% in 2012.
Real estate is one sector that has suffered as a result of social unrest. As of May, land prices and rental rates had fallen by 40-60% in the Northwest Governorate as a result of security concerns there, according to the Bahrain Real Estate Society. Overall, the market was felt to have “bottomed out”, according to an April report from CB Richard Ellis.
In a December report, the local Cluttons office wrote that residential rental rates continued to “stagnate” but noted that significant progress had been made in the push to provide more social and affordable housing, in part thanks to funding from the GCC Support Programme, a $10bn aid package that was announced in 2011 and set to be dispersed over ten years.
Cluttons also noted a new scheme, a joint venture between the Ministry of Housing and several banks, which aims to provide off-plan properties from a list of approved private developers to some of the more than 50,000 people on the waiting list for social housing. Growth in the government’s housing programme is also likely to boost demand for services from local and international construction companies.
Steady population growth and industrial development have strained energy infrastructure. The government is taking a multi-pronged approach to help ensure power plants will be able to meet medium- and long-term demand. According to the Electricity and Water Authority, peak power demand nearly doubled between 2003 and 2012, rising from 1540 MW to 2967 MW, putting pressure on natural gas supplies. In 2012 Bahrain’s power plants consumed 36% of the 592bn cu feet of natural gas produced in the country that year.
In response to growing resource pressure, officials are looking to boost energy efficiency, increase natural gas production, prepare for LNG imports to meet future demand, and diversify their energy portfolio with renewable power facilities.
On the conventional fuel front, officials have said Bahrain is committed to investing $15bn in developing oil and gas resources over the next two decades. As part of this investment drive, Tatweer Petroleum – a joint venture between Bahrain’s nogaholding, the investment and development arm of the National Oil & Gas Authority (NOGA), US-headquartered Occidental Petroleum Company and Abu Dhabi’s Mubadala Development Company – is working to triple oil production at the Bahrain Field, as well as boost gas output capacity from just over 1.5bn to 2.7bn cu feet per day by 2024. In addition, Occidental plans to drill its first ultra-deep-water well to search for reserves below the Bahrain Field next year.
Foreseeing a supply gap before these gas-related investments bear fruit, nogaholding and NOGA are moving forward with plans to build an LNG-receiving facility with a planned capacity of 400m cu feet per day. At the time of writing, the project was in the pre-engineering phase.
The Kingdom is also pushing ahead with renewable energy plans, with its first solar power plant, a 5-MW joint venture with planned connections to the University of Bahrain and the Awali area, under development. According to a 2012 report by the Gulf Research Centre, Bahrain has the potential to produce 33 TWh through solar power, more than twice the total demand in 2010.
Political challenges may continue in 2014, but Bahrain’s path to diversified economic growth looks well-paved by expansionary government spending policies, with the approved 2013-14 budget calling for an 11% year-on-year increase in expenditures. Given the emphasis on industrial and housing developments, the EDB expects non-hydrocarbons GDP to grow at 4.5% in 2014, compared to a rise of 3.1% for the oil and gas sector.
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