The Bahraini Economy Excels

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I’ve got some Good News™ for you guys:

As an exercise in deflating pessimism it couldn’t have been better. The merchants of doom and gloom have been predicating their comments on declining oil reserves for years, with the implicit rider that the entire economy of the kingdom was destined to plummet down a slippery slope.

Now a report from the Central Bank of Bahrain (CBB) has left the pessimists spluttering and bereft of ammunition for the slightest tale of woe. Oil revenues are up. Inflation is minimal (something Dubai and Qatar would love to be able to claim). Exports are up. The trade surplus is up. The heart and homeland of banking in the Gulf and beyond is riding the crest of a wave and – perhaps best of all – the vast majority of the new jobs that have been created in the past 12 months are in the private sector.

The report, a first of its kind issued on August 16, showed that the kingdom’s gross domestic product (GDP) increased by 7.1% in 2006, driven by strong local and foreign investment, a record high current accounts surplus and an expanding private sector.
Oxford Business Group – Bahrain Volume 117 – 24 Aug, ’07

That, my friends, is Good News™ and it will be a lot gooder when that percolates down to the rank and file.

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16 Comments
  • Samboosa
    24 August 2007

    Sorry to be a party pooper, but i’d take these figures with a pinch of salt. The OBG isn’t exactly an unbiased source, since it’s on some government marketing payroll somewhere. As for the figures:

    – 2.1% inflation rate. You gotta be kidding me right? With food subsidies aboloshied, the high dollar pushing imported inflation up, this figure is simply unbelievable. And has Bahrain radically changed the way it measures inflation over the past year? Because if it has not, then it is common knowledge that the CPI index is unrepresentative of true living costs in Bahrain, which have soared over the last few years. The basket of goods thats supposed to represent average monthly household goods hasn’t changed in years. In fact, the removal of food subsidies this year increased food costs by at least 20% by my estimates.

    – An insider has even told me that the official figures sent to the IMF are ‘educated guesses’. So the Bahraini economy has been ‘booming’ for years now. Realistically, I don’t think Dubai and Qatar are dying in envy over Bahrain as the report seems to imply.

    -This report which is “the first of a kind” is it like the first report the Central Bank every publishes or something? and where is it, cos it’s not coming up on the CBB website.

    -what about unemployment figures? Has the CBB produced a report on the measurement of the unemployment rate, or is it still mastering the art of fudging the numbers?

    -77% of exports is oil. This is not good at all. We’re obviously still an oil-dependent economy. So much for banking, how much does that constitute in the current/capital account?

    Sorry as a pessimist, i’m NOT left spluttering and ammunition stocks are still high.

  • Adel
    25 August 2007

    NEW VOTE OF CONFIDENCE!
    By BABU KALYANPUR

    MANAMA

    MANAMA: Bahrain’s rapid economic growth won yet another global vote of confidence yesterday. The kingdom’s sovereign credit rating has been upgraded to ‘A’ from ‘A-‘ by ratings agency Fitch. This follows excellent upgrades by Standard & Poors and Moody’s last month.

    Strong growth in the kingdom’s non-oil sector and recent political and economic reforms were taken into account by Fitch for the ratings upgrade.

    The agency said that the kingdom was growing rapidly without overheating and its outlook was stable.

    Bahrain is rated A by Standard & Poors and A2 by Moody’s. Standard & Poors had said that Bahrain’s economy was so sound that it was virtually shockproof.

    Top international financial think-tank, the Economic Intelligence Unit, has predicted that the country’s GDP is set to grow by almost a third over the next five years.

    “Improvements in domestic and external solvency ratios, continued strong non-oil growth and advances in economic and political reform explain the rating upgrade,” Charles Seville, associate director in Fitch’s Middle East and Africa Sovereign team, said.

    Low and falling public debt is one of Bahrain’s rating strengths, Fitch said, noting government debt was 24 per cent of gross domestic product (GDP) last year, five percentage points down on the previous year, and below the median for A-rated sovereigns.

    “Unlike the majority of A-rated sovereigns, the public finances are forecast to remain in surplus, allowing the government to both increase deposits and reduce debt,” Mr Seville said.

    GDP growth was 7.1pc in 2006, driven mainly by the non-oil sector, where growth has exceeded 8pc for the last four years.

    Fitch said that the size of the financial sector is almost 24pc of the GDP, almost equal to the hydrocarbon sector.

    “With inflation at just 2.1pc in 2006, Bahrain is growing rapidly without the overheating observed in some other Gulf states,” the report added.

    http://www.gulf-daily-news.com/Story.asp?Article=191627&Sn=BNEW&IssueID=30158

  • Sara
    25 August 2007

    I agree with Samboosa. It’s difficult to believe any reports of this nature as we have seen in the past the conflicting figures issued regarding unemployment rates.

  • exclamation mark
    25 August 2007

    I find that hard to believe ..

    I don’t know why ?!

  • Merlin
    25 August 2007

    All this means nothing if the masses do not start to feel that their lives are actually improving…. ask the men on the street and he shall yield the answer…

  • Redbelt
    26 August 2007

    Well said Merlin

  • Adel
    26 August 2007

    FUTURE SECURE

    MANAMA: Bahrain’s economic future is secure for years to come, the country’s top banker declared yesterday. Economic and political reform, partnered with sound financial management, will spur new prosperity, says the Central Bank of Bahrain.

    It welcomed the global vote of confidence which came on Friday, as international rating agency Fitch upgraded Bahrain’s sovereign credit rating to ‘A’, from ‘A-‘, with stable outlook.

    This followed a foreign currency debt rating of ‘A’ from international rating agency Standard & Poor’s (S&P) and an A1 for foreign currency country ceiling for bonds from Moody’s.

    “The government’s unwavering commitment to economic and political reforms, complemented by sound fiscal management, has created a solid foundation for renewed economic prosperity for Bahrain,” said CBB Governor Rasheed Al Maraj.

    Bahrain’s economy has grown six to eight per cent in the past two years, compared to 4-5pc in previous years.

    Real economic growth for last year is estimated at 7.1pc, driven mainly by the non-oil sector, he said.

    “While higher oil prices have helped, Bahrain’s economic buoyancy is due as much to the deep economic and structural reforms being implemented,” said Mr Al Maraj.

    Central to the reform process is increased private sector involvement in the economy and reduction of government intervention, to create a more transparent and business friendly environment.

    “The general stability of the financial sector and the overall growth-oriented economic climate point to a favourable outlook for Bahrain in the years to come,” said Mr Al Maraj.

    The financial sector’s contribution to the country’s gross domestic product (GDP) is expected to exceed 28pc for last year, having surpassed the oil sector as the largest contributor in 2005.

    http://www.gulf-daily-news.com/Story.asp?Article=191862&Sn=BNEW&IssueID=30159

  • ammaro.com
    26 August 2007

    but the majority will not feel any benefit whatsoever. Infact, all they will feel is the pinch of increasing prices, inflation, traffic, etc…

  • Johnster
    26 August 2007

    I don’t know how these people calculate the inflation rate — maybe it is a rate for bahrainis only?

    The rest of us expats have to cope with skyrocketing rents. My guesstimate is that rent has increased at least 20% over the last year

  • Abdulkarim
    26 August 2007

    Johnster,
    In advanced economies the inflation rate is calculated based on a basket of goods that are weighted in accordance with how much important they are to the household expenditure. I presume that is the case in Bahrain too.

    Having said, rent is important to you but is it equally important to the rest of the population? I doubt it.

    Given my own observations a lots of goods here in Bahrain have in fact, experienced a fall in their prices over the past few yeas. Think of it how much does an AC would cost you now versus how much it was 5 yeas ago? Think of school items now we are in the back to school season? The list is almost endless.

    Property prices have indeed gone up sharply over the past few years. But this is not the only thing we buy. We buy fruit, meat, bread, TVs and cars. Have they gone up. No they have not, not as sharp as properties anyway. In fact, meat prices have remained as they were 30 years ago. Petrol has not gone up by a fils in well I can’t remmeber when was the last time it was increased! Now I am not so sure if we are in inflationary times. Perhaps we are in deflationary times.

  • Johnster
    27 August 2007

    Thanks Abdulkarim – I know how it is calculated.

    The issue is that rental income, if aggregated, amount to quite a contribution to the economy. Whether you pay it or not is immaterial. The issue is how significant to the economy it is.

  • Abdulkarim
    27 August 2007

    Johnster,
    I get your point and I apologise.

    Yes it is how important rental income is to the economy. That is what I said if you were to re read my comment. Each item is given a weight.

    Now I do not know how heavy is rental income to the average household. If we say 25% of the household expenditure is spent on rent and that rental cost has gone up by 20% as you say, that gives an overall inflation rate of 5% only assuming everything else has remained constant.

    Well they have not. Many items have gone up but many have not and some have even declined so the overall impact is certinly not 20%. I do not know the true figure. The government says it is minimal and I think they are right.

  • Samboosa
    28 August 2007

    There are a million and one definitions of inflation. I think the inflation rate referred to in this ‘report’ is the Consumer Price Index or the Retail Price Index which does not include the price of housing.

  • milter
    28 August 2007

    “The Bahraini Economy Excels”.

    That sounds great. One can only hope that the people of Bahrain will benefit from this.

    But, that means that somehow a bit of that extra income will have to be transfered to other people’s pockets. The ugly word “taxation” springs to mind.

    Maybe even a bit of it could be spent on ways to eliminate some of the unemployment so that Bahrain wouldn’t have to rely so much on cheap foreign labour.

    Maybe even a bit of it could be spent on higher salaries and better conditions for these workers.

  • Abdulkarim
    28 August 2007

    Samboosa,
    Yes you are right. There are different inflation rates but the one that is mostly used or referred to is the CPI. That is what most people care about and that is the one the government meant when they said inflation was minimal.

    I beleive it is indeed minimal especially if we exclude housing.
    Regards,
    Chapati. Ops!

  • Adel
    29 August 2007

    BUSINESS BOOMING!
    By MARK SUMMERS

    MANAMA: Business is booming for Bahrain’s banks, stock exchange and real estate market, according to figures released yesterday.

    Domestic government debt is falling and more than half the population is employed, according to the Central Bank of Bahrain’s latest quarterly Economic Indicators bulletin.

    The banking system’s consolidated balance sheet grew 11pc in the second quarter of this year, from $190.6 billion to $212.7bn.

    Market capitalisation of Bahrain Stock Exchange (BSE) hit new heights – rising to BD8.6bn from BD7.7bn in the same time.

    The real estate market is rocketing, with the total value of traded land permits in the second quarter of this year hitting BD345.9 million – more than the BD329.6m recorded for the whole of 2003.

    The number of permits traded has stayed largely the same, but land prices have soared. Bahrain’s domestic public (government) debt fell to BD545m, or 9.3pc of gross domestic product – compared to 18.8pc of GDP in 2002.

    Total employment is also up – with 392,147 people currently employed in Bahrain, meaning 52pc of the population is working.

    In 2002, the corresponding figures were 229,879 and 32.2pc. But Bahrainis have slipped to just 20.5pc of the country’s private sector workforce and wages have stagnated for many – and in the case of non-Bahraini men actually fallen from their 2002 level, says the report.

    http://www.gulf-daily-news.com/Story.asp?Article=192184&Sn=BNEW&IssueID=30162

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