Bahrain's economy will grow significantly above its long-term average this year before returning to “normal” for the first time in years, according to the Bahrain Economic Development Board.
EDB chief economist Jarmo Kotilaine said Bahrain would see 6.2 percent growth this year, based on the recovery of the oil sector, which recorded negative growth in 2012 after it was shut-down for several months due to a technical disruption.
Despite the downturn in oil, which accounts for about one-quarter of the economy, the island nation managed to post 3.9 percent growth in 2012 as the non-oil sector recovered from the political turmoil in 2011.
Kotilaine told Arabian Business the non-oil sector's recovery would stabilise in 2013 while the oil sector would show huge year-on-year growth on the back of last year's disruption.
The figures should return to normal in 2014.
“2014 should be the first normal year in quite a while in the sense that we'll be through these base effects and rebound effects and we should see something that is quite close to trend growth in the non-oil sector, and that trend is in the neighbourhood of 4 percent, perhaps a little less,” Kotilaine said.
“And the oil sector is dictated largely by the global oil price environment. I'm quite optimistic on the oil price, I think it will remain at a fairly high level, even with the supply situation evolving in North America”
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EDB acting chief executive and Minister of Transportation Kamal bin Ahmed said more than 40 firms established a presence in Bahrain last year, while bond markets showed faith in the country's short and long-term economic stability.
“Bahrain’s business fundamentals are strong and the economic recovery is gathering momentum,” he said during a speech at the Euromoney conference in Manama on Tuesday.
Bahrain relied on successful business within its borders and the EDB would aim to attract “smart” foreign direct investment, he said.
“In order to achieve this, Bahrain is committed to sustaining and strengthening its core business fundamentals: a highly skilled workforce, stable and transparent regulation, an open business environment and sustainable growth, offering a vibrant market and attractive base for accessing the wider GCC market,” he said.
However, former United Nations deputy secretary-general Lord Malloch-Brown warned the political uprising in Bahrain in 2011 could put the country's economic competitiveness back an entire generation.
“One's got to look at the subsequent events of 2011 of having cost the country not just a couple of years in terms of competitive position as a hub to this new global economy … but potentially … losing its competitiveness for a generation,” he said.
“The sooner these political issues can be resolved and that Bahrain can retake its place as a liberal society and an open trading economy at the heart of the Gulf and at the hinge of this extraordinary new political economy that comprises an Asia and Africa which are changing and transforming the terms of global trade … the better for this country and, I would argue, better for the world as well.”
However, Kotilaine said there was no doubt Bahrain would recover in the short-term rather than suffer the effects for a generation.
“These kinds of changes are challenging when they come but in fairness all countries go through these kinds of disruptions, whether it's just the cyclical variations of a market economy or it's some kind of social or political challenges or trade union militancy or whatever,” he said.
“There have been times when people have been ready to write-off London as a financial centre because of the rise of the Euro, they were ready to write-off Hong Kong because of the reunification with China, they wrote off Singapore at one point because the real estate market collapsed … but I think one of the hallmarks of a real financial centre is that it's resilient and it is capable of refocusing and regrouping and rebounding as a result and quite clearly Bahrain has to deal with these challenges and it is dealing with these challenges but I think if they're addressed in the right way you can turn them into opportunities.
“What's good about this country is that it has very strong fundamentals for economic development and business development whether it's regulations or human capital or whatever.”