Bahrain’s economic growth momentum falters

7 November 2024

 

Bahrain’s economy grew by just 1.3% year-on-year in the second quarter of this year, representing its worst quarterly performance since early 2021 and marking a significant slowdown from the 3.3% growth seen in Q1.

Overall, it meant the economy grew by 2.3% between the start of January and the end of June, compared to the same period in 2023.

However, at a time of subdued regional oil activity as a result of the Opec+ production limits, the figures from Bahrain’s Ministry of Finance & National Economy still mean the country’s performance has been better than that of many of its neighbours.

Dubai-based bank Emirates NBD said in a report issued in early October that it was sticking to its forecasts of 2.4% growth for Bahraini GDP for the whole of 2024 and 3.3% in 2025.

That growth rate, said the bank’s Middle East and North Africa economist Daniel Richards, “would make Bahrain’s the second-strongest growth in the GCC in 2024, after the UAE”.

Some other observers, such as the Washington-based IMF, predict slightly faster growth for Bahrain.

Oil and non-oil activity

The country’s relatively strong performance is in part due to the modest role that oil and gas plays in its economy. The oil sector accounted for a little less than 15% of total GDP in Q2 2024 and the IMF thinks that will shrink to 10% by 2030.

The oil sector grew by 3.4% in Q1, but contracted by 6.7% in Q2, resulting in an overall contraction of 2.1% for H1.

Production at the Abu Safah field was down 4.2% year-on-year in the first half, while output from the onshore Bahrain field stayed almost flat.

According to the finance ministry, Bahrain produced an average of 184,000 barrels a day (b/d) in Q2 across its two main fields, some 6% below its Opec+ quota of 196,000 b/d.

Emirates NBD is forecasting a 2% contraction in oil GDP this year, with a return to growth next year of 2.0% – a figure which is dependent on the Opec+ restrictions falling away.

The latter cannot be guaranteed, however. In early November, the group’s leading members announced a further month-long extension of their voluntary production curbs, pushing back the deadline to the turn of the year.

In contrast, there has been a more consistent positive momentum in Bahrain’s dominant non-oil activity, which grew by 3.2% in Q1 and 2.8% in Q2, leaving overall H1 growth at 3.1%.

Emirates NBD forecasts that non-oil growth will rise further in the second half of the year to reach 3.5% for the year as a whole – the same as in 2023 – and should stage a further modest increase to 3.7% next year.

Lower interest rates and low inflation should provide a supportive environment for non-oil activity.

The largest element of the non-oil economy remains financial and insurance services, which made up 17% of GDP in Q2 and grew by a modest 2.1% in Q2.

This followed a 7.4% expansion in the first quarter, meaning the sector’s H1 figure was a robust 4.7%.

Attracting more investment and talent to the country is critical to ensuring that non-oil momentum continues in the future.

Government initiatives and outlook

With this in mind, the authorities have launched a number of enhanced services in an effort to compete more effectively against regional economic powers such as the UAE and Saudi Arabia – including a ‘golden licence’ introduced in April 2023 for businesses and a ‘platinum residency permit’ introduced for individuals in June that year.

Since then, the Nationality, Passports and Residence Affairs office has issued more than 10,000 enhanced residency permits to citizens of 99 countries.

Such efforts will have contributed to the 9% increase in the total stock of foreign direct investment in Bahrain in Q2 2024, reaching a total of BD16.6bn, up from BD15.2bn in the same period last year, according to data from the Ministry of Finance & National Economy.

However, there are some clouds on the horizon. An IMF report issued in mid-October noted that Bahrain’s budget deficit grew in 2023, after two years of reducing under the government’s fiscal balance programme.

The IMF has urged the government to rediscover its commitment to economic reforms, with John Bluedorn – who led the IMF team in its latest Article IV review of the economy – saying “a multi-year and pre-committed fiscal consolidation and reform package is the policy priority” in order to put the government’s debt-to-GDP ratio on a durable downward path.

While praising the recent introduction of a ‘top-up’ tax to meet international minimum standards on corporate taxation, Bluedorn added that “additional steady fiscal efforts over multiple years … remain necessary”.

The government’s policy options include introducing more taxation on the non-oil sector and cutting energy subsidies and other spending. However, all of these options are politically unpalatable.

“Economic diversification has progressed well, but additional reforms would foster higher, greener and more inclusive medium-term growth,” added Bluedorn.

More recent economic data has highlighted the fragile position of the country. GDP data for the third quarter has yet to be released, but there have been some other indicators.

On 29 October, the Information & eGovernment Authority released its Q3 trade report, which showed that the value of non-oil imports had risen by 3% year-on-year to reach BD1,443m, up from BD1,402m for the same period in 2023.

The value of non-oil exports rose by just 1% to BD949m, while the value of non-oil re-exports did better, increasing by 3% to BD190m. All this meant the country’s non-oil trade balance widened further, reaching BD304m in Q3 2024, compared to BD275m in the same period of 2023.


OIL & GAS: Bapco Energies sets sights on clean energy goals
POWER & WATER: Manama jumpstarts utility sector
CONSTRUCTION: Bahrain construction struggles to keep pace
INDUSTRY: Alba positions for the future

https://image.digitalinsightresearch.in/uploads/NewsArticle/12866777/main.gif
Dominic Dudley
Related Articles
  • Riyadh Royal Commission awards metro Line 2 extension

    18 July 2025

     

    Register for MEED’s 14-day trial access 

    Saudi Arabia’s Royal Commission for Riyadh City (RCRC) has awarded an estimated $800m-$900m contract to build the next phase of the Riyadh Metro project, which is the Line 2 extension.

    The contract was awarded to the Arriyadh New Mobility Consortium.

    The Line 2 extension is 8.4 kilometres (km) long, of which 1.3km is elevated and 7.1km is underground. It includes five stations – two elevated and three underground.

    It will run from where Line 2 currently ends at King Saud University (KSU) and then travel onwards to new stations at KSU Medical City, KSU West, Diriyah East, Diriyah Central, where it interchanges with the planned Line 7, and then finally to Diriyah South.

    According to the consortium’s official website, the consortium members include Italy’s Webuild, India’s Larsen & Toubro, locally based Nesma & Partners, Japan’s Hitachi, Italy’s Ansaldo STS, the Canadian firm Bombardier, Spain’s Idom and WorleyParsons from Australia.

    Riyadh Metro Transit Consultants (RMTC), which is a joint venture between the US-based firm Parsons and the French engineering firms Egis and Systra, is the project management and construction supervision consultant.

    RMTC has previously worked as a project management and construction supervision consultant on Lines 1, 2 and 3 of the Riyadh Metro scheme.

    In 2013, the Arriyadh New Mobility Consortium secured Riyadh Metro’s Line 3 project for $5.21bn.

    Line 3, also known as the Orange Line, stretches from east to west, from Jeddah Road to the Second Eastern Ring Road, covering a total distance of 41km. 

    Riyadh Metro

    Riyadh Metro’s first phase features six lines with 84 stations.

    The RCRC completed the phased rollout of the Riyadh Metro network when it started operating the Orange Line on 5 January.

    In December last year, the RCRC started operating the Red Line and Green Line.

    The Red Line, also known as Line 2, stretches 25.1km from the east of Riyadh to the west, via King Abdullah Road, connecting King Fahd Sports City and King Saud University. It has a total of 15 stations.

    The Green Line, also known as Line 5, extends 13.3km from King Abdullah Road to the National Museum. With 12 stations, it serves several ministries and government agencies, including the Defence Ministry, the Finance Ministry and the Commerce Ministry, as well as other areas.

    Earlier in December, the RCRC started operating the Blue Line (Line 1), Yellow Line (Line 4) and Purple Line (Line 6).

    The Blue Line connects Olaya Street to Batha; the Yellow Line runs along King Khalid International Airport Road; while the Purple Line connects Abdul Rahman Bin Awf Road with Al-Sheikh Hassan Bin Hussain Road.

    King Salman Bin Abdulaziz Al-Saud inaugurated the Riyadh Metro on 27 November last year.

    The network spans 176km. Four of the stations have been designed by signature architects.

    The metro is part of the Riyadh Public Transport Project, which encompasses metro and bus systems. The project aims to relieve traffic congestion.

    The $23bn project was scheduled to open in 2018, but construction activity slowed due to disputes over prolongation and the disruption caused by the Covid-19 pandemic.

    The RCRC awarded the main construction packages for the scheme on 28 July 2013.

    In November 2022, the RCRC struck a deal with three contracting consortiums working on the Riyadh Metro scheme regarding the completion of the project’s remaining works.

    The Fast consortium won lines 4, 5 and 6, reportedly valued at $7.82bn. The Bacs consortium was awarded lines 1 and 2 for $9.45bn, while Arriyadh New Mobility secured Line 3 for $5.21bn.

    US firm Bechtel leads the Bacs consortium. Italian firm Ansaldo STS is the leader of the Arriyadh New Mobility group, and Spanish firm FCC Construccion heads the Fast consortium.

    AtkinsRealis has delivered programme management and supervision services for the operations and maintenance of the Riyadh Metro scheme.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/14289337/main.jpg
    Yasir Iqbal
  • Firms submit bids for Maaden gold project water pipeline

    17 July 2025

    Saudi Arabian Mining Company (Maaden) has received proposals from local firms for a water pipeline network it plans to build as part of a larger project to develop a new gold mining and processing facility in the Al-Rjum region of the kingdom.

    The Al-Rjum gold mining and processing facility, located in Medina province, is expected to be commissioned by the end of 2027. It will become the largest gold mining operation in Saudi Arabia when operational.

    According to sources, the pipeline is to be developed using a build-own-operate-transfer (BOOT) model. The engineering, procurement and construction (EPC) works will have a duration of 38 months, followed by a 20-year operations and maintenance period.

    Lamar Holding and Alkhorayef are understood to be the only bidders for the proposed Taif to Al-Rjum water pipeline, which forms package B of the Maaden gold mining project.

    The two contractors submitted bids for the water pipeline project on 1 July, sources told MEED.

    The main scope of work involves building a 150-kilometre pipeline that will supply treated sewage effluent water to the Al-Rjum gold mining facility.

    ALSO READ: Saudi Arabia issues mining exploration licences

    The Al-Rjum gold mining and processing facility will have an output capacity of 250,000 ounces of gold a year. The project will increase Maaden’s total gold production to 700,000 ounces a year by 2028, helping the company support Saudi Arabia’s overall goal of doubling gold production by 2030 and achieving a four-fold increase in output by 2040.

    MEED recently reported that Maaden had received bids for a tender to develop accommodation facilities for over 4,500 of its workers at the upcoming Al-Rjum gold mining and processing facility.

    Bids for the Al-Rjum worker accommodation tender, which is also under the BOOT model, were submitted in late June. The operations and maintenance period for this contract is 15 years.

    ALSO READ: Saudi Arabia and Oman open up their minerals potential
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14284263/main3503.jpg
    Indrajit Sen
  • Bahrain and US sign nuclear energy agreement

    17 July 2025

    Bahrain and the US have signed a cooperation agreement covering the field of peaceful nuclear energy.

    The agreement aims to enhance collaboration in nuclear energy, recognising its vital role in sustainable development and energy security. It aligns with Bahrain's ambitious goal of achieving carbon neutrality by 2060 and contributes to global efforts to combat climate change.

    As Bahrain explores alternative energy sources, senior officials have previously indicated to MEED that they are closely monitoring developments in small modular reactor (SMR) technology. This is particularly crucial for Bahrain, where limited land availability poses challenges for solar energy projects. Floating solar plants have been identified as a potential solution, but the exploration of nuclear energy and SMRs remains a priority for future energy diversification.

    The agreement was signed during an official visit to the US by Prince Salman Bin Hamad Al-Khalifa, the crown prince and prime minister of Bahrain.

    The agreement was formalised by Abdullatif Bin Rashid Al-Zayani, Bahrain’s minister of foreign affairs, and Marco Rubio, the US secretary of state.

    Al-Zayani added that the agreement builds upon the Comprehensive Security Integration and Prosperity Agreement (C-SIPA) signed in 2023. The agreement aims to strengthen cooperation in defence, security, emerging technologies, trade and investment.


    READ THE JULY 2025 MEED BUSINESS REVIEW – click here to view PDF

    UAE and Turkiye expand business links; Renewed hope lies on the horizon for trouble-beset Levant region; Gulf real estate momentum continues even as concerns emerge

    Distributed to senior decision-makers in the region and around the world, the July 2025 edition of MEED Business Review includes:

    > PROJECTS MARKET: GCC projects market collapses
    > GULF PROJECTS INDEX: Gulf projects index continues climb
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14281751/main.jpeg
    Colin Foreman
  • Kuwaiti firm wins $53m Duqm coastal road contract

    17 July 2025

    Kuwaiti contractor Combined Group Contracting Company (CGCC) has won a RO20.6m ($53m) contract to construct coastal roads in Duqm.

    The scope of work covers the construction of roads with a total length of 14 kilometres, including a coastal road, a proposed service road, an extension to an existing service road, a resort street, four roundabouts, future extensions and proposed links.

    The contract duration is two years from the start date of construction.

    MEED reported in August 2023 that CGCC had emerged as the lowest bidder for the project.

    GlobalData estimates that the construction industry in Oman will grow by 3.6% in real terms in 2025, supported by rising foreign direct investment (FDI) in the country, particularly in the manufacturing sector, as well as investment in the energy and transport sectors.

    The infrastructure construction sector is estimated to grow by 5.7% in 2025, before recording an annual average growth of 5.2% between 2026 and 2029, supported by the government’s investment in upgrading road and airport infrastructure.

    CGCC’s contract win in Oman comes shortly after a key contract win in the UAE, worth AED685m ($186m).

    The scope of work under this contract encompasses the upgrade works on Emirates Road, from the Al-Badea intersection in Sharjah to the E55 intersection in Dubai.

    The UAE’s Ministry of Energy & Infrastructure is the project client.

    The contract duration is 25 months.


    READ THE JULY 2025 MEED BUSINESS REVIEW – click here to view PDF

    UAE and Turkiye expand business links; Renewed hope lies on the horizon for trouble-beset Levant region; Gulf real estate momentum continues even as concerns emerge

    Distributed to senior decision-makers in the region and around the world, the July 2025 edition of MEED Business Review includes:

    > PROJECTS MARKET: GCC projects market collapses
    > GULF PROJECTS INDEX: Gulf projects index continues climb
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14281451/main.gif
    Yasir Iqbal
  • Algeria awards $855m contract for gas production project

    17 July 2025

    Register for MEED’s 14-day trial access 

    Algeria’s national oil and gas company Sonatrach has awarded an $855m contract to China’s Jereh Group for a project to develop facilities at the Rhourde Nouss gas field.

    Jereh Group said that its subsidiary Jereh Oil & Gas Engineering will build a natural gas booster station in the Rhourde Nouss gas field and upgrade and renovate related transmission pipelines.

    The Yantai-based company cited a letter of award from Sonatrach and said that the contract will boost the company's footprint in North Africa’s oil and gas engineering service sector.

    The Rhourde Nouss boosting project will centralise the boosting of natural gas produced by the gas field and the adjacent Gassi Touil gas field, to improve their production efficiency and natural gas processing capacity, the company said.

    Sonatrach, the largest gas producing company in Africa and the largest state-owned enterprise in Algeria, will pay $629.1m and $226m for the construction of the project, Jereh said.

    Jereh's growing footprint

    Jereh has been expanding overseas in recent years and has won contracts with major Middle Eastern oil and gas clients, including Saudi Aramco, Abu Dhabi National Oil Company (Adnoc) and Kuwait Petroleum Corporation.

    In June 2021, the company was awarded a contract for the design, procurement and construction of a gas debottlenecking project in Algeria.

    The project was located in the Bir Rebaa Nord and Rhourde Ouled Djemma fields, which are located in the eastern Algerian desert, about 300 kilometres southeast of Hessi Messaoud.

    The client on that project was Groupement Sonatrach Eni, a joint venture of Sonatrach and Italian energy company Eni.


    READ THE JULY 2025 MEED BUSINESS REVIEW – click here to view PDF

    UAE and Turkiye expand business links; Renewed hope lies on the horizon for trouble-beset Levant region; Gulf real estate momentum continues even as concerns emerge

    Distributed to senior decision-makers in the region and around the world, the July 2025 edition of MEED Business Review includes:

    > PROJECTS MARKET: GCC projects market collapses
    > GULF PROJECTS INDEX: Gulf projects index continues climb
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/14278458/main.jpg
    Wil Crisp