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Bahrain’s projects sector drags on economy

21 November 2024

Analysis
John Bambridge
Analysis editor

Despite posting relatively robust growth compared to its Gulf neighbours, Bahrain’s economic trajectory reveals a mixed bag of promising developments and noticeable areas of weakness. In the second quarter of 2024, Bahrain’s growth slowed to 1.3% as higher non-oil growth struggled to compensate for a 6.7% contraction in the country’s relatively modest but still significant oil sector.

As with the rest of the GCC, Bahrain’s oil sector is liable to wax and wane quite intensely with the oil price, the policies of oil producers’ group Opec and – given the industry’s modest size – the fluctuating nature of exports. However, as a country with a far more sizeable non-oil sector, it is the hovering of non-oil sector growth around 3-3.5% that merits additional scrutiny – especially when it is compared to the more buoyant non-oil performances of Riyadh and Abu Dhabi.

Comparing like for like, one of the apparent causes of Manama’s somewhat underwhelming non-oil performance is its sluggish projects sector. In contrast to the boom sweeping much of the GCC, Bahrain’s projects market is stuck in a slow-motion decline, having witnessed the value of project completions exceed the value of awards for the past seven years running.

This weakness is evident in the construction and transport sectors, where average contract award values have dwindled in the past four years; in power and water, where growth has been muted since the 2021 completion of the Al-Dur 2 independent power project; and in the oil and gas sector, which has not seen a multibillion-dollar contract since 2017.

In all of these sectors, there remain projects in the pipeline that could pave the way for a revival. There are $5bn-worth of pending construction schemes, including plans for work on five reclaimed islands, as well as the refloated plans for a $3.5bn second causeway to Saudi Arabia. In power and water, meanwhile, there are plans for several major utilities plants, including the $1.3bn Sitra independent water and power project. In oil and gas, there is a $4bn carbon capture and storage scheme that is understood to be in the front-end engineering and design phase.

The key concern for Bahrain’s contracting sector in all instances, however, will be the speed of delivery of such schemes. As Saudi Arabia has found to its cost in recent years, a period of contracting sector contraction can have long-term implications for future capacity. After seven years of sluggish project activity, much of Bahrain’s local capacity may have been downsized or headed overseas. If Manama wishes to reawaken its project sector, and the non-oil growth that it would support, time is of the essence.

 

This month's special report on Bahrain includes: 

> GOVERNMENT & ECONOMY: Bahrain’s economic growth momentum falters
> BANKING: Bahrain banking works to scale up
> 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

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John Bambridge

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