Bahrain's non-oil sector grew by 3.6% in the second quarter of 2016, a marked acceleration from 2.7% in the first three months of the year, the latest Bahrain Economic Quarterly, released Wednesday by the Bahrain Economic Development Board (EDB), revealed. The sector, which accounts for more than 80% of GDP, has demonstrated continued resilience in the face of lower oil prices and considerable global economic volatility. This momentum has been seen across a number of sectors and is strongly underpinned by the ongoing implementation of a $32 billion pipeline of strategically significant infrastructure projects in the Kingdom. For instance, the total cumulative value of the active projects financed by the GCC Development Fund has reached nearly $4 billion, more than tripling in less than a year. Also a number of real estate, transportation, and manufacturing projects, such as ALBA Line 6, are progressing well. Non-oil growth has been broad based. The fastest growing individual sector during the second quarter of 2016 was Social & Personal Services, a category dominated by private education and health care. It has been consistently one of the most dynamic sectors of the economy in recent years and grew by an annual 9.9% in Q2. The Financial Services sector has continued to perform well with a 4.0% pace of real growth in Q2. Likewise, the Manufacturing sector expanded by 3.3% in Q2 in a near-tripling of the pace seen in Q1. Growth across the private sector was also supported by growth in bank credit, with the average annual rate of credit growth during the first half of the year reaching 7.2%, and the cost of credit remaining stable, declining slightly in the course of the first half of the year. Khalid Al Rumaihi, Chief Executive of the EDB, said: "The resilience the economy has demonstrated reflects the strength and maturity of the non-oil private sector in Bahrain – we are very pleased to see continued growth even in the face of considerable headwinds." "In the coming years we expect the GCC economies to move from a model of extensive growth, driven by increased people, land and capital, to productivity-led growth. The large infrastructure investments we are currently seeing and the strength of the non-oil private sector will be important in creating opportunities for investors and ensuring that Bahrain continues to thrive." Economic growth in the GCC has shown continued resilience this year. However, it is becoming increasingly evident that the continued oil price correction and the ongoing fiscal re-engineering efforts by the regional governments have weakened some of the key traditional growth drivers and tested sentiment. In general, growth across the region is expected to fall clearly short of last year's levels before rebounding somewhat in 2017. For instance, the latest IMF projection for Saudi growth put the headline figure for this year at 1.2%, followed by 2.0% in 2016, the report said. The IIF expects non-oil growth in the GCC to decelerate from close to 3% in 2015 to less than 1.5% this year before rebounding to the neighborhood of 2% in 2017. Saudi headline growth is projected at 1% this year and 1.2% next year, whereas the corresponding figures for the UAE are 2.2% and 2.7%. Growth in the GCC region has been adversely affected by renewed oil price volatility which in turn has triggered further fiscal consolidation efforts. 2016 may well end up posting the slowest headline growth figures during the current cycle, with region-wide unlikely to be much ahead of 1.5% before a rebound in 2017. — SG
