Bahrain set for new 2.5% trend growth
The Bahraini economy is set for faster growth over the coming three years, albeit still well below the 3% rates seen recently. The International Monetary Fund used its October 2018 biannual fore- casts to raise the outlook for the kingdom. It now expects growth of 3.2% in 2018 rather than the 3.0% it saw in April 2018. The economy will then slow to 2.6%, 2.5% and 2.5% in 2019, 2020 and 2021 respectively, up from 2.3%, 2.2% and 2.3% six month earlier. Bahrain’s headline growth rate increased sharply in the second quarter of 2018 to an annual rate of 2.4%. It shrank 1.2% year-on-year in the rst quarter of 2018, after downwardly revised 2.3% growth in the previous quarter. In the second quarter non-oil GDP expanded by 2.8%, driven by the construction (up 6.7%) and manufacturing sectors (up 4.5%). The expansion in the construction sector was high- lighted by the total of infrastructure projects reaching $87.3bn in mid-September according to MEED Projects, a 3.8% year-on-year growth. The World Bank said its forecast for growth was driven by higher oil production, a raft of mega projects including the scheduled capacity enlargement at Aluminum Bahrain may raise aluminium production capacity by over 50% and continued regional support.
Bahrain follows Fed and raises rates
The central bank raised its key policy interest rate in September 2018. It raised its key policy inter- est rate on the one-week deposit facility from 2.25% to 2.50%. in the wake of the decision of the US Federal Reserve to raise interest rates, as it has done over the course of the Fed’s tightening programme. It also decided to increase the overnight deposit rate from 2.00% to 2.25% and adjust both the one-month deposit rate from 3.00% to 3.25%, and the lending rate from 4.00% to 4.25%. In ation fell to its lowest level for 10 months in October 2018 building on four successive monthly falls. The annual rate of in ation slowed to 0.5% from 0.8% in September. The annual rate had hit 3.1% as recently as February 2018. The main driver was a 5.4% drop in prices for furniture and household equipment (from a 3.7% gain in September). Housing and utility costs, which account for 24% of consumer expenses, also fell, by -0.2% and -0.1% in the previous month.