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Bahrain-GCC links contribute to trade growth.

Bahrain's deeper links that it has established with other economies in the region has been a substantial contributor to the kingdom's trade growth over the past decade, according to a recent report.

The Economic Insight: Middle East Q3 2014 pointed out that over a third of Bahrain's total goods exports growth over the period was accounted in exports to other regional countries.

Bahrain, however, will face more competition from its GCC neighbours over the next four years as they race to increase their freight and passenger capacity in a bid to encourage more cross-border trade, it said.

GCC nations plan to invest a massive $134 billion in transformative railway infrastructure, with Saudi Arabia, Qatar and the UAE leading the charge with investment plans worth $45 billion, $37 billion and $22 billion respectively.

Bahrain's $7.9 billion rail plans are comparatively smaller, with only Kuwait set to invest less than the kingdom.

The GCC's huge infrastructure pipeline is expected to see transport and logistics sectors play an increasingly large role in the region's economies.

Kuwait, Saudi Arabia, UAE and Oman are likely net the biggest windfalls, with logistics forecast to contribute 13.6 per cent, 12.1 per cent, 11.7 per cent and 11.7 per cent to their respective economies by 2018.

Michael Armstrong, ICAEW regional director for the Middle East, Africa and South Asia (Measa), said: "Once GCC neighbours' rail and airport projects come online, diversification of Bahrain's economy is going to become even more critical. While additional investments in transport networks could help Bahrain retain its high share of intra-regional trade, more attention will need to be paid to improving education and building downstream industries."

In addition to improving transport networks, free trade policies and continued minimisation of tariff and non-tariff barriers to trade will also help foster deeper intra-regional trade links.

Currently, Bahrain is the fourth most open trade market in the GCC, scoring 79 per cent on the Heritage Foundation's Trade Freedom Index, ahead of Saudi Arabia and Kuwait.

Charles Davis, director, Centre for Economics and Business Research (CEBR), said: "With smaller oil reserves the Bahrain government has always recognised the need to diversify its economy away from oil. Its comparatively larger manufacturing sector, compared to other GCC nations, has also given Bahrain a head start on cross border trade within the Middle East. Deepening these links, as well as other sectors of the local economy, will be important for sustaining growth over the short to medium term."

The report further found that government consumption and infrastructure developments should support growth in Bahrain of around 3.8 per cent this year, with similar levels expected for 2015-16.

With extensive infrastructure investment and fiscal expansion set to continue in Saudi Arabia, the kingdom's GDP is expected to grow 4.3 per cent this year, and rising to 4.4 per cent next year, it said.

The real GDP in the UAE is expected to increase by 4.7 per cent, with the pace of growth set to decelerate marginally in 2015-16. This is due to non-oil activities driving job creation and growth.

The high investment levels in Qatar will support growth over the medium term, with real GDP expected to be 6.3 per cent higher this year and annual growth rising above seven per cent during 2015-16.

However, a downside risk for Qatar's growth projection is the possibility of FIFA reconsidering the country's award of the 2022 World Cup.

The GDP growth in Oman is expected to rise 3.4% this year and remain broadly flat in 2015.

A strengthening in the domestic non-oil sector in Kuwait will lead to annual GDP growth of around 2.7 per cent this year, said the report.

The consumption growth and a robust pipeline of infrastructure developments will help the economy accelerate in the coming years, reaching four per cent annual growth by 2016, it added. - TradeArabia News Service

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Publication:TradeArabia (Manama, Bahrain)
Geographic Code:70MID
Date:Sep 15, 2014
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