The sector’s return to normalcy is expected to help offset economic losses earlier in the year and also send a strong message to investors that Bahrain is open for business.
In late August, it was announced that a major mixed-use development in Manama has been approved. The 140,000 square metre project, which will house the Manama Central Market, commercial and retail establishments, and residential apartments, will cost between $397million and $529million to complete and is expected to open within six years.
The development, to be called the Capital Trade Centre, was first announced in 2008 but was delayed due to the onset of the global economic crisis. The resumption of the project will likely be a reminder for international investors that Bahrain is ready to do business.
The contract to supervise the project’s development was awarded to Tashgeel for Commercial Buildings Management. At the contract signing ceremony in August, Bahrain’s deputy prime minister, Sheikh Khalid bin Abdulla Al Khalifa, said that he sees the project as a benchmark for the commercial, industrial and overall achievements of the capital city.
Manama Municipality’s director-general, Yousef Ibrahim Al Ghatam, agreed, saying the upside should be significant. “When I look at the benefits for the municipality, the return from this project is going to be phenomenal.”
“In the more immediate term, consumer and business confidence appears to be returning to normal, with investors interested in setting up shop in the Kingdom,” according to recent comments by the industry and commerce minister, Hassan Fakhro.
From May through the end of July, the number of companies registering with the ministry was 30% higher than in the same period last year, Fakhro said in an interview. In addition, the number of shoppers at the country’s biggest mall, City Centre, was 8.5% higher in July than a year earlier, he said.
Retail is leading the way as the government looks to build up other areas of the economy to help offset the impact of the political unrest in early 2011, as well as the effects of the global economic slowdown on the finance and construction sectors.
Indeed, the island kingdom’s annual GDP growth slowed to 1.8% in the first three months of 2011, down from a revised 3.7% in the fourth quarter of 2010, according to data from the government’s Central Informatics Organisation. In early August the Bahrain Chamber of Commerce and Industry said the economy had lost up to $2billion due to the political unrest, a setback for a country with an annual GDP of around $22billion.
Quarter-on-quarter, Bahrain’s economy shrank by 1.4% during the first quarter of 2011 as the unrest brought many businesses, particularly in the tourism sector, to a halt. This was the economy’s first quarterly contraction since the 2008 global financial crisis. In recognition of this, in June the central bank cut its economic growth forecast for this year to 3%.
Meanwhile, the Ministry of Finance reported in July that the 2010 budget deficit amounted to $1.22billion, an increase from $1.18billion in 2009. Non-OPEC member Bahrain is the only Gulf state projected to see its budget deficit continue in 2011, although robust crude prices are expected to bring some relief this year. In June, analysts polled by Reuters expected a deficit of 0.7% of GDP in 2010 and 1.4% in 2011.
But the prospect of a return to health for the retail sector is an important indicator for the kingdom’s economy. “I am now more optimistic than I was in April or May because I’ve seen the return to normality and I’ve seen things are happening by the day,” Fakhro said.