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Richard Thompson Editorial Director MEED Outlook 2017 Bahrain British Business Forum Manama 30 March 2017
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Page 1: Bahrain British Business Forum | Bahrain British …bbbforum.org › wp-content › uploads › 2017 › 06 › Bahrain-Outlook...2017/03/30  · Deerat Al Oyoun : (404 Villas) Diyar

Richard ThompsonEditorial Director

MEED

Outlook 2017Bahrain British Business ForumManama

30 March 2017

Page 2: Bahrain British Business Forum | Bahrain British …bbbforum.org › wp-content › uploads › 2017 › 06 › Bahrain-Outlook...2017/03/30  · Deerat Al Oyoun : (404 Villas) Diyar

8,613 articles

734 on Bahrain

3,343 News

4,426 Tenders

705 analysis

46 sectors

2.3m page views

10,187 users

5:51 mins/visit

4.5 pages/visit

89 videos

www.meed.com

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Bahrain prepares to tender Al-Dur 2 IWPP – 29 Mar

Bahrain plans multibillion dollar coast strip – 27 Mar

Bahrain receives bids for sewage plant – 19 March

GFH in merger talks with Shuaa – 15 March

Bahrain light rail tender expected in H1 - 27 Feb

Firms bid for Bahrain airport packages – 26 Feb

Bahrain receives bids for island project – 26 Feb

Construction buoyed by developments – 15 Feb

Local group appointed for housing project – 30 Jan

Recent MEED headlines

Source: meed.com

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Kingdom of Bahrain

Page 5: Bahrain British Business Forum | Bahrain British …bbbforum.org › wp-content › uploads › 2017 › 06 › Bahrain-Outlook...2017/03/30  · Deerat Al Oyoun : (404 Villas) Diyar

GDP: $33.9bn

Population: 1.3 million

2017 GDP growth: 1.8%

Inflation: 2.5%

GDP/capita: $25.2

Govt debt: 82%

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The region’s pioneer

1933: First Gulf Arab state to discover and produce oil

1960s: First to embark on economic diversification

1970s: Established as regional financial hub

1980s: Manufacturing hub around Alba smelter

1990s: Tourism around ecology, autosport and history

2000s: Real estate boom around financial sector

2005: Liberal political reform and social inclusion

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Lasting achievements

Diversified economy

World scale aluminium

Regional logistics hub

Centre for finance

International investment

Brand Bahrain

Oil21%

Other20%

Financial Corporations

16%

Manufacturing

Government services

Transport & communications

Real estate & business Trade

5%4%

7%

13%

Bahrain GDP by sector, 2015Source: Bahrain Central Bank

14%

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Bahrain’s journey since 2011

7-10%/year average GDP

annual growth, peaking

2000-2010

2011,

growth

hit by

political

protests

2011-2017,

growth below

6%/year 20162.1%

20171.8%

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Crude hit 30-year low before recovering

Surplus becomes deficit

Capital spending under review

Restructuring in government and business

Liquidity squeezed by fall in govt deposits and debt

Banks increase provisioning for non-performing loans

Economy hit as rents, spending and travel falls

Payment delays created cash flow crisis

Aleppo, Yemen and Syrian refugee crisis

Rise of nationalism in US and Europe

2016: A challenging year

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GCC growth hit 7-year low in 2016

0

20

40

60

80

100

120

0

1

2

3

4

5

6

7

8

9

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

MENA GCC Ave oil price ($/barrel)

Real GDP

growth

(%)

Oil price

($/barrel)June 2014

Oil prices

crash from

$114/barrel

peak

Jan 2016

Oil prices

hit 30-year

low of

$26/barrel

2016: Growth slides as

governments cut spending

2015: Governments use

reserves to maintain spending

Source: IMF, World Bank, BP, MEED

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GCC project activity slumps

$61bn fall in value of project activity as completions outpaced awards

$166bn of contracts completed in 2016 while only $105bn awarded

Source: www.meed.com; MEED Projects

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GCC contract awards 2015/16 ($m)

0

10,000

20,000

30,000

40,000

50,000

60,000

Bahrain Kuwait Oman Qatar SaudiArabia

UAE

2015

2016

Source: MEED Projects

34% fall in value of GCC contract awards to $117bn from $177bn

Bahrain was the only market to grow in 2016

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Source: MEED Projects

GCC contract awards by sector, 2015/16 ($m)

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2015 2016

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Projects market growth has stalled

Gulf up 1.1% YoY to $3.3tn

GCC flat at 0.0% to $2.6tn

Iran up 16.3% to $312bn

Kuwait up 3.8% to $256bn

Saudi Arabia up 1.9% to $1tn

UAE up 0.6% YoY to $856bn

Oman down -0.6% to $173bn

Iraq down -1.9% to $360bn

Bahrain down -4.4% to $69.7bn

Qatar down -9.9% to $256bn

Value of all projects planned or underway in the Gulf ($bn)

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The new normal

Oil expected to remain in $50-$60 range for medium term

IMF forecasting Brent average of $50.1/barrel in 2017

Rising gradually to $57.5 by 2021

Source: ft.com

$50/barrel

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The impact of low oil

Bahrain Kuwait Oman Qatar Saudi Arabia UAE

$50/barrel

Bahrain fiscal breakeven oil price in 2016 was $92/ barrel, Opec

reference basket price was $39.5/barrel

Mena exporters lost $360bn in oil revenues in 2015, down 23% and16% in 2016

Fiscal breakeven point ($ a barrel)

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GCC Bahrain Kuwait Oman Qatar Saudi Arabia UAE

The growing fiscal black holeGCC fiscal deficit in 2016 was about 12.8% of GDP

2016-2019, Bahrain, Oman, Kuwait and Saudi Arabia average annual fiscal deficit of 10%

GCC must finance a total budget deficit of $765bn between 2015-21

Riyadh needs to raise an estimated $389bn by the end of 2021

Source: S&P; MEED

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Balancing the books

Fiscal consolidation – cut spending, restructuring, job cuts, efficiency

Diversify non-oil revenues – taxation, fees, private sector

Structural reforms – privatisation, SMEs

Energy reform – subsidy cuts, diversify, IPP/IWPP

PPP – Energy, water, housing, transport

Diversifying funding – new sources, ECAs, IPO

Source: www.meed.com

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Diversification has allowed economy to be resilient

Government infrastructure investments a key driver

Supported by GCC partners – Riyadh, UAE, Kuwait

Supported by proximity to Saudi Arabia

Fall in oil has squeezed government finances

Government spending being cut

Where is Bahrain today

Source: www.meed.com

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Manama’s investment drive

EDB reforms facilitating investment and stimulate SME sector

40 new companies invested $281m in 2016, compared to

$142m from 22 companies in 2015

New hotels as part of tourism drive to be 5.1% of GDP by

2024 up from 4.1% by getting Saudis to stay longer and

diversify visitors

Construction sector grew of 7.2% in 2016 due to retail and

hospitality developments across the country

EDB says total value of projects that broke ground doubled in

2016 and the value of tendered projects rose by 21% to

$4.3bn

Source: www.meed.com

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Source: www.meed.com

Project ClientValue

($m)

Aluminium Smelter Expansion: Phase 6 Alba 2,500

Bahrain International Airport Upgrade: Terminal Expansion BAC 1,100

Alba Power Station 5 Alba 800

Bahrain Gas Plant (BGP 3) Banagas 355

400 kV Transmission Network: Substations Package MEW 177

East Hidd Housing Project : Infrastructure Package I MoH 161

Bahrain Financial Harbour: Harbour Row GFH 150

400 kV Transmission Network: Cables Works for Phase 2B MEW 107

Alba Power Station - Power Distribution Package Alba 100

Field Pipelines and Sitra Storage Expansion Project BNGEC 99

Island 10, 11 & 12 : Infrastructure Package MoH 95

Catamaran Complex at Seef Alyal R E 84

Deerat Al Oyoun : (404 Villas) Diyar al Muharraq 80

Infrastructure & Maintenance Works MoH 80

East Hidd Housing Project : 740 Villas MoH 75

Top Bahrain projects awarded 2016

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Growth to slow to 1.8% in 2017 due to austerity

Challenge is to maintain 3.9% non-oil growth

$32bn pipeline of schemes in next 5 years with

estimated $30bn on infrastructure and industrial

sector spending over the next 10 years

Funding secured from GCC Development Fund but

future growth threatened by spending cuts

Construction has weathered the storms, says CBRE

Sector grew of 7.2% in 2016 due to ongoing retail and

hospitality developments across the country

Future growth threatened amid reduced spending

Bahrain Outlook

Source: www.meed.com

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• Aldur II IPP to be tendered in May

• $3.5bn development of northern cities housing

• $5bn Sitra refinery expansion

• Second causeway

• Bilaj al-Jazayer beach strip development

• 25km Bahrain light rail BOT tendered H1 2017

• WWTP/STP expansion programme

• Several major real estate master developments

• Bahrain International Airport expansion

• Hotel and retail sector

Future projects

Source: www.meed.com

Page 24: Bahrain British Business Forum | Bahrain British …bbbforum.org › wp-content › uploads › 2017 › 06 › Bahrain-Outlook...2017/03/30  · Deerat Al Oyoun : (404 Villas) Diyar

Source: MEED Projects

Value of Bahrain future projects by sector ($m)

Chemical$4,000

11%

Construction$11,517m

33%

Gas$600m

2%Industrial $206m 1%

Oil$4,220m

12%

Power$4,203

12%

Transport, $9,518m

27%

Water$650m

2%

$30,690m of projects announced but not yet awarded

Page 25: Bahrain British Business Forum | Bahrain British …bbbforum.org › wp-content › uploads › 2017 › 06 › Bahrain-Outlook...2017/03/30  · Deerat Al Oyoun : (404 Villas) Diyar

Outlook

2017 will be another challenging year but market improving

Higher oil prices will ease pressure on government finances

Fiscal consolidation and reform policies will shape agenda

Consolidation will hit private and non-oil sector activity

Project spending likely to be around 2016 levels but could fall below

Financing will be a primary challenge as market conditions harden

Reform and fiscal consolidation will get progressively harder

Source: www.meed.com

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Outlook

Source: IMF

Real GDPgrowth (%)

Average 2009-2013

2016 2017

GCC 1.7 2.3

MENA 3.1 2.9

Bahrain 3.6 2.1 1.8

Kuwait 1.9 2.5 2.6

Oman 4.8 1.8 2.6

Qatar 10.9 2.6 3.4

Saudi Arabia 4.1 1.3 2.0

UAE 2.6 2.3 2.5

Egypt 3.2 3.8 4.0

Iran 0.8 4.5 4.1

Iraq 7.8 10.3 0.5

Weakest MENA growth since the 2009 due to

tightening fiscal policy

Saudi Arabia will continue to be slow but

momentum will pick up on Vision 2030 reforms

Kuwait growth will remain weak despite strong

balance sheet

Qatar will be sluggish as fiscal policy becomes

more restrictive and credit growth eases

Bahrain and Oman will underperform due to

austerity

Egypt will is expected to endure a painful 2017

following the effective devaluation of the pound

Inflation is expected to rise, and monetary and

fiscal policy will be tightened further.

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Source: MEED Projects

2017 Outlook for GCC Contract Awards ($m)

0

10,000

20,000

30,000

40,000

50,000

60,000

Bahrain Kuwait Oman Qatar Saudi Arabia UAE

Best case Worst case

2017 best case = $151bn

2017 worst case = $112bn

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Other disruptive influences

Energy reform

PPP

New finance

Climate change & COP 21

Efficiency and optimisation

Digitalisation & IoT

Cybersecurity

Defence & securit

Refugees

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The Taxman cometh

VAT

GCC to introduce 5% value added tax (VAT) from the start 2018. Impact unclear until

national legislation in place but operational challenges should be expected:

• Collecting and remitting VAT will have set-up and compliance costs

• Cash flow under pressure from paying VAT on purchases before reclaiming

• Pressure to absorb cost in highly competitive, low margin sectors

• Renegotiating contracts could pose additional challenges

• Risk of errors in tax collecting and accounting could see companies liable

• Costs of staff training update or replacement of IT infrastructure

• VAT and government cutbacks could reduce disposable incomes

Companies involved in supplying goods and services between countries

or free zones likely to face additional complexities as agreements vary

Source: www.meed.com


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