• PPPs to play role in infrastructure development
  • Bahrain’s government budget under pressure due to lower oil prices
  • Government says there are more than $22bn-worth of infrastructure projects in the pipeline

The growing strength of the private sector in Bahrain will help counter any potential cuts in government spending in this year’s budget, according to Jarmo Kotilaine, chief economist at the country’s Economic Development Board (EDB).

“There is a lot of infrastructure being built thanks to funding mechanisms that have nothing to do with the government budget,” he told reporters in Manama in early March.

Due to current low oil prices, it is anticipated the Bahraini government will have to consider cutting capital expenditure plans in its yet-to-be-announced budget.

Bahrain has an estimated breakeven oil price of about $125 a barrel, but with oil prices forecast to hover around the $55 a barrel mark for the rest of this year, the government’s finances will be under pressure.

Capital expenditure on infrastructure is the most likely expense to be cut by Manama, with social spending being a more politically sensitive area of investment.

Kotilaine says increasing private investment, foreign direct investment and funding from the GCC Development Fund will help finance new infrastructure, filling the gap if the government cuts back on spending.

Healthcare and education are also attracting rising levels of private funding.

Public-private partnerships (PPPs) will play a key role in supporting infrastructure, particularly in affordable and social housing, says Kotilaine.

“Bahrain has been a regional pioneer of PPPs and one area where we are scaling up,” he says.

According to the EDB’s quarterly updates, Bahrain’s construction sector saw significant growth in the third quarter of 2014. It grew at an annual pace of 12.3 per cent, compared with annual growth of 3.6 per cent in the second quarter.

EDB says there are more than $22bn-worth of infrastructure projects in the pipeline.

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