Bahrain Infrastructure Report 2010
by mahmood on 17/12/09 at 8:49 pm
New report provides detailed analysis of the Construction market
After rapid growth in real GDP during earlier years (6.5%-7.8% between 2005 and 2007), we expect slower economic growth in Bahrain going forward. However, Bahrain has not been as badly affected by the economic crisis as other countries in the region. It is believed that GDP will witness a small contraction (of -0.1%) in 2009, followed by a sluggish recovery to 1.3% in 2010. We remain cautious in our outlook for construction. We estimate that real growth in the construction sector will fall 4.64% in 2009. Marginal growth will return in 2010, and will recover to around 4% a year in 2012. However, this is far short of pre-crisis levels. Between 2005-2007 real growth in the construction sector averaged 21.7% per year. Between 2010 and 2014, by contrast, BMI forecasts that growth will stand at just 3.5% per year.
Meanwhile, according to reports in Construction Week in October 2009, Bahraini contractors are being forced to cut staff numbers. Samir Nass, the head of Nass Group, Bahrain’s largest construction company, claims that the entire construction sector is being forced to downsize, as a lot of projects are coming to an end, with few new projects being set up to replace them. Highlighting the severity of the slowdown, cement consumption has fallen by 25-30% recently. Meanwhile, a number of other major companies in Bahrain’s construction sector are said to be considering suspending their large-scale contracting operations. However, there is hope that some government-funded infrastructure projects and a number of low-cost housing developments could add some stimulus to the sector in 2010.
In a positive development for the sector, in June 2009 the partners of Al Dur independent water and power plant (IWPP) sold a 30% stake in the project and achieved financial closure for US$1.6bn, one of the largest financing arrangements in the Gulf in 2009. Both achievements are notable in the current economic climate, which has forced other sponsors of IWPPs in the region to either postpone or abandon financing operations. The two partners for Al Dur are France’s GDF Suez and the Gulf Investment Corporation (GIC), an investment vehicle owned equally by all six GCC governments. Both partners had an equal 50:50 stake in Al Dur. Following the sale of 30% of their stakes to a group of investors from Bahrain, GIC now holds a 25% stake in Al Dur and GDF Suez is the largest stakeholder, with 45%. The new stakeholders in the project are the Social Insurance Organisation of Bahrain, Instrata Bunya Fund, First Energy Bank, Bahrain Islamic Bank and Capital Management House.
There are also a number of other big-ticket developments under way in Bahrain. In October 2009, Bahrain announced that it would be expanding the Bahrain International Airport, including the construction of a two new terminals. The BHD1.8bn (US$4.8bn) project is planned over the next 30 years as passenger numbers are expected to triple to 27mn per year. Terminal 2 – which will handle 5mn passengers per year – will be commissioned in 2012. In addition, the current Terminal 1 is set to be demolished in 2014 and replaced with a brand new state-of-the-art development.
Bahrain Infrastructure Report 2010
Source: OfficialWire
