Bahrain's economy remains on a recovery path heading into 2014, boosted by a normalisation of oil output, continued improvements in non-oil business activity, and steadfast fiscal support from the government. We forecast real GDP growth of 4.3% this year and 3.4% in 2014, up slightly from our previous projections of 3.7% and 3.2%. There is the potential for a robust recovery in private consumption in 2013, helped by strong base effects after growth of only 0.7% in 2012. We forecast a 6.0% expansion in 2013, moderating to 4.0% in 2014. This has positive implications for food and drink spending.
Headline Industry Data (local currency)
- 2013 food consumption growth = +13.9% year-on-year (y-o-y); compound annual growth rate (CAGR) to 2017 = +7.6%
- 2013 soft drink value sales growth = +10.2% y-o-y; CAGR to 2017 = +5.7%
- 2013 mass grocery retail sales = +18.1% y-o-y; CAGR to 2017 = +9.5%
Key Company Trends
Promising Soft Drinks Outlook: Bahrain, much like its regional Gulf neighbours, has seen soft drinks sales soar over the last decade. Buoyed by impressive consumer spending power across the Gulf Cooperation Council, core carbonates continue to perform well. However, we believe the non-carbonated segment offers greater long-term growth potential. With bottled water and functional drinks gradually gaining momentum over our forecast period to 2017, diversification beyond core carbonates will likely shape the industry's growth trajectory.
Waitrose Ups Exposure in Lucrative MGR Market: Upscale UK-based retailer Waitrose has recently increased its foothold in the lucrative UAE mass grocery retail market. Due to launch its sixth store in Abu Dhabi, the move highlights dynamic growth prospects for value added, premium positioned produce, spurred by both increasing Emirati and expatriate demand. BMI expects Waitrose to continue to perform in both its UAE and Bahrain outlets. With both countries the only locations in which the upscale retailer has established international operations (despite an impressive array of international supply deals for the Philippines to the Turks and Caicos Islands), confidence in the growth potential of both markets is further highlighted.
Key Risks To Outlook
A marked drop in oil prices concomitant with a slowdown in growth in Europe, the US and China would pose a significant risk to the country's near-term growth outlook, and likely lead to a marked deterioration in the country's balance of payments and fiscal dynamics. In terms of the latter, Bahrain's breakeven oil price is now close to US$120/bbl, which is by far the highest in the Gulf. Meanwhile, a more pronounced regional crisis stemming from an uptick in tensions between Iran and the West could see risk premiums spike higher, particularly for Bahrain.