Bahrain to press on with $2bn airport upgrade despite oil fall

A Gulf Air Airbus A330 airliner stands at the passenger terminal at Bahrain international airport. Phil Weymouth / Bloomberg

Bahrain is going ahead with its airport expansion despite falling oil prices that are expected to dent its economic growth.

The US$2 billion upgrade will increase the passenger capacity to 13.5 million in five years’ time from 9 million at present, and include a new passenger terminal and retail facilities. Cargo capacity would also increase to 60,000 tonnes a year from 38,000 tonnes.

Bahrain’s airport expansion, which was announced in 2006, was meant to aid its non-oil growth.

However, the new $2bn plans were announced during the Bahrain International Airshow in January this year.

Bahrain Airport Company (Bac) declined to comment.

The move comes at a time when plunging oil prices are expected to hit Bahrain. Oil revenues constituted 87 per cent of total government revenues and accounted for 77 per cent of overall exports in 2012, the latest year for which figures are available.

Brent crude settled at $61.85 a barrel on Friday, down nearly 46 per cent from its June peak of $115.

Among the Arabian Gulf countries, Bahrain and Oman have the highest break-even levels for their crude production and the lowest oil reserves, according to a report from the ratings agency Moody’s Investors Service last week.

“Bahrain and Oman are likely to finance any increase in fiscal deficits [next year] through sovereign debt issuance [next year],” the report said. The Gulf countries are expected to adjust their non-strategic investments to cope with the falling oil prices. The hydrocarbons sector contributed 1.8 percentage points of growth in the second quarter, up from 0.8 of a percentage point in the first quarter, according to the Bahrain Economic Development Board in September. The GDP was 5.5 per cent last year.

The non-oil private sector accounted for 3.7 percentage points of growth in the second quarter, up from 2.4 percentage points in the previous quarter.

During the first half of the year, the country announced a few infrastructure spending plans, including an expansion at Aluminium Bahrain that is expected to be ready in 2018, and a new 120-bed, 31 million Bahraini dinar (Dh302m) national oncology centre expected in 2016.

Tourist numbers have remained steady this year at about 200,000 arrivals a month and peaked at 300,000 tourists in August. A turnaround for the national carrier Gulf Air in the first half of the year resulted in revenue rising 10 per cent year-on-year and losses falling 30 per cent. The carrier did not reveal actual figures.

It also started services to Sialkot in Pakistan, Tehran, Athens and Moscow, and increased frequencies to Mashhad in Iran, Kuwait and Cairo.

Bac will host a two-day aviation development forum in April to showcase the country’s connectivity.

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