Bahrain expects 4.5% economic growth in 2011

Analysts' forecasts less optimistic about prospects amid continuing political unrest in the kingdom
Bahrain expects 4.5% economic growth in 2011
Bahrain Financial Harbour.
By Reuters
Wed 23 Mar 2011 09:01 PM

Bahrain's government still sees its economy growing by 4.5 percent this year, it said on Wednesday, though analysts have slashed forecasts due to unrest that brought the Gulf financial centre to a near standstill.

Pro-democracy protests led by Bahrain's Shi'ite majority against discrimination in the Sunni-ruled kingdom were crushed by the government last week.

The authorities imposed martial law and called in forces from Gulf neighbours Saudi Arabia and United Arab Emirates to help restore order. "The minister of finance stated today that Bahrain still expects to achieve 4.5 percent growth this year despite recent events," a government spokeswoman told a news conference, without giving further details.

Analysts polled by Reuters in March cut real gross domestic product growth forecasts for the small non-OPEC crude producer to 3.4 percent for 2011, from 4.2 percent expected in December.

The government has yet to release the 2010 GDP data with analysts estimating 4 percent growth.

Economic growth in Bahrain, where the financial sector accounts for about a quarter of its GDP, slowed in the third quarter to 4.3 percent year-on-year due to sluggish recovery in financial and property sectors hit by the global crisis.

"It (government forecast) is overly ambitious ... given the situation, downgrades and the challenges that lie ahead for the Bahraini economy ... unless they are expecting a very, very high growth from hydrocarbons," said John Sfakianakis, chief economist at Banque Saudi Fransi.

"The private sector will decline compared with last year as well as investments and financial services due to the crisis and tourism, which is at nil over the past few weeks," he said.

The political turmoil, which started in February, triggered a series of downgrades by rating agencies and sent debt insurance costs for Bahrain, where nearly $10 billion in mutual funds were parked last year, to 20-month highs.

Bankers have said some investors were moving money out of Bahrain, home to a $66 billion Islamic finance industry, though the scale of capital outflows from the smallest Gulf economy of 1.2 million people was hard to estimate due to a lack of data.

Worried by the unrest, the government cancelled last month an opening race of the Formulae One season, planned for March, though its supremo Bernie Ecclestone said earlier this month it could be re-scheduled at the end of the year.

Wealthier Gulf Arab countries have pledged to provide $10 billion to Bahrain over 10 years to improve housing conditions and ease social tensions.

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