Bahrain’s economic growth slowed sharply in the final quarter of 2012 as growth in hydrocarbon output stalled and two years of social unrest weighed on the banking sector.
The economy grew 3.4 per cent in full-year 2012, government figures showed, compared to a median forecast of 3.5 per cent in a Reuters poll and up from 1.9 per cent in 2011 when the government crushed pro-democracy protests.
The small non-OPEC oil exporter has reported a decline in crude output from its key Abu Safa field shared with Saudi Arabia, which accounts for around 70 per cent of budget revenue.
Output in the hydrocarbon sector, which accounts for a quarter of Bahrain’s $30 billion economy, grew by a mere 0.4 per cent in October-December from the previous quarter and plunged nearly eight per cent on an annual basis.
Growth of Bahrain’s gross domestic product, adjusted for inflation, slowed to 0.5 per cent quarter-on-quarter in October-December from a revised 2.8 per cent in the third quarter. On an annual basis, the growth rate decelerated to 2.7 per cent from 3.3 per cent, the data showed.
The country of 1.3 million people has based its economic strategy on becoming a regional financial hub as it lacks the petrodollar wealth of its Gulf Arab neighbours.
The plan was dealt a blow from the political violence of 2011, in which the island’s Sunni Muslim rulers crushed protests led by the Shi’ite Muslim majority.
Lingering unrest continues to knock confidence in Bahrain’s economy and growth of the financial industry, which makes up around 16 per cent of GDP, slowed in the final quarter of 2012.
Last month, the central bank governor forecast 2013 economic growth of around four per cent, much less than the 6.2 per cent the government’s Economic Development Board predicted in February.
That is still more optimistic than the latest Reuters survey in which analysts trimmed their 2013 growth forecast to 3.2 per cent from 3.5 per cent seen in September, partly due to the ongoing unrest.
The country is the only GCC member facing a fiscal deficit this year.