Bahrain’s economic growth slowed in the final three months of 2011, a sign that political unrest is continuing to weigh on businesses.
Inflation-adjusted expansion in gross domestic product deccelerated to 1.3 per cent quarter-on-quarter from 2.2 per cent in the third quarter of 2011, the statistics office said on Wednesday. On an annual basis, GDP expanded 3.2 per cent in the fourth quarter after a 2.9 per cent rise in July-September.
Overall, economic growth in the small non-OPEC oil exporter roughly halved to 2.2 per cent last year, the worst performance since a 0.3 percent contraction in 1994, when oil prices fell to $13 per barrel. They are currently above $120.
“Given the high oil prices last year, for an oil producer a two per cent growth is not particularly impressive,” said Gabriel Sterne, a senior economist at Exotix in London.
“That is mainly due to the political tensions that we have seen. Nothing was really resolved to the satisfaction of all parties.”
The Sunni-controlled island kingdom, a Gulf financial hub, was hit hard in February and March by its worst sectarian unrest since the 1990s, which forced banks and shops to close and triggered an outflow of funds. Total investment parked in Bahrain’s mutual funds dropped by nearly $800 million last year to $8.4 billion, central bank data show.
Last year’s economic growth “is satisfactory in light of current economic challenges and the economic outlook in the near term looks positive”, Central Informatics Organisation president Mohammed al-Amer said as he announced the GDP data.
“Improving local and global indicators are also expected to result in economic stability (and) encourage local and foreign investors to reconsider shelved investment decisions. However, restoration of economic growth rates which were prevalent before the crisis will take some time,” he said.
Output growth in the hydrocarbon sector, which accounts for a third of Bahrain’s $26 billion economy, more than halved to 2.4 per cent quarter-on-quarter during October-December, the data showed.
The real estate and business activities sector shrank 4.8 per cent, a worse performance than it posted during the first quarter of last year when the uprising occurred. The hotel sector fell 4.8 per cent after a 20.8 per cent jump in the previous quarter.
Clashes still occur daily between riot police and youths in Shi’ite districts of Bahrain. The government describes the youths, who throw petrol bombs at police, as vandals and says opposition groups should do more to rein them in.
If oil prices stay high, however, analysts think Bahrain’s economy may pick up moderately this year because of strong government spending, even if the private sector remains sluggish.
“We are expecting an improvement in growth. We think government spending is going to be a key growth driver in the region and that includes Bahrain,” said Khatija Haque, senior economist at Emirates NBD in Dubai. She has a 3.3 per cent GDP growth forecast for Bahrain this year.
Bahrain predicted 2012 government expenditures of KD3.1 billion ($8.2 billion) in its two-year budget before the protests broke out. It boosted spending by 22 per cent from its original budget target in 2011, but has not revealed changes for 2012 despite announcing public sector wage rises last year.