New figures boost economy

Bahrain’s economy grew by one per cent quarter-on-quarter in April-June after shrinking in the previous three months, data showed this week, writes Martin Dokoupil.

The kingdom saw its real gross domestic product falling by 1.4 per cent in the first three months of 2011 compared with the previous quarter, its first quarterly contraction since the global financial crisis in late 2008.

On an annual basis, GDP growth in the kingdom decelerated to 0.8 per cent in the second quarter from 1.8 per cent in January-March 2011, the sixth slowdown in a row, the data from the Central Informatics Organisation showed.
 
“The quarter-on-quarter rebound seems reasonable. In terms of year-on-year it could have been worse but it still shows that 2011 is going to be a pretty tough year for the economy,” said Paul Gamble, head of research at Jadwa Investment in Riyadh. “The issue is still the legacy of the unresolved political tensions that we had earlier in the year have made the private sector very cautious.”

Bahrain, a financial hub where nearly $9 billion in mutual funds is parked, had been rocked in February and March by anti-government protests.

Around 30 people – amongst them protesters and police officers – died during the unrest which brought in Gulf troops, closed banks and shops and triggered some capital flight. At the time, NCB Capital estimated economic losses at $1 billion, which made up 17 per cent of the first quarter GDP.

Analysts polled by Reuters in June slashed their 2011 growth forecasts to 2.7 per cent from 3.4 per cent expected in March.

“What seems to happen obviously is further slowdown,” said Giyas Gokkent, head of research at National Bank of Abu Dhabi. “We will have to see the third quarter for hopefully a bounce because of establishment of some stability.”

In July, Central Bank of Bahrain Governor Rasheed Al Maraj expected the economy to expand by three per cent this year, less than 4.5 per cent seen by the finance ministry in March.

Bahrain’s financial sector, which accounts for around a quarter of the GDP, has been slowly picking up from the global financial crisis and a regional property crash. It grew 1.7 per cent year-on-year in real terms in April-June, up from a 1.3 per cent rise in the previous quarter.

Hotels, the most heavily hit by the unrest, booked a 29.3 per cent drop in the second quarter after a 30.3 per cent output slump in January-March.

The real estate sector, which has yet to return to levels seen before the global crisis, was down 5.0 per cent in the second quarter, the data showed.

Transport and communication and government services remained the main GDP drivers, analysts said, growing at an 8.6 per cent and 4.9 per cent annual clip, respectively.

Output of the hydrocarbon sector, which accounts for around one third of the economy, was up 1.9 per cent in real terms compared with the same period a year ago. It jumped 43.5 per cent in nominal terms as crude prices soared to $115 per barrel in May.

Bahrain’s nominal GDP increased by 19.8 per cent year-on-year to BD2.4 billion ($6.3 billion) in the second quarter, the data also showed.