A research note published by the Institute of international Finance (IIF) on Bahrain, considered that the lingering social and political unrest has resulted in a patchy economic recovery. Real growth is expected to rise from 2.2% in 2011 to 3.7% in 2012, triggered by a surge in oil production and a recovery in non-hydrocarbon output from a low base.
In fact, the outbreak of the social and the political unrest last year, mostly affected the retail trade, tourism, business services and construction sectors which are likely to experience the biggest rebound this year.
The surge in private credit would positively impact retail trade. Construction activity, which declined last year, should benefit from governmental contracts for housing and other social infrastructure. The financial sector, which is the largest in the Bahraini economy, accounting for nearly a quarter of the real GDP, managed to record a positive growth although slowing down from 3.0% recorded in 2010 to 2.3% in 2011. Indeed, the sector has been hit by several storms in the last few years, but still has managed to come through in reasonable shape.
The wholesale, mainly offshore banking, has suffered the most with assets having fallen markedly over the past few years. In contrast, retail banks assets have risen steadily over the past couple of years after a small dip in 2009. Prospects for the sector overall have improved and some of the conventional wholesale banks have acquired some good assets from foreign banks that withdrew from Bahrain last year. Other sectors that stood strong were oil and gas, manufacturing, transport and communications, and government services.
Bank Audi – The Mena Weekly Monitor