Bahrain economy shrinks in Q2 as financial sector weighs

Reuters

* Real GDP falls 0.3 pct q/q vs +2.5 pct in Q1

* But economy grows 5.3 pct y/y, most since Q4 2010

* Hydrocarbon output up, financial sector drops

DUBAI, Oct 2 (Reuters) - Bahrain's economy shrank 0.3percent from the previous quarter in the April-June period, itsfirst quarterly drop in a year, largely because of weakness inthe financial sector, official data showed.

Gross domestic product, adjusted for inflation, had expanded2.5 percent quarter-on-quarter in the first three months of2013. The small non-OPEC oil producer last experienced aquarter-on-quarter contraction in April-June 2012.

On a year-on-year basis, however, GDP growth quickened to5.3 percent in the second quarter of 2013, the highest ratesince the final quarter of 2010, from 4.2 percent inJanuary-March, the data from the Central InformaticsOrganisation showed.

Limited oil resources have forced the island kingdom of 1.3million people to rely on other forms of business, particularlyfinance. But political unrest since 2011, in which thegovernment has clashed with mainly Shi'ite-led pro-democracyprotesters, has hurt Bahrain's status as a regional financialhub while increasing pressure on the state budget.

Output in the hydrocarbons sector, which accounts for aquarter of Bahrain's $30 billion economy, grew 1.2 percent inApril-June from the previous quarter, after a 1.3 percent risein the first three months.

On a year-on-year basis, hydrocarbon output jumped 18.6percent in the second quarter, as last year's drop in crude oiloutput from Bahrain's key Abu Safa field, which it shares withSaudi Arabia, was corrected.

Meanwhile the financial industry, which accounts for roughly16 percent of GDP, shrank 1.0 percent quarter-on-quarter inApril-June, the first contraction since the second quarter of2012.

In the hospitality sector, which nosedived during the 2011turmoil, output climbed 1.7 percent quarter-on-quarter inApril-June, accelerating from a 0.5 percent rise in the previousthree months.

Analysts polled by Reuters in September forecast thatBahrain's GDP growth would accelerate to 4.0 percent in 2013from 3.4 percent in 2012, before slowing again to 3.5 percentnext year.

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