Bahrain Sees Slow Recovery for Banks as Property Prices Weigh on Lending - Bloomberg

Bahrain’s Economic Development Board said the recovery of the financial industry, which contributes about a quarter of the country’s gross domestic product, is likely to be slow as low property prices weigh on lending.

“The EDB expects the finance sector to recover only slowly from the downturn,” the government’s advisory group said in its annual report. “Given the outlook for property, wholesale banking is unlikely to expand for some time, and Islamic banking will be more constrained than expected.”

Bahrain, the smallest of the six Gulf Cooperation Council states, halted about $13 billion of projects last year as the global financial crisis sapped demand for real estate and prices fell across the Gulf. Economic growth slowed to 3.1 percent in 2009 and public debt rose to 24.2 percent of GDP in the first quarter, from 17.4 percent in the earlier three months.