Bahrain is set to see its economy contract by 1.6 percent this year on the back of the social unrest that hit the country earlier this year, Business Monitor International has said in a new report. Analysts said growth would "slow markedly" with investment, consumption and trade all expected to trend lower. "Although the Bahraini government will likely aggressively ramp up spending in a bid to shore up domestic political support, we continue to project the country posting a budget surplus in 2011 and 2012 to the tune of 2 percent and 0.4 percent respectively," BMI said. "This will be due primarily to the impact of higher oil prices and external aid from other Gulf Cooperation Council states," it added. Earlier this month, the head of the country's chamber of commerce said Bahrain's economy had lost up to $2 billion due to the recent unrest. BMI said it had revised down its average 2011 consumer price inflation forecast for Bahrain to -0.1 percent year-on-year from 1.8 percent previously. "This comes on the heels of a massive drop lower in housing prices, which contracted over 14 percent in March and April as a result of the government deciding to reduce housing installments by 25 percent," the BMI report said. Last week it was reported that Bahrain's economy shrank by 1.4 percent quarter-on-quarter in the first three months of 2011 as unrest hit businesses in the tourism sector.
