Bahrain¡¯s GDP grew by 3.9 percent in real terms in 2017 despite a sizeable contraction in the hydrocarbon sector (Figure 1). Oil sector contracted further in Q1 2018 by 14.7 percent year on year, due to oilfield maintenance. The non-oil sector grew by 1.9 percent over the same period, driven by large scale construction projects and related domestic demand growth. Notwithstanding steady growth in the real sector, increased risks associated with large current account and fiscal deficits triggered strong market reactions in the first half of 2018.
The Bahraini economy is projected to grow by 3.2 percent in 2018 and by 2.6 percent in 2019, driven by higher oil production, a raft of mega projects (e.g., a scheduled capacity enlargement at Aluminum Bahrain, Alba), may raise aluminum production capacity by over 50 percent), and continued regional support.