* Major part of unrest impact over
* Country’s debt within comfortable limits
By Shaheen Pasha
MANAMA, Nov 23 (Reuters) - Bahrain’s economic growth is expected to be positive in the third quarter as the economy has already overcome a major part of the impact of social unrest earlier this year, its central bank governor said on Wednesday.
The island kingdom, a Gulf financial hub, was rocked in February and March by its worst public unrest since the 1990s, which closed banks and shops and triggered capital flight.
Asked about the impact of the turmoil on economic growth, Rasheed al-Maraj told reporters: ”A major part of that we are already (passed), as the figure shows for the second quarter and hopefully for the third quarter.
“For the third quarter, from feedback we are getting, it will be positive growth,” he said on the sidelines of an Islamic finance conference in Bahrain’s capital.
Bahrain’s economy grew by 1 percent quarter-on-quarter in April-June after shrinking in the previous three months, official data shows, but annual growth decelerated to its slowest pace since 2008 as the impact of unrest continued to stifle activity.
The small non-OPEC oil exporter saw its real gross domestic product falling by 1.4 percent in the first three months of 2011 compared with the previous quarter, its first quarterly contraction since the global financial crisis in late 2008.
”I think we are going to see growth quarter-on-quarter,“ said Farouk Soussa, Middle East chief economist at Citi. ”We are going to see the economy start to pick up from its low point in the first half of this year when it was impacted by the violence.
“But on a year-on-year basis, I don’t think that it is likely that we are going to see growth in the economy” in the third quarter of 2011. Bahrain has not announced when it will release third-quarter data.
Analysts polled by Reuters in September forecast Bahrain’s economy, the smallest in the Gulf, would grow by 2.0 percent this year, below the 4.5 percent expansion seen in 2010. Growth is expected to pick up to 3.2 percent in 2012.
Maraj also said Bahrain’s debt was “still within comfortable boundaries”.
The International Monetary Fund forecast in October the country’s gross government debt would rise to 34.2 percent of GDP this year, the highest level since 2004, from 32.0 percent in 2010.
Bahrain, which pegs its dinar to the U.S. dollar, boosted its government spending by 22 percent this year from its original target to ease social tensions. It sold a $750 million Islamic bond earlier this month, which was its first sovereign debt issue since March 2010.