Bahrain's economy shrank by 8.9% in second-quarter amid coronavirus restrictions

FILE PHOTO: A Bahraini woman walks through a local souq as she looks for clothes for her children in Manama, Bahrain, August 19, 2018. REUTERS/Hamad I Mohammed/File Photo

DUBAI (Reuters) - Bahrain’s economy contracted by 8.9% year on year in the second quarter, government data showed on Sunday, as the small Gulf state suffered from restriction measures to contain the new coronavirus.

Hotel and restaurant activity declined by 61.3% compared to the same period a year earlier.

“This is mainly due to the widespread restrictions imposed on tourists, hotel and restaurants and other related economic activities in the country due to the pandemic COVID-19 virus,” the government said in a statement.

The oil sector increased by 3.2% at constant prices, while the non-oil economy declined by 11.5%.

S&P Global Ratings said this month Bahrain’s real GDP could contract by 5% this year, due to the pandemic and the impact of lower oil prices on consumption and investment activities.

Its oil sector, however, is not expected to decline due to the fact that Bahrain is a small producer and is not subject to OPEC production cuts, the ratings agency said.

Bahrain was bailed out in 2018 with a $10 billion aid package from wealthy Gulf neighbours to avoid a credit crunch.

The International Monetary Fund has said it expects Bahrain’s fiscal deficit to jump to 15.7% of gross domestic product this year from 10.6% in 2019.

Reporting by Davide Barbuscia; editing by David Evans