Manama: Bahrain's Central Bank Governor Rasheed al-Maraj said the country's economy will probably grow at the fastest pace in three years in 2013, helping to maintain loan growth of as much as 10 per cent for a second year.The smallest (GCC) economy grew 3.7 per cent in 2012 and may expand at a "slightly" faster pace this year, al-Maraj said on January 27 in the capital, Manama, as public spending and increased political stability stimulate domestic demand. His forecast is higher than International Monetary Fund's 2.8 per cent projection and the 3.2 per cent median estimate of nine economists surveyed by Bloomberg.
Bahrain's economic recovery from unrest that broke out two years ago amid the so-called Arab Spring prompted Standard & Poor's to revise the credit outlook of the kingdom to stable from negative on January 28. The cost of insuring the country's debt for five years plunged more than three times the Middle East average in 2012, according to data provider CMA.
"We have overcome many of the economic difficulties from the past years and the situation now is more comfortable and positive," al-Maraj said.
Military and financial aid from fellow GCC states, led by Saudi Arabia, helped Bahrain retain its investment grade rating throughout the crisis, which started with Shiite-led protests for a greater share of power. Bahrain is classified as BBB at S&P, the second-lowest investment grade, and one level higher at Moody's Investors Service.
The premium investors demand to hold Bahrain's 6.125 per cent dollar bonds due 2022 over the US Treasuries' yield curve, known as z-spread, tumbled 53 basis points, or 0.53 percentage point, this year to 260 on February 1, according to dat`a compiled by Bloomberg.
Bahrain's credit default swaps declined 193 basis points in 2012 to 190, compared with an average 62 basis point-drop for Middle East nations, according to CMA. Bahrain's contracts climbed to 205 on February 1, the data show.
Still, Bahrain's recovery has lagged behind un-rated Dubai that has emerged as the closest thing to a safe haven amid regional political unrest.