RIYADH: Bahrain’s non-oil economy grew 2.2 percent year on year in the first quarter of 2026, despite a contraction in overall gross domestic product amid regional disruptions, official data showed.
According to a quarterly report by the Ministry of Finance and National Economy, real GDP fell 3.8 percent year on year, driven largely by a 37.2 percent contraction in oil activities, linked to restrictions on maritime traffic through the Strait of Hormuz and scheduled maintenance, the Bahrain News Agency reported.
Non-oil activities held firm, accounting for 90.1 percent of real GDP, with nine of 13 non-oil sectors posting positive growth.
“The national economy witnessed a strong performance during January and February 2026,” the report noted, adding that average wages for Bahraini workers in the public and private sectors reached their highest level ever, driven by record growth in average monthly wages in the private sector.
Ashraf I. Jarrar, international broker and asset management at United Securities, told Arab News that the figures point to “an important distinction between a temporary external shock and the underlying structure of the economy.”
He noted that the ability of the non-oil economy to keep growing through a quarter marked by regional disruption was “a meaningful signal of resilience,” adding that diversification in Bahrain is “not only about reducing the share of oil in GDP, but about building a competitive business environment” that can keep generating activity even under external pressure.
Finance leads sector gains
Financial and insurance activities, the largest contributor to GDP at 19.7 percent, recorded the highest annual growth among non-oil sectors, at 8.6 percent. Manufacturing followed with a 14.6 percent share, then public administration at 9 percent and construction at 7 percent.
Foreign investment climbs
Foreign direct investment stock grew 2.6 percent year on year by the end of the first quarter, reaching 17.6 billion Bahraini dinars ($46.7 billion), the ministry said.
Jarrar highlighted that investor sentiment “appears to have held up as well,” pointing to the 2.6 percent rise in inward foreign direct investment during the quarter. He noted that this, taken together with the non-oil sector’s performance, offers “a reasonably encouraging reading” of Bahrain’s economic progress.
Bahrain entered the world’s top 20 most competitive economies in 2026 for the first time, ranking 20th out of 70 economies in the IMD World Competitiveness Yearbook. It has climbed significantly from 30th place in 2022, while also ranking third globally for price stability in the 2026 edition.
The IMF projects Bahrain’s real GDP to contract 0.5 percent in 2026, with growth rebounding to 4.5 percent in 2027.
