Bahrain’s fixed exchange rate policy has led to a “high degree of economic and price stability,” said the country’s central bank in a report, because it is the currency peg to the US dollar that has helped the island develop a financial services sector. Financial services has now surpassed oil as the largest contributor to economic growth; it contributed 25.5% to GDP in 2006 at BD4.1 billion [$1.12 billion], the central bank said in a study on the banking sector’s growth in 2007.
Total bank assets were $233.2 billion at the end of October, up 33% from a year earlier, the central bank said, adding that assets of Islamic lenders jumped 85% over the same period to $18.8 billion, it added.
Bahrain’s government said on Sunday it was looking into ways to ease the impact on citizens from a rise in the cost of living in the Gulf Arab kingdom, which it said reflected global surges in prices of basic goods. The official Bahrain News Agency (BNA) reported that, “The cabinet decided to ask the ministerial financial and economic affairs committee to hold an extraordinary meeting yesterday to study the solutions debated by the cabinet.”
Although inflation in the island state was the lowest in the Arab side of the Gulf in 2007, it hit Bahrainis harder due to relatively lower wages.
Arab News, January 8, 2008