Bahrain’s economy contracted by 3.8% year-on-year in Q1 2026, following a 4.6% expansion in the previous quarter, according to preliminary data. This was the first quarterly contraction since Q1 2021 and the sharpest decline since Q3 2020, driven primarily by a 37.2% slump in oil-related activities. The downturn in the oil sector was largely attributed to restrictions on maritime traffic through the Strait of Hormuz, which curtailed export capacity.
In contrast, the non-oil sector expanded by 2.2% in Q1 (down from 7.4% in Q4), and accounted for 90.1% of total GDP, with nine out of thirteen sectors posting positive growth. Within non-oil activities, financial and insurance services remained the largest contributor to GDP at 19.7%, recording growth of 8.6%. This was followed by manufacturing, which contributed 14.6%, public administration at 9.0%, and construction at 7.0%.
For 2025 as a whole, the economy grew by 3.5%, supported by a 4.1% expansion in non-oil activities, while oil activities edged down by 0.3%. Overall growth outpaced the government’s projection of 3.1%.
