Bahrain's banks have weathered the turmoil and lending is expected to rise this year, a Bahraini central bank official said on Monday.
"The expectation is that probably by the second half of the year we will see more (lending) growth," Khalid Hamad, an executive director at Bahrain's central bank, told reporters on the sidelines of a finance conference in Saudi Arabia.
Analysts polled by Reuters this month slashed their 2011 growth outlook for Bahrain for the second quarter in a row, to 2.7 per cent from 3.4 per cent, making it the worst performer in the region.
King Hamad bin Isa Al Khalifa has set July 1 as the start of a national dialogue to discuss reforms.
"I feel that by looking at the data and the government initiative in Bahrain, given that this year is an outstanding year in terms of the size of the budget... That will definitely give a push to more growth," central bank official Hamad said.
In May, Bahrain approved a 44 per cent rise in government spending in 2011-2012 compared to the previous two-year period.
Asked if lending in 2011 would exceed the previous year, Hamad said: "Most probably yes, because the government budget is larger than ever."
Private sector credit was up by 9 per cent year-on-year at the end of March, central bank data showed, compared to a 1.5 per cent decrease in the same period a year ago.
Hamad said that despite a period of unrest banks were still able to operate with little impact on their operations.
"During the week from March 13-17, there was not a single payment that was missed through our system," he said.