BASEL: Gulf economies will grow on average 4 percent this year thanks to elevated oil prices but Bahrain will underperform the others because of political turbulence, the head of the Arab Monetary Fund said Sunday. "Prices of oil at around $100 a barrel are very lucrative for oil producers. Based on this the economic situation will continue to improve. On average 4 percent is achievable as a whole," Jassim Al-Mannai, director general of the Abu Dhabi-based AMF, told Reuters in an interview. "In Bahrain because of the turmoil, growth could be revised down a little bit," he said on the sidelines of the Bank for International Settlements. Bahrain, a regional financial center, has suffered after a month of unrest and banks and shops were closed and investors took flight. Economic losses reached $1 billion or about 20 percent of quarterly gross domestic product, according to NCB Capital estimates. A Reuters poll showed that economists slashed estimates for Bahrain's gross domestic product growth this year to 2.7 percent, on average, from 3.4 percent seen in March. For 2012 it was cut to 3.3 percent from 3.6 percent. "Because of the turbulence people are relatively concerned, especially investors, and they would like to make sure Bahrain is back to the normal situation for sure so that they can go back to business. They are watching the dialogue process," Al-Mannai said. "Foreign investors will never throw into money into the uncertain situation. It will take some time." The Gulf region is home to large US Treasury holdings, but low rates are making it unattractive for central banks to buy additional US government debt, Al-Mannai said. Negotiations aimed at raising the US debt limit and avoiding default fell apart on Thursday as Republicans walked out over Democrats' demand for tax increases as part of a deficit reduction plan. Earlier, UAE central bank governor Sultan Nasser Al-Suwaidi told Reuters that US Treasuries were unattractive and the central bank preferred other dollar-based instruments to manage reserves .
