MANAMA //At the height of the Arab Spring-inspired demonstrations last year, hotels in Bahrain's capital hit rock bottom, with occupancy rates in single digits. It is one of the reasons the government pushed so hard to hold the Formula One race last month - to get the word out to investors worldwide that Bahrain is back in business.
But there is another economic crisis in Bahrain, and it is largely internal. Consumers have started taking sides in a political conflict, boycotting enterprises frequented by or owned by one side or another.
"We're facing not only a political crisis but a sectarian one. And now it's out in the open; people think that it's normal," said Yaqoub Al Slaise, a young Sunni activist who works with the media office, The Gathering of National Unity (TGONU), a group formed last year to oppose the Shiite protesters. "People say, 'I won't buy from Sunni or Shia'."
Bahrain has had near daily protests since the Shiite-led protests began in February of last year. Opposition groups sought a greater political voice in the Sunni-ruled nation and at least 50 people have died in the unrest.
These days, when you meet a Shiite in Bahrain, for example, the venue will likely be a branch of a coffee franchise run by a prominent Shia businessman, Faisal Jawad. Meet a Sunni, and he will refuse to see you there.
Shiite customers frequent Mr Jawad's groceries and stores but, late last month, a security camera caught a group of young men joining members of the police, a traditionally Sunni-dominated institution, in trashing one of the outlets. Mr Jawad is not the only target: a group of Sunni youth have circulated a booklet listing shops owned by Shiites that they urge their supporters to boycott.
"Boycotts of Shia or Sunni-owned businesses are increasingly prevalent, friendships have been severed," said Matthew Hardeman, a risk analyst for RTI Forensics in Bahrain. "It gives you an idea of just how unrelenting and deep the divide has become."
Economic sectarianism is nothing new in Bahrain, though rarely has it reached such levels. Jobs in the security sector have traditionally gone to Sunnis, argues Justin Gengler, a researcher at the Social and Economic Survey Research Institute in Doha. Mr Gengler did a survey in 2009 and found that 13 per cent of Sunni households had someone in the police or military, while not a single male Shiite reported the same.
Bahrain's economic backslide came after an impressive decade of reform and growth, much of it directed by Crown Prince Salman bin Hamad bin Isa Al Khalifa, who oversees the Economic Development Board (EDB). The Prince oversaw the opening of markets and the signing of a free-trade agreement with the United States.
"Before the uprisings, Bahrain became increasingly central [in the region]," says Mr Aymel. "It was instituting the right kinds of reforms and investors viewed that really positively."
By the late 2000s, GDP was up 70 per cent, exports had increased 116 per cent, and manufacturing output rose 80 per cent, according to the EDB. In 2010, the agency projected growth rates reaching 7.2 per cent by 2015.
Yet now, with Bahrain's economy on hold, the fragile social compact it produced is fraying. Sunni political groups blame the Shia protesters. "It's very sad. Every day there's burning tyres, blocked roads. The small businesses especially are suffering too much," said Nassar Al Fadhala, a former MP for Bahrain's wing of the Muslim Brotherhood.
"The [Shia] political parties ... are affecting economic growth," said Dr Shaikh Al Mahmood, the leader of TGONU, who said that people's priority is simple: "bread".
Shia protesters argue that the government has lagged in instituting reforms. At the height of the demonstrations last year, hundreds of workers, mostly Shia, were sacked from their positions, and while some progress has been made to reinstate them, labour unions say that many have been demoted or reassigned. The continuing detention of protesters also decreases the likelihood that Shiite protesters will stand down.
Pressures on the government to improve the economic situation are increasing. One of the major demands of the Sunni political groups is an improvement in public housing. Bahrainis whose income is below a threshold can apply for government accommodation, but the standard waiting time is about 20 years.
The government has moved to meet some of these demands.
On April 11, Manama announced that it would construct 10,000 new housing units in 2012 and 2013, hoping to clear some of the backlog.
The government's budget deficit is up five-fold from its level just a decade ago, but the GCC, in an initiative led by Saudi Arabia, Bahrain's wealthy neighbour, has pledged its support for the ruling family and promised US$10 billion (Dh36bn) over the next five years to the governments of Bahrain and Oman.
Meanwhile on the streets, business is far from usual. "The world is not going to wait for Bahrain," said Jasim Hussein, a former parliamentarian for the Shiite opposition party Al Wefaq, who resigned at the height of the protests last year. "The capital is going to Dubai and Qatar."
This story was altered on May 22, 2012. The name of Matthew Hardeman, the risk analyst for RTI Forensics in Bahrain, was spelt incorrectly.