Country Report Yemen April 2009

Summary

Political cohesion in 2009-10 could be undermined by the deteriorating public finances, rising al-Qaida activity and potential outbreaks of tribal and separatist violence in both the north and the south of the country.
The opposition coalition, the Joint Meeting Parties, and the ruling General People's Congress have agreed to postpone the legislative election for two years, but the delay is unlikely to lessen tensions over political reform.
We expect Yemen to return wide fiscal deficits, equivalent to an average of 12% of GDP in 2009-10, as oil revenue falls markedly from 2008 levels, and the government struggles to rein in expenditure.
Yemen's economic growth is likely to be held back by falling oil prices and weak government consumption. However, average real GDP growth should still rise to 5.2% in 2009-10, as Yemen's first LNG plant comes on stream.
Average inflation in 2009 is expected to decline rapidly, to 5.6%, owing to the forecast sharp drop in global commodity prices.
The current-account deficit is expected to average 13.4% of GDP in 2009-10, although Yemen's foreign reserves, equivalent to an estimated 8 months of import cover, should be sufficient to meet its financing obligations.

Four South Korean tourists and a Yemeni have been killed by an al-Qaida suicide bomber, and a subsequent second attack targeted the South Koreans' families. South Korea has urged its nationals to leave the country.
In the wake of angry denunciations locally, the Yemeni government has vehemently denied rumours that it has granted permission to the US to launch military strikes against al-Qaida in the country.
A war of words has broken out between the leadership of the Houthi rebels and the government, raising concerns about the sustainability of the ceasefire announced in July last year.
The deputy prime minister and minister of planning and international co-operation, Abdel-Karim al-Arhabi, has called for increased foreign donor aid.
According to the latest International Energy Agency data, oil output slipped to 280,000 barrels/day (b/d) in February, down from the peak level of 464,000b/d in 2003.
Enthusiasm over the start-up of Yemen LNG in June has been tempered by the al-Qaida attacks on the South Koreans, and by evidence that gas demand in the US is falling. South Korea and the US are the project's key markets.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1;15;60;70
NAICS Code: 11;23;52;72