Country Report Yemen February 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 next parliamentary election is scheduled to be held in April 2009, but the risk of a postponement is high owing to a threat by the opposition to boycott the poll in protest at the alleged unfairness of the electoral process.
Yemen will return large fiscal deficits over the outlook period, of almost 15% of GDP a year, forcing the government to seek more foreign donor support.
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 authorities will allow the Yemeni riyal to depreciate more rapidly against the strengthening US dollar in 2009-10, as inflation starts to ease and oil prices fall.
The current-account deficit is expected to average 13.9% of GDP in 2009-10, although Yemen's foreign reserves, equivalent to an estimated 8.5 months of import cover, should be sufficient to meet its financing obligations.

In a video on a jihadi website, it has been announced that the Yemeni and Saudi branches of al-Qaida have merged, forming al-Qaida in the Arabian Peninsula (AQAP).
A government statement that it will step up its counter-terrorism efforts has been undermined by the news that the authorities are releasing 170 suspected al-Qaida members.
A shortage of gas has led to a surge in its price. Alleged culprits include tribesmen, who have been accused of blocking supply routes, and smugglers, who have been criticised for selling subsidised gas to neighbouring countries.
Yemen's ranking in the Heritage Foundation's 2009 Index of Economic Freedom has improved slightly, but it is still categorised as "mostly unfree".
Growth in throughput at the Aden Container Terminal has stalled, largely reflecting a fall in imports.
Yemen has announced plans to upgrade three fishing ports, as parts of a wider effort to build capacity in the fisheries sector.

Source: Country Report

This report covers the following industry codes:
SIC Code: 60;49;10;37;47
NAICS Code: 52;22;212;336;48;11