Country Report Yemen May 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 13.7% of GDP in 2009-10, although Yemen's foreign reserves, equivalent to an estimated eight months of import cover, should be sufficient to meet its financing obligations.

Security in the south has continued to deteriorate, with protestors demanding independence and a number of soldiers killed in violent clashes.
In a blow to the president's prestige, a powerful ally of his, Tariq al-Fadhli, has defected to the newly formed Southern Movementwhich includes a host of former southern soldiers and "sultans".
In an embarrassment for the government, a US Internet phone company, Latin Node, has pleaded guilty to making payments that the company knew would be passed on to Yemeni officials.
A meeting between Yemen's key donors and the government has been convened to discuss the slow pace of disbursement of aid monies pledged at the 2006 London donor conference.
A mid-term review of Yemen's five-year plan has been released, revealing that a number of targets are set to be missed, owing in part to security problems, environmental setbacks and the slow pace of reform.
Concerns have risen that agricultural production in the eastern province of Hadramawt may never regain its former levels, following the serious floods that inundated the region last October.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11