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Area: 527,968 sq. km

Population: 28,284,000 (2014, est.)

Capital: Sana’a

GDP: USD 43.2bn (2014, est.)

Exports: USD 7.041bn (2014, est.)

Imports: USD 10.39bn (2014, est.)

Currency: Yemeni Rial (YER)

Exchange rate: 1 EUR = 214.880 YER (01/2016)


Economic Structure and Development:

After a significant drop in GDP of -12.7% in 2011, the Yemeni economy is estimated to have experienced a GDP growth of 6.0% in 2013. Why this is the positive development, the growth cannot completely compensate for the preceding drop. Obstacles on the path towards further economic recovery are manifold and include the dependence on hydrocarbon production, the lack of economic diversification, the tense state budget due to increasing public sector wage bill and high subsidies, and the sabotage attacks on the important or production sector. Furthermore, consumer price inflation is still stands high, at 9.9% in 2012.

In particular, the dependence on all production seems problematic, since the countries resource deposits are almost depleted. Nonetheless, all production is still accounts for about 70% of government revenues, although production has been declining since its all-time high of 460,000 bpd in 2002, down to only 180,000 bpd in 2012. That intensified production of liquefied gas can partly compensate for this decline in the medium-term. Acts of sabotage on the infrastructure of the hydrocarbon sector are also partly account for the low production levels. In order to secure Yemen’s economic stability over the long term, diversification of the economy is crucial. This has to include, among other steps, the revival of the crippled chosen sector, the promotion of non-oil industry and a reform of the agricultural segment. The latter consumes 90% of the water resources in an already water-scarce country while only contributing 8% to the country’s GDP. Furthermore, Qat cultivation takes up most of the agricultural land, which leads to food shortages and the need to import between 85% and 95% of the country’s food. Non-oil industries in Yemen currently only account for a marginal share of GDP and are mainly constituted by small family-run enterprises, which are not competitive in a bigger market.

Another important precondition for Yemen’s economic recovery is a reform of government expenses. Due to an increasing wage bill for public sector employers, which is exceeded 11% of the GDP, high levels of subsidies and small tax revenues (only 7% of the GDP), the state budget of USD 12.6bn can only be used marginally towards promoting economic development. One of the consequences is the dependence on international financing of projects.

Economic Outlook:

The future development of Yemen’s economy depends heavily on the implementation of the political transition process, the reform of state expenses, the continuation of international assistance flows, poverty and unemployment reduction, and diversification of the economic structure. The finalisation of the National Dialogue Conference in January 2014 marks an important step for the country’s political transition process and is now to conclude with the adaption of a new constitution and national elections. The effective implementation of the new constitution, the creation of binding legal frameworks for investment, and the stabilisation of the security situation are essential preconditions for an economic recovery, in particular for the private sector. This political development also has to include a clear decision on stages of the south in order to prevent recurring conflicts and a marginalisation off of the country. Concerning the state budget, the new government will have to undertake reforms of the currently excessive subsidies system and to take measures to increase tax revenues, which in 2012 accounted for only 7% of the countries GDP. The gain surplus can then be allocated towards the necessary reduction of poverty and the creation of employment opportunities. In addition to an internal restructuring of the state expenses and revenues, Yemen will nonetheless remain reliant on international assistance to avoid external payment problems in the coming years.

Another essential element other sustainable economic development in Yemen is the diversification of the economy in order to reduce the countries dependence en it’s already declining reserves. Besides the increase in tax revenues, the promotion of liquefied gas production and another sectors of the Yemeni economy is necessary in order to raise non-oil revenues and create a sustainable basis for economic growth in the long-term. This also includes tackling the over exploitation of the countries water resources due to agricultural production, which is dominated by the cultivation of Qat, and the failure to meet for supply needs. A reduction of food imports can serve to alter the current negative trade balance. Positive signs for the future economic-development of Yemen are predicted recovery of GDP growth to 3.4% in 2014, and 3.9% and 3.8% in 2015 and 2016 respectively.

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