Yemen's economy risks recording negative growth

Officials at the Central Bank of Yemen have said that the economic crisis could worsen if political unrest continues. [Faisal Darem/Al-Shorfa]

Officials at the Central Bank of Yemen have said that the economic crisis could worsen if political unrest continues. [Faisal Darem/Al-Shorfa]

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Yemeni officials and economists say the growth rate of the Yemeni economy will decline significantly this year, possibly facing negative growth levels, due to the political crisis that has rocked the country since February.

The Yemeni economy grew at a 5-6% rate over the past five years according to Yemeni government official data, but a number of experts told Al-Shorfa that the growth rate could drop to -1% or -2% this year. At best, it could fall back to 0%, they said.

Deputy Minister of Planning and International Co-operation Dr. Mutahar al-Abbasi told Al-Shorfa that the country's political crisis has led to stoppages in most investment sectors, as well as stoppages in the activities of some private sectors.

"The general budget is facing difficulties, among them the stoppage of the public investment programme, coinciding with a cut-off in aid from donors, which will cause the rate of economic growth to drop precipitously," he said.

However, al-Abbasi said that halting expenditures of general budget allocations to the public investment programme will generate a surplus that ought to mitigate the growth shortfall.

"A number of sectors, such as the agricultural sector and some business sectors, are still active due to existing market demand for their products, which will spur continued production, despite the rise in prices due to the rise in oil derivatives prices," he said.

Dr. Hassan Farhan, professor of economics at the University of Sanaa, attributed the drop in growth to several factors, including the stoppage of the public investment programme, whose contribution to the GDP is 28-30 %.

"We are in the last quarter of the year; should there be a breakthrough in the political crisis, new investments will not provide motivation, because time is very short," he said.

The second reason for the decline in the growth rate, according to Farhan, is the halt of most of the private sector's activities due to the lack of oil derivatives or their high prices, and the almost total loss of electricity.

The private sector, according to Farhan, represents 70% of the gross national product, and its decline will drag the growth rate down.

He explained, "This sector is semi-paralysed, because small and medium industries, which constitute most of the sector, are unable to cover the cost of oil derivatives or private generators to provide electricity", forcing many of them to stop operating.

Governor of the Central Bank of Yemen Mohammed bin Hammam said on September 15th in press statements at a meeting of Arab central bank governors in Doha, that the economy could contract "if the political crisis continues". He declined to provide a specific percentage because, in his words, of a lack of data from the affected sectors.

Dr. Taha al-Faseel, an economist and advisor to the Ministry of Industry and Trade, told Al-Shorfa that the political crisis added new burdens on the national economy and will lead to a significant decline in the growth rate.

He also expects the growth rate this year to fall to a negative value, after reaching 5% last year.

"This decline is due to a contraction amounting to 17% in non-oil sectors, 14% in the oil sector, 18% in services, and 10% in agriculture," al-Faseel said. He also pointed to the worsening state of the general budget due to the continuing decline in revenues, lack of foreign funding, mounting current costs, and the almost complete cessation of investment and capital expenditures.

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    ياسين

    2011-11-26

    What happened and is still happening in Yemen is one of the hardest and the most difficult matters. The state of Yemen has suffered greatly from Ali Abdullah Saleh, and among the people now, the brother kills his brother, and there is no security, safety, stability, freedom or democracy. The high prices in Yemen constitute a great problem, which makes stability in Yemen nonexistent. The Yemeni economy is very decadent and the ratio of the high prices in the market is very high.

  • صباح الشجار

    2011-11-13

    Yemen's economy will significantly deteriorate because of the political events and the continuous violence occurring in Yemen. This situation is due to the increasing violence and pressure, together with the oppressive operations carried out by the government against Yemenis. In addition, they have created a divide among people, in order to sow dissension and disputes among them. All these situations have played a negative role and affected Yemen’s economy, especially as its people are suffering from poverty, hunger, corruption and the lack of all the necessary services that should be provided. For these reasons, the situation has been deteriorating more and more, because of the events taking place in Yemen. The people reject the government that wants to impose itself by force. Yemenis have been patient for 30 years. They have been suffering from poverty, hunger, corruption and bad conditions, because the government didn’t take any real measures in favor of the citizens. The government was supposed to work for the benefit of Yemenis and serve them. Unfortunately, Yemenis are still suffering from chaos, oppression, violence, hunger and ignorance at all levels. For this reason, it is very necessary to significantly change the situation in order to put an end to the deteriorating economy in Yemen. We shouldn’t witness a tragic situation, and for this reason, it is very important that we act quickly in order to save the country from great, real chaos that will make the situation deteriorate even more than now.

  • ابو عامر

    2011-11-12

    Yemen is currently going through dire economic conditions, as a result of the political events which overwhelmed the country months ago, and the continuous violence that has spread in many Yemeni cities. The latter are suffering from these events which have a negative impact on many sectors in Yemen. Consequently, the major impact has been on the Yemeni economy, which is suffering from a decline in the growth rate this year because of the stagnation caused by the political events in the country and the dangerous events that accompanied them. In fact, the current situation in Yemen has contributed to halting investments and causing a clear decline in the private sector which Yemen depends on very much. Indeed, the lack of security and stability certainly has a negative impact on the economy. The latter is usually influenced by the surrounding conditions, given that it is closely linked with stability. In this respect, a lot of investment and private-sector projects are almost suspended, and this is one of the major reasons for the economic and growth rate decline. In fact, the political crisis is ongoing and a many foreign investors have halted their investment activities, given the lack of clarity of the political process in Yemen. In fact, no one knows when or how it will end. These concerns will affect the functioning of investors, thus influencing the Yemeni economy, which has already been suffering from some internal problems. Also, the Yemeni economy has been affected as a result of the decline in exportation and importation. The latter has reached very low rates, compared to the period before the start of demonstrations, which had a very negative impact, causing economic stagnation and decline at a serious rate, and had a considerable impact on much of the Yemeni social class. In fact, the political crisis, clashes, and violent acts had a major impact on the functioning of the economy, hence the limitation on the growth rates as such and their negative decline, particularly after the continuation and aggravation of these events. This has contributed to harming the Yemeni economy, which is currently going through its worst moments. In fact, I expect that the Yemeni economy will continue to decline until the internal problems are resolved.

  • Raqeeb

    2011-11-10

    The Yemeni economy was not strong or flourishing in the first place, which is why it cannot go back to normal when it goes through crises. The current conditions in Yemen have had a great impact that damaged the Yemeni economy, thus significantly affecting the whole country and its people. These demonstrations, marches, violence and political tension in the country started months ago, and are still the same. The situation is totally unstable, because we do not know what is coming tomorrow. Will Ali Saleh be defeated, or will he force himself on the people and defeat their will? This political crisis has pushed the Yemeni economy to the edge. It already had errors in its structure and its controllability. Now, the country is greatly suffering because this crisis has cast its shadows on the people and affected all economic activities, whether they were productive, service-related or commercial. All these activities were affected by these conditions and were completely paralyzed, due to the halt in oil imports and the deterioration of the banking sector’s activities, and in causing work on many developmental projects to stop. This led to an increase in the number of the unemployed, which was already high in the first place. There is a significant and terrifying increase in all prices of food items and oil derivatives. Even the transportation fees are increasing. This has aggravated the crisis and increased the Yemeni citizens’ suffering. In addition to that, the aid that was supposed to be offered to Yemen stopped, because of the conditions and the instability that the country is going through. I hope these scenes will end well, and that work will be done quickly and powerfully, so that the country could overcome this crisis and could improve its very bad economic situation. It is considered one of the worst and most deteriorated economies in the world.

  • جليل

    2011-11-10

    The Gulf countries have intervened as they did before, but I do not think they will be successful. In the most recent period, they tried to intervene and provide protection to Ali Abdullah Saleh to go to a Gulf country like Saudi Arabia, after the demonstrations started in Yemen. They tried to talk him into leaving office, to get away with his life before his people put him on trial, and it would be a harsh one. The people's revolution will be the winning party in the end, and we all know that. It will win, just as the other less enthusiastic revolutions did. The other revolutions also faced more repression than the revolution in Yemen did. These revolutions won in the end and proved to everyone that the will of the people can never be bent or affected. That is why I think it would be better if Ali Abdullah Saleh presented himself directly for a trial, rather than hiding and then falling like a coward into the hands of rebels and demonstrators, like Gaddafi. If he does not present himself for a trial, he will face the same ending his fellow tyrant Gaddafi has faced; he will be killed in the streets of Tripoli. This end is the end of any unjust person, and it will be your end, Ali Abdullah Saleh.

  • ناطق بو سليم

    2011-11-9

    The political events in Yemen turned it into a poor country in need of aid and assistance. Brother Saleh does not care about anything except being comfortable. The people are hungry, with one person killing the other, while Saleh is holding on to his position. God is greater than he is and greater than all the cowardly tyrants. Qaddafi received his punishment. God willing, your end is coming soon as well. Look at the condition of Yemenis, who were killed by hunger, poverty and depravity. The economy has been ruined and these circumstances helped to completely destroy it. Why is all this? What do you want from the Yemenis? Leave them alone. Violence and fighting in streets are difficult things that cannot be met with silence. I am one of those who have the greatest hate for this despicable man, who does not know God at all. The Yemenis’ economy has been greatly affected, and it cannot stand anything more. But what can we say except that God is our only and best guardian against you and against all unjust cowardly rulers who are afraid to lose their places, because they are rotten? The Arab countries will not receive you at all, because you are a filthy person and you made your people among the worst peoples. I hope with all my heart for the Yemeni people to get the utmost wellness and success, and for life in Yemen to go back to better than it has been before, God willing, and for your ego to be broken, O cowardly Saleh. Yemenis are currently suffering from great weakness regarding the economy because of the conditions in the country. The operations and exportation came to a halt, along with everything else. But God is generous; the future will show us what is going to happen, and tomorrow is not far away.

  • لؤي جبار

    2011-10-30

    Those who are manipulating people are currently paying for their political decadence and for falling short of their responsibilities. In fact, they have been dancing for 33 years and have forgotten their basic mission. We would like to say that there is no longer room for inheriting the rule, neither for your spoiled son, nor for his cousins. It is time to leave, and today it is too late to regret. Regret has caused Qaddafi to remember mercy at the moment of his death. Indeed, he had erased this notion from his dictionary throughout four decades. As a result, the grandchildren of Mukhtar have reacted in the same manner as Qaddafi did. In fact, I would like to address Saleh and ask him to save himself. Escaping via the Haradh or Bab Al-Mandab are the only safe outlets for him and his family before the zero hour comes. We also address those who are dancing on people’s corpses. You have become known to the entire world, and dancing on people, neighbors or the world’s leaders is no longer worthy. In fact, you have danced until you were tired and you have been corrupt for a very long time. Thus, there will be no room for elusiveness, given that Ibn Omar and Zayani are coming and bringing with them the 2014 resolution that calls for the Yemeni tyrant to step down in order to rid the country and its people of his evil intentions, as he says: “Either me or a flood.” Here is perhaps your last opportunity to escape, together with the remaining children and their cousins and some of the mercenaries. Eventually, your weak media speech is no longer useful and is disgusting. Thus, you should turn off your useless speakers.

  • سجاد عارف

    2011-10-29

    The government must put an end to this crisis, step down and make way for another government in order to serve the interests of the Yemenis and to preserve the State of Yemen and avoid its destruction, God forbid. Therefore, everyone must put the interest of the country above personal interests, given that the nation’s interest is very important. In fact, the country may be subjected to destruction at any time. Thus, we must be cautious, particularly about the corrupt groups among the evil and malicious terrorist members, who are spreading sabotage, death, murder and bombings.