News Analysis: Yemen's economy to grow by 6.6 pct in 2013 amid recovery signs: expert
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E-mail Xinhua, April 22, 2013
Yemen's economy is expected to grow by 6.6 percent in 2013 amid recovery indicators, including positive growth, supplies stability, vigorous fiscal reforms and donors' pledges, said a Yemeni policy expert.
"Despite the unusual circumstances, there have been positive economic indicators boosting the hope to overcome all challenges in the future, thanks to the government's efforts that have partially restored political and security stability, basic services, sufficient supplies, mainly oil products and electrical power, and ensured donor pledges last year," said Abdulmajeed Al- Batali, an expert at the country's planning and international cooperation ministry.
POSITIVE SIGNS
The national economy growth has been estimated at 2.1 percent for 2012, up from a minus growth of 15.3 percent in the previous year, according to Al-Batali, who forecasts the economy to grow between 4 and 4.7 percent in the next three years.
Among the key reforms by the power-sharing government were the fiscal measures, such as improving the revenues collection system, limiting unnecessary spending and lifting oil subsidies, he said, adding "These fiscal reforms led to controlling the budget deficit which did not exceed 4.8 percent in 2012 and to stabilizing the national currency at 215 Yemeni rials versus the U.S. dollars."
"Furthermore, the foreign exchange reserve increased from 4.5 billion U.S. dollars in 2011 to 6.2 billion dollars by the end of 2012, thanks to the Saudi deposit of one billion dollars into the central bank of Yemen that remarkably contributed to the improved financial situation in the country," he said.
In February, the central bank of Yemen reduced the interest rate from 18 to 15 percent, a move that reflected positive signs of economic recovery and the determination to attract investments into the country.
The recovery indicators also included a drop in the consumer price inflation rate from 22.3 percent in 2011 to 5.8 percent in 2012 and the flow of investments resumed after restoring confidence in Yemen's economy after the 2011 unrest, Al-Batali said.
Meanwhile, Bashir Al-Qadasi, an official at the central statistical organization, said foreign trade statistics improved in 2012 as well.
"The value of the imports dropped from around two trillion Yemeni rials (9.3 billion dollars) in 2011 to around 1.4 trillion Yemeni rials (6.5 billion dollars) in 2012," he said.
SUSTAINED IMPROVEMENTS
Yemeni officials and analysts argued that maintaining improvements remains necessary, especially amid prolonged measures to release donor aid and the need to conduct better radical budget reforms.
Suleiman Al-Qutabry, assistant deputy minister of planning and international cooperation, said Yemen has got only less than two billion dollars from the over eight-billion-dollar donor pledges made last year.
"The Yemeni government and donors have agreed on the appropriation of more than six billion dollars of the 2012 pledges but releasing aid can't be given urgently," he said, adding "Slow donor aid and some persistent problems, such as power outages and attacks on oil and gas pipelines, are affecting the efforts to accelerate the economic recovery."
Taha Al-Fusayel, an advisor of the industry and trade ministry, said economic improvement has been obvious since the power- transfer deal was signed, but going ahead requires better steps, especially in terms of fiscal reforms.
"The budget problems are behind other challenges; hence, carrying out methodological fiscal reforms and formulating better policies to ensure sustained improvement are the clue to recover the national economy," said Al-Fusayel, also an economics professor at Sanaa University.
In 2012, donors and friends pledged around eight billion dollars in aid to Yemen during the transitional period. So far, about 1.7 billion dollars or a little more has been given, including the Saudi deposit of one billion dollars which has been put into the central bank of Yemen to alleviate the budget deficit and stabilize the national currency.
The aid comes within their support to the Gulf Cooperation Council-brokered power-transfer deal reached after the 2011 mass protests.
Marzouk Abdulwadoud, head of the economic and social development research center, said progress in the political reconciliation and power transition boosts the factors to restore the trust of investors in Yemen's economy.
"Though the reforms and efforts by the government to recover the economy and stabilize the situation are not that fruitful, steps forward to make the transition a success such as the recent decisions on restructuring the army will largely encourage donors to release aid and investments to flow into Yemen," he said.
RALLYING FOREIGN AID
The Yemeni government has set up an executive body on accelerated absorption of foreign aid and is now continuing talks with key donor organizations such as the International Monetary Fund to get urgent financial and technical assistance.
Al-Batali said the government is now rallying donor support in the form of grants.
"Continuing the reforms, including restricting the budget deficit to safe limits and improving the government's performance to provide improved services, will facilitate getting direct aid to the budget and exempting it from the governmental contribution to donor-funded projects," he said.
"In addition to the chronic problems facing the state budget such as its restructuring, the budget is facing the problem of additional spending required during the transitional period such as funds for new employees, rebuilding the damaged areas, compensation to the unrest victims and the funds to restore security and fight terrorism," he said.
In 2013, the budget deficit is expected to increase to 9.2 percent (of the GDP), but the government will continue the fiscal reforms, including rationalizing spending and improving the revenues collection systems to keep the deficit low, because it is difficult at the moment to get funds from national resources, Al- Batali said.
Meanwhile, the government pins hope on accelerating donor aid to finance rebuilding programs and to implement infrastructure projects to reduce the jobless rate which reaches about 52.9 percent among the youths, he added. Endi
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