Via the Eurasia Review, an update on Yemen’s economic performance:

Yemen’s economy posted positive indicators at the end of 2013, recording a growth rate in real Gross Domestic Product (GDP) of about 5.4%, according to a government report.

The Ministry of Finance report pointed to a number of positive economic developments over the year, including a rise in the rate of growth, a decline in the inflation rate and stability in the national currency exchange rate in relation to hard currencies.

The growth rate of real GDP rose to 5.4% in 2013, compared with around 2% in 2012 and a negative growth rate of 12.8% in 2011, the report said.

There has been a steady decline in the inflation rate, which has dropped from 19.3% in 2011 to 9% in 2013, and the local currency exchange rate has been stable, which positively impacts the productive sectors, experts told Al-Shorfa.

Improved revenues

“These positive developments were the result of the adopted economic policies and improved efficiency in the collection of oil and non-oil revenues,” said the finance ministry’s budget sector assistant undersecretary Ali al-Shamahi.

“The steady decline in the inflation rate to 9%, which is likely to continue to drop in 2014 down to 8%, can be attributed to the stabilisation of the exchange rate of the riyal against foreign currencies,” he told Al-Shorfa.

This encouraged the Central Bank to cut interest rates to help revive the national economy and facilitate lending to small and medium enterprises, which helped create new jobs, fight poverty and achieve an increase in production and the rate of growth, he added.

The preservation of the banking system’s foreign reserves at safe levels, sufficient to cover the import bill for a six-month period, contributed positively to stabilising the national currency exchange rate and thus limited inflation, al-Shamahi said.

The growth in non-oil revenues in the first 11 months of last year also led to an increase in customs and tax revenues compared to the corresponding period in 2012, with each growing by about 33%, he said.

“The relative political and economic stability stemming from the political settlement reached in the country encouraged entrepreneurs to resume their various activities,” Central Bureau of Statistics head Hassan Thabet Farhan told Al-Shorfa.

This, in turn, “reflected well on the economic indicators, especially the GDP growth rate, which would have risen even higher had oil production not been interrupted by the sabotage to the oil pipelines”, he said.

The Central Bank has had success implementing financial and economic policies to stabilise the price of the Yemeni riyal against foreign currencies, Farhan said, and this produced economic stability and led to a decline in the inflation rate.

The Central Bank follows a “managed float” policy, meaning it manages the currency exchange policy and controls prices by virtue of the autonomy it is granted in its founding law, he said.

Additionally, the Yemeni government in 2013 did not present an additional funding allocation to parliament for approval as a supplementary budget, in contrast to past practices, Farhan said.

Sanaa University economics professor Hamoud Aqlan attributed the positive economic indicators to the increase in the volume of production, especially industrial and oil and gas production, in comparison to the years prior to 2013.

The official aid Yemen received also contributed to the increase in the general growth rate, he said.

At the same time, Aqlan pointed to the clear decline in the volume of both local and foreign investments in the private sector, which he said has an adverse effect on development.

Aqlan called on the government to address this issue in the days ahead, pointing out that preliminary data show the volume of local investment averages no more than 8.5% of GDP, and 36% of the volume of private sector deposits with local banks.