Economic Analysis - Minimal Prospects For Rapid Recovery - JULY 2017

BMI View: The Yemeni economy will continue to contract over the coming quarters as persistent fighting and instability prevent reconstruction and hydrocarbon production. Even if a peace deal is reached , the recovery process will be slow, given Yemen's lack of economic diversification and still-elevated security risks. The country will remain reliant on foreign assistance from Gulf neighbours over the long term.

Economic conditions will remain dire in Yemen over the coming quarters as fighting and instability continue to prevent reconstruction and resumption of hydrocarbon production. We forecast the country's real GDP to contract by 5.9% and 3.9% in 2017 and 2018, respectively. Upon the eventual reaching of a peace deal, prospects for a rapid recovery are low, given the country's persistent overreliance on a hydrocarbon industry in structural decline. Foreign investors will continue to shy away from Yemen for many years amid still-elevated on-the-ground security risks, hampering the development of its non-hydrocarbon sector and leaving the country heavily dependent on financial assistance from the Gulf. Indeed, we do not expect Yemen's nominal GDP to return to pre-war levels for at least another decade.

Continued Fighting To Prevent Reconstruction In Near-Term

Economic Conditions To Remain Dire
Yemen - Nominal GDP, USDbn
e/f = BMI estimate/forecast. Source: National sources, BMI

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