The World Bank expects the Yemeni economy to grow below 1%
English - Tuesday 26 July 2022 الساعة 03:35 pm
Aden, NewsYemen, special:
The World Bank expected that the Yemeni economy will register modest growth in 2022 due to the declining basic effects, the armistice, the expected increase in remittances, and the financial support provided by Saudi Arabia and the UAE.
The World Bank stated, in the Yemen Economic Monitor report, issued at the end of last June, that in the absence of additional internal or external negative shocks, the gross domestic product in Yemen is expected to rise by 0.8% in 2022.
The World Bank said that the economic prospects for Yemen in the short term and beyond are still tainted by a high degree of uncertainty, as it will be shaped primarily according to the developments of the peace process or conflict and the general security conditions.
The World Bank indicated that on the positive side, higher remittances from the GCC countries, improved foreign exchange liquidity, increased hydrocarbon exports, and prospects for the peace process are expected to be drivers of growth.
He stated that the $3 billion financing package announced by Saudi Arabia and the UAE will have immediate effects on the Yemeni economy and is expected to help stabilize the exchange rate, ease upward pressures on prices, and increase public finance imports.
He explained that there is an urgent need for this financing, as estimates indicate an expansion in Yemen's current account deficit from 4.7 to 12.3% of GDP between 2021 and 2022, which would have led to an increase in the financing gap and a decrease in the levels of international reserves.
According to the report, as the Central Bank of Yemen continues to adhere to the monetary growth criteria contained in its annual plan, these developments are expected to translate into significant improvements in consumer price levels in Yemen.
The World Bank expected that the improvement in foreign exchange liquidity in the financial system would benefit the private sector, as the authorities are likely to respond to repeated requests from the banking sector to increase the size of the foreign exchange auction mechanism, from its current size.
The World Bank stated that several major reforms remain a critical factor in enhancing the resilience of the macroeconomic and fiscal framework in Yemen in the face of shocks and crises.
He pointed out that while the financing package provided by Saudi Arabia and the UAE can be benefited from, in addition to the expected transfer of special drawing rights, to reduce the large financing gap and support the stability of the riyal price.
He stressed that these one-time unexpected gains will not dispel the need to take structural measures to address the deep-rooted imbalances in the economy, on top of which is ending monetization of the fiscal deficit, in order to support the stability of the exchange rate and the inflation rate.
