Inflation in Yemen at Record High

Article Summary
Inflation is rising sharply in Yemen, say recent economic reports, affecting transportation and food the most. Ibrahim Mahmoud reports that the inflation was attributed to several factors, including price speculation as well as the rising prices of oil derivatives. An IMF publication predicts an uncertain future for Yemen’s economy.

According to the Economic and Social Development Research Center in Sana'a, the general inflation rate in Yemen rose to roughly 23.17% at the end of last year compared to 13% in 2010. Last January, it reached 24.09%.

The research center published a report in which it noted that last year’s overall inflation rate was 20.64% for food, 14.5% for clothing and footwear, 13.05% for housing, 20.15% for furniture, 18.58% for healthcare, 52.6% for transportation, 3% for communications, 11.58% for education, 5.7% for the restaurant and hospitality industry and 10% for the culture and entertainment industry. The report stressed that inflation doubled the size of the poor, worsened unemployment and the housing crisis, raised transportation costs, lowered the purchasing power of the local currency, slowed economic growth, caused instability and depressed investments. It also impacted the balance of payments and trade.

The report attributed the inflation to “traders and importers manipulating the prices of goods and services, monopolies, the high prices of oil derivatives, the weakening of the riyal against the dollar, increased domestic demand combined with low supply, weak government supervision and the high prices of production inputs.” The report also noted a sharp rise in the prices of oil derivatives by about 400%, while some food items rose by 80%. The prices of grains and their derivatives significantly rose in 2010 and 2011 — reaching their peak in the middle of last year with a 50% price rise for wheat — but they fell by 30% last March.

The International Monetary Fund’s Regional Economic Outlook said that “the currency depreciation and the shortage in commodities other than food were the direct causes of inflation, which rose in Yemen by about 20%.”

The report predicts “a 0.9% decrease in real GDP in 2012 and a decrease of 2.9% in 2013," noting that "2011 witnessed a 10.5% decrease in real GDP” and that the average annual price inflation will be “17.1% this year and 14.1% in 2013, versus 17.6% in 2011.”

The report did not rule out that the public balance of the central government decrease by 0.5% of GDP this year, and 5.6% in 2013, compared to the 4.4% decrease last year.

The International Monetary Fund report estimated the GDP current account balance to decrease around 1% this year and 3.9% in 2013. This comes against the backdrop of a 3.5% decrease in 2011.

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Found in: yemeni gdp, yemeni economy, price manipulation, oil prices, oil, inflaction, imf
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