2014-01-03 16:48:06 - Fast Market Research recommends "Yemen Infrastructure Report Q1 2014" from Business Monitor International, now available
Revisions to historical data by the Yemeni statistical authorities have prompted us to make some adjustments to our forecasts for the country's construction sector. Nevertheless, our tepid outlook for Yemen's construction industry remains in place and, following an estimated expansion of 0.4% in 2013, we are predicting real industry growth of 3.7% and 3.2% in 2014 and 2015 respectively. Persistent political instability will continue to engulf Yemen's political and security environment and in turn inhibit both domestic and foreign investment into the country's construction sector.
Key developments in the sector:
* Political risk and instability in Yemen continue to dominate the headlines. Yemen's National Reconciliation Conference (NRC), which has brought together 565 representatives of Yemen's various political groups to aid the
constitution-making process, was due to come to an end on September 18, but it has been held up by wrangling between different political blocs. Since we see no end to these wrangling anytime soon, political instability will remain elevated in 2014, which will hit the domestic economy and the export sector hard.
* At least 100 people were killed in clashes between rival Muslim clans in northern Yemen at the beginning of November. Battles between Shi'ite Muslim Houthi fighters and rivals from a Sunni Salafi group erupted on October 30 in the north western Saada province, highlighting the lack of government's control over large swathes of territory and increasing sectarian tensions in the country. This persistent insecurity continues to undermine investor sentiment towards the country in general, with the oil and gas sector particularly exposed. Indeed, attacks on the pipeline that links the Maarib gas fields to Yemen's Balhaf LNG export plant have led to a halt in LNG exports as of October 2013.
* Despite gradual improvements in the security situation over the coming years, BMI's country risk analysts expect security risks to remain elevated, which will contribute to below potential real GDP growth over the coming years. We forecast Yemen's economy to expand 3.0% and 5.4% in 2013 and 2014, respectively.
* China has deepened its economic ties with Yemen by signing multiple deals to construct and develop new power plants and ports. According to President Abdu Rabu Mansour Hadi, China will develop a new 5,000MW power plant in Yemen. The construction of the new power plants, to be powered by gas and coal, is expected to start by early 2014. China has also agreed to develop two container ports in the country located in Aden and Mokha, at an estimated cost of US$508mn. The announcement is a welcome boost for the sector given the challenging conditions that continue to inhibit private investment.
* Meanwhile, it was announced in November 2013 that Yemen Gulf of Aden Ports Corporation (YGAPC) has awarded a contract worth US$507mn for the expansion and deepening of Aden Container Terminal to China Harbour Engineering Company (CHEC). The expansion project at Aden will see the construction of a new 1,000m-long berth that will be 18m deep - the depth required to handle the newest 18,000TEU capacity mega vessels currently at sea.
Full Report Details at
- www.fastmr.com/prod/759155_yemen_infrastructure_report_q1_2014.a ..
With the 34-year rule of President Ali Abdullah Saleh at an end, we point to the colossal social, economic and political challenges that his successor will face. We emphasise that the risk of widespread political instability will remain high for many years to come.
On top of its political troubles, over the next 10 years Yemen must face slowing oil production and the ongoing depletion of its water resources. Under these circumstances, its economic outlook is far from positive.
Despite gradual improvements in the security situation over the coming years, security risks will remain elevated, which will contribute to below potential real GDP growth over the coming years. Growth in other segments of the economy will be weak as the government struggles with revenue collection and political strife affects private-sector investment. The draining of Yemen's oil reserves will put downward pressure on exports, with negative consequences for GDP growth and currency strength.
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