New Report Available: Yemen Infrastructure Report Q1 2014

From: Fast Market Research, Inc.
Published: Thu Jan 02 2014

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.

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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.

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