Yemen’s economy is recovering from its 2011 recession as construction expands and bank lending to private businesses and consumers surges, Central Bank Governor Mohammed Bin Hammam said.
“Borrowing by the private sector increased more than 18 percent in the first five months of 2013” after the central bank reduced its benchmark interest rate by a total of 5 percentage points to 15 percent in October and February, Bin Hammam said in an e-mailed response to questions. Inflation, which had climbed to a 15-month high of 14.5 percent in May, may ease to “around a single digit by the end of the year,” he said.
The economy of Yemen, the poorest nation in the Middle East, may grow 4.4 percent this year from 0.1 percent in 2012, according to International Monetary Fund estimates. Gross domestic product contracted 10.5 percent in 2011 amid the uprising that ended the rule of President Ali Abdullah Saleh.
“The construction industry is picking up and most economic activities would be targeting going back to normal capacities that were hurt during 2011,” the governor said. Foreign reserves were $5.7 billion at the end of June, compared with an external debt of $7.2 billion, he said.
This year’s budget envisions a deficit of $3.2 billion, which will be financed in part by foreign aid, Bin Hammam said. “If such financing does not materialize then the government would take necessary actions to limit the budget deficit to levels that could be financed from domestic non-inflationary resources.”