* Firms report jump in sales, still below pre-crisis levels
* Construction, tourism remain paralysed, job market idle
* Inflation fell sharply, currency stabilised
* Government faces budget strains, unemployment high
* Pipeline attacks cost up to $500 mln every month
By Martin Dokoupil and Mohammed Ghobari
DUBAI/SANAA, Feb 13 When political turmoil drove
Yemen to the brink of economic collapse in 2011, Jumaan Trading
& Investment Co saw its sales plunge by more than 60 percent,
prompting the company to shift part of its operations to
neighbouring Saudi Arabia.
But the ouster of strongman president Ali Abdullah Saleh a
year ago, and a partial improvement of security in the poverty-
and militancy-stricken country, are now helping to revive the
economy, boosting JTI's sales.
"There is definitely an improvement in the situation,
especially compared to 2011," said Ahmed Jumaan, general manager
of JTI, which focuses on agriculture, power generation and
Sales at JTI, founded in 1958, jumped 55 percent to about
$24 million in 2012, although that is still 5-10 percent below
levels seen before the political crisis began, he told Reuters.
Yemen's fledgling economic recovery is good news for efforts
to restore political stability in the country, which is
important for the entire region because it lies near major oil
The recovery is also a positive omen for other Arab Spring
states which are struggling to rebuild their economies after
political turmoil in the past two years.
The economy of Yemen, the second poorest Arab state after
Mauritania, shrank 10.5 percent in 2011, the International
Monetary Fund estimates, as the unrest caused fuel and power
shortages and oil pipelines were attacked.
The IMF says the economy stabilised in 2012, and after a
business revival toward the latter half of the year, it predicts
growth of around 4 percent in 2013.
Other key indicators have drawn back from crisis levels.
Inflation eased from a peak of 25 percent in October 2011 to 5.5
percent last November, the latest available official data shows.
The Yemeni rial has stabilised around 215 to the U.S. dollar
after sinking to about 243 in 2011. This has allowed the central
bank to cut its key interest rate twice in four months to aid
the economy, by a total of 5 percentage points to a still-high
Much of Yemen's economy is operating close to subsistence,
so it would not take much to stifle the recovery. The country
faces dwindling oil and water reserves, and per capita income
was $2,232 in 2012, just 8 percent of the level in neighbouring
Oman, according to the IMF.
A third of the 25 million people live under a poverty line
of $2 a day and unemployment is estimated at around 35 percent -
with youth unemployment at 60 percent.
Watheq al-Hamadi, manager of a large grocery store in
Sanaa's upscale neighbourhood of Hidda, said that despite the
economy's improvement, few Yemenis could afford to buy any form
of luxury item.
"The only thing that has come back is power supplies and
petrol. The purchasing power is still weak," Hamadi said as he
warned his staff to look out for shoplifters.
Since the tourism and construction industries remain
paralysed - Jumaan said his company's construction equipment
sales were still only about 30 percent of normal - economic
growth will not necessarily create many jobs.
"I've been living off my friends since the revolution
started," said Ali Abdul Rahman, who used to work as a
translator, teacher and assistant to foreign aid agencies, but
now spends most of his time reading at Sanaa cafes.
"I was hoping that electing a new president and forming a
new government would improve the situation, but nothing has
changed so far," he said.
Finding jobs outside Yemen, which could be a safety valve to
limit unemployment, is difficult since countries in the region
restrict the entry of Yemeni workers.
Yemen's labour market "can absorb barely 20,000-30,000 from
this huge number of unemployed", said economist Mohamed
al-Maytami, chairman of the Khobara Centre for Development and
Consulting Services, which provides services to foreign aid
donors, the government and the business sector.
JTI and tens of other Yemeni firms moved their construction
businesses to Saudi Arabia and other Gulf states during the 2011
turmoil. If Yemen's construction sector starts to recover, many
of these companies will return and the sector could absorb
150,000-200,000 local workers, Jumaan said.
A construction recovery will require the cash-strapped
Yemeni government to issue a large number of infrastructure
tenders, however. And for that to happen, at least two
conditions will have to be met.
One is further improvement in security. Yemen depends on
crude oil exports for about 60-70 percent of its state budget
income, and its finances are still being sapped by bombings of
oil and gas pipelines by insurgents or disgruntled tribesmen.
"You are talking about a $400-500 million loss every month
because of the sabotage, which is big money for Yemen," Maytami
In the latest incident, attackers last week blew up the
country's main oil export pipeline, which carries 110,000
barrels per day.
The government is mounting a two-pronged campaign to secure
the oil infrastructure, at times attacking tribesmen with tanks
and rockets and at other times negotiating with them, but a
solution lasting more than a few weeks has not yet been found.
The second condition for a construction recovery is larger
inflows of foreign aid. Last autumn wealthy Gulf Arab countries,
Western governments and other donors pledged $7.9 billion over
several years to Yemen, but only a small fraction of that money
has so far arrived; Maytami estimated under $750 million. The
Yemeni government is seeking $12 billion.
Other countries hit by Arab Spring uprisings have found that
pledged aid can be slow to arrive. Donors are due to meet in
London next month to assess the situation in Yemen.
The IMF estimates Yemen posted a state budget deficit of
about 5.5 percent of economic output last year, and that the
deficit will widen slightly this year.
"I do not think the budget itself is enough to confront
challenges facing the country. That's why in the short term,
there is concern about the financial commitment from donors,"