ESDR Report: Unemployment Rate To Be Raised To 60% In 2015
An economic report issued by the Economic & Social Development Research Center (ESDR) confirms that the current political and security deterioration in the country leads the economy to a very serious deterioration which cannot be controlled and stopped easily in the future. Controlling such deterioration requires big economic and financial possibilities and exerting more political and security efforts and conditions.
The report indicates that unemployment rate rose before the February, 2011 Revolution from 25% to 36% and 44% in 2012 and 2013. It is expected that the unemployment rate may increase to become more than 60% in 2015. Many indicators confirmed that there is a new line of Yemenis are joining the ranks of unemployed. It will lead to turning these productive energies from building means to demolition tools in society and constitutes a humanitarian and security burden and then creating economic, social, and political problems which are endless.
The report pointed out that the political forces must be aware about the economy deterioration and it is moving toward escalating decline and increasing contraction and collapse rapidly. To make Yemen maintains continuity of the current investment projects and controls the economic indicators stopping them on those lowest limits, it is very important to accelerate restoration of security and political, legal and economic stability.
The report pointed out that there is a significant decrease in the economic activity movement, stopping many investment projects, and escaping number of foreign companies and institutions as well as domestic capitals to outside Yemen. Furthermore, there is general concern haunting investors due to the deterioration of the political situation and no solutions in sight. The report has ruled out entry new investments and new capitals to Yemen especially this year or next year except those regional political investments. This is because investors look for a safe and appropriate investment environment which brings them suitable profit returns.
The report explained the importance of the psychological aspect of investors and depositors in the local banks as the current deterioration generates a feeling of anxiety and fear among them. Such situation will push them to withdraw their deposits by the local currency and exchange to USD. The volume of deposits has reached about 2.2 trillion YER in commercial banks in December 2014. If these deposits are withdrawn, it requires to be covered by about $10 billion while the local commercial banks have only $ 2.1 billion. Therefore, the commercial banks need $ 8 billion which will be requested from the Central Bank of Yemen, which has only $ 4 billion at the end of January 2015.The central bank will face a deficit by about $ 4 billion, in addition to its disability to pay for necessary imports of consumables.
Thus, the demand for the US Dollar will be increased which will lead to a rise in the dollar rates against the Yemeni rail and then leading to a decrease in the local currency rate. This problem will result lack of trust the local currency and therefore the biggest capital of Yemen will flight that will deepen the economic problem chronically. This situation may bring serious political problems. Moreover, local banks are vulnerable to looting and robbery by gangs and this was what happened in some areas which will force banks and exchange companies to shut down many of their branches.
The report warns that the continuity of the political crisis, absence of security and stability, and the continued closure of foreign embassies in Sana’a will lead to suspension of some foreign banks of their dealings with the Yemeni banks which will lead to suspend money transfers to and from Yemen. This case will increase the difficulties and obstacles to commercial exchange between Yemen and other countries around the world, which amounted to about $ 21 billion in 2013, which means doubling the serious repercussions and the negative impacts on the economy.
On the other hand, statistics show that the number of Yemeni expatriates abroad is more than 2 million so that Yemen ranked the seventh among the Middle East countries in remittances. The total volume of financial transfers to Yemen is about $ 3.5 billion in 2012, reflecting the importance of foreign remittances as a source of income for families and supplying the Yemeni economy by foreign currency. Therefore, imposing severe and complicated control procedures at individuals and companies remittances will have serious repercussions on families and negative effects on the Yemeni economy.
The report mentions that small and medium enterprises are also suffering from lower sales to nearly half compared to the same period of the previous years. Some businesses defaulted on their obligations, such as paying projects rents as well as unable to pay employees wages and salaries. Furthermore, some companies have laid off all their employees and some others reduced number of workers which reflected on low family income of the large group of families. This will force families to reduce consuming demands of goods and services, forcing producers and investors to reduce their production and investments and then suspending some of their projects, which means more workers are demobilized and then many of the economic productive resources crashed. All of these problems are due to the political crisis that increases worsening economic conditions.
Certainly, the continuation of the political and security deterioration will bring a significant decline in economic growth and gross domestic product which will be reflected on low per capita of GDP in addition to declining real income and life quality more and more.
In brief, the report concluded that more than 50% of Yemenis incomes are less than one dollar per day. This refers to a decline in citizens’ income, savings, and purchasing power weakness. The poverty rate estimated is about 50%, and more than 50% of the population does not have access to adequate food. This means that more than 12 million people suffer from food insecurity. In other words, more than half of Yemenis live below the poverty line and suffer from malnutrition. All these indicators confirm that food problem becomes complicated day by day, which increases citizens suffer and exacerbates their problems. Thus, this situation is threatened by a food humanitarian catastrophe in case situation continued as it is.
Source: Yemen Observer
BY FAISAL DAREM
- Mar 16, 2015