Decelerating Gross Domestic Product, orGDP growth widening primary non-oil fiscal deficitpersisting double digit inflation and rapidly dwindlingcurrent account surpluses characterize the weaknesses in theYemeni economy. Decline in oil production is proving to bean important turning point in Yemen s economic development.With the annual growth of GDP projected around percent forthe second year in a row Yemen s per capita GDP is set todecline again in 2005. Underlying primary non-oil fiscaldeficit continued to widen to 27 percent of GDP in 2004,reflecting the poor resource mobilization efforts. Inflationhas persisted near 12 percent annual rate in the last twoyears and the inevitable revisions to petroleum prices andintroduction of general sales tax will call for tightermonetary management to contain inflation in 2005.Thebuffer of foreign exchange reserves that the government hasbuilt to US $ 5 billion from high oil prices by end 2004(some months of imports equivalent), could only provide atemporary cushion against erosion of current account balance.
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