Boston, MA -- (SBWIRE) -- 04/14/2014 -- While revisions to historical data by the Yemeni statistical authorities have prompted minor adjustments to our forecasts we continue to forecast only modest growth for Yemen's construction industry over the coming years. Political uncertainty and persistent security risks will inhibit investment and see industry growth remain well below potential. We forecast real industry growth of 3.8% and 3.2% in 2014 and 2015 respectively. . Key developments in the sector:
- Although Yemeni political parties signed a document on December 23 2013 saying that Yemen will become a united, federalist country, we believe that a resolution to the country's myriads of issues - the most notable of which is Southern autonomy - will remain elusive. General elections, set to take place in February 2014, will most likely be delayed as a result.
- Recent months have seen the security situation in Yemen worsening steadily and we expect security risks to remain elevated over the coming quarters, ensuring that foreign and domestic investment into infrastructure remains modest in 2014. One recent incident in February 2014 security forces in the Yemeni port city of Aden foiled an attack on the Gulf of Aden oil refinery.
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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 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.
It was announced in November 2013 that Yemen Gulf of Aden Ports Corporation (YGAPC) has awarded a contract worth US$507mn for the expansion and deepening of Aden Container Terminal to China Harbour Engineering Company (CHEC). The expansion project at Aden will see the construction of a new 1,000mlong berth that will be 18m deep - the depth required to handle the newest 18,000TEU capacity mega vessels currently at sea.
With the 34-year rule of President Ali Abdullah Saleh at an end, we point to the colossal social, economic and political challenges that his successor will face. We emphasise that the risk of widespread political instability will remain high for many years to come.
On top of its political troubles, over the next 10 years Yemen must face slowing oil production and the ongoing depletion of its water resources. Under these circumstances, its economic outlook is far from positive.
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