Inflationary Pressures To Rise

On the back of a weak fiscal position and the lack of willingness on the government's side to mitigate rising global commodity prices through subsidies, we expect inflationary pressure in Yemen to mount in 2011. We have therefore revised up our average forecast to 16.5% y-o-y from 11.2% previously. While the food component, accounting for almost half of the consumer price basket, will be the main driver of rising headline inflation, the housing shortage will also add some pressure. Unless the political tensions ease, we expect inflation to remain well in double digits.

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