From: The World Bank
The political situation remains challenging. A concerted government campaign has succeeded in suppressing Al-Qaida activities but the group retains the ability to engage in sporadic incidents such as a recent attack on Korean tourists. The Government also reached an agreement with the opposition to delay parliamentary elections for two years, thereby averting a major political crisis. Finally, demonstrations in the South have become less frequent and violent. Concerns remain, however, over the fragile peace accord with the Houthis signed in July 2008, which is threatened by intermittent clashes and mutual accusations of breaches.
The economy grew modestly in 2008 on the back of buoyant oil prices. Preliminary estimates suggest a GDP growth rate of 4.4 percent as compared to 4.2 percent in the previous year. Higher oil revenues and some progress in tax collections also helped to reduce the fiscal deficit to 4.3 percent of GDP and the current account deficit to around 2 percent of GDP. Given that oil prices were very high during the first nine months of the year, the overall economic performance in 2008 is disappointing and underscores the difficult challenges faced by Yemen.