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Yemen inflation eases to 9-mth low of 8.6 pct y/y in Oct
January 6, 2014 / 8:51 AM / 4 years ago

Yemen inflation eases to 9-mth low of 8.6 pct y/y in Oct

DUBAI, Jan 6 (Reuters) - Yemen’s annual inflation eased to a nine-month low of 8.6 percent in October from 9.4 percent in the previous month as the price growth of stimulant qat leaves nearly halved, central bank data showed.

Core inflation excluding food and qat, which many of the country’s 25 million people chew daily, remained at 8.1 percent, the fastest clip since August 2012, the central bank’s latest release covering key Yemeni indicators showed.

Annual inflation plunged at the end of 2012 as political unrest in Yemen faded and economic activity showed signs of revival after two years of turmoil.

But consumer price growth took off again in 2013, hitting a 16-month high of 14.5 percent in June, mainly due to higher prices for food, tobacco and qat.

However, the latest reading brings headline inflation closer to levels where the central bank last decided to reduce borrowing costs to support economic recovery in the impoverished Arabian Peninsula state. The margin between the headline and core inflation has also narrowed significantly.

The central bank slashed rates by 5 percentage points from October 2012 to February 2013, bringing them to a three-year low of 15 percent. Headline inflation averaged 7.1 percent during this period and core 7.3 percent.

Yemen’s central bank head said in September the bank would need to watch inflation before deciding whether to trim interest rates again.

Annual price growth for tobacco, cigarettes and qat, fell to a nine-month low of 9.9 percent in October from 18.1 percent in September. Food prices grew 8.5 percent, up from a 7.9 percent rise in the previous month, which was the lowest rate of increase since January 2013.

The IMF forecast in October that Yemen’s inflation would average 12.0 percent in 2013, raising its previous April prediction of 7.5 percent. Consumer prices grew 10.2 percent in 2012.

Yemen’s foreign currency reserves stood at $5.6 billion in November, little changed from the previous month when they slipped to their lowest level since August 2012.

Oil exports rose 2.6 percent to $218 million in November, rebounding from $212 million in October, which was the lowest level since June 2013. Compared with the same month of the previous year oil exports were down 3.9 percent, a significantly smaller drop than October’s 23.5 percent fall.

Yemen, the second-poorest Arab state after Mauritania, depends on oil exports to replenish its currency reserves and pay for up to 70 percent of its budget. But frequent attacks on pipelines by disgruntled tribesmen have squeezed its income.

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