Outlook for 2011-12

• The position of the president, Ali Abdullah Saleh, looks less secure than at any time since the 1994 civil war. Emboldened by events in Tunisia and Egypt, protesters have been increasingly directing their ire at Mr Saleh personally.
• The president has stated that he will again delay the parliamentary election. We do not expect the election to go ahead until the present disorder has died down (which may not occur until Mr Saleh leaves office).
• The US will seek to assist the government's anti-terrorism efforts while not being accused by pro-democracy activists of propping up the regime. The Gulf countries will have fewer qualms about providing aid to the regime, however.
• The unstable political climate will slow economic reform, and for the time-being the ten-point programme of economic reform will be superseded by the government's desire to restore stability.
• Given the strong and growing public pressure on the leadership, we now believe that any major moves to rein in spending will be deferred this year. As a result, we have revised our forecast for the fiscal deficit upwards.
• After strengthening in 2010 on the back of newly commissioned gas export capacity, real GDP growth is expected to revert to a more modest pace over the forecast period.
• We have revised up our projections for Yemen's current-account deficit, in response to an increase to our forecast for global foodstuffs prices in 2011.

Monthly review

• Ali Abdullah Saleh has announced that he will not stand for re-election in 2013, nor will he permit his son, Ahmed, to succeed him. However, his announcement has failed to quell the growing protests against his rule.
• The government has delayed the election, and offered to restart a "national dialogue" with the opposition. However, in light of the increasing number of attacks on anti-regime protesters, the opposition has rejected the offer.
• The US president, Barack Obama, has urged Mr Saleh to follow up his pledges of reform with "concrete actions", but otherwise the US response has been fairly muted.
• The government has announced that it is implementing various economic support measures to help the hard-pressed population. However, the measures may fray relations with the IMF.
• The Central Bank has announced the issuance of its first ever sukuk.
• Plans to advance various infrastructure projects, including three independent power projects, have been hit by a series of delays.