Yemen's economy is facing severe challenges as the ongoing conflict, political division, and rising regional tensions worsen the humanitarian and economic crisis. The World Bank's latest Yemen Economic Monitor (YEM) report, titled "Confronting Escalating Challenges," indicates that Yemen’s GDP is expected to shrink by 1 percent in 2024, following a 2 percent decrease in 2023. This decline adds to a significant drop of 54 percent in real GDP per capita since 2015. The ongoing conflict has driven most of the population into poverty, with food insecurity reaching unprecedented levels as over 60 percent of Yemenis struggle with inadequate access to food.
The report highlights the economic difficulties caused by the Houthi blockade on oil exports, leading to a 42 percent reduction in fiscal revenues for the Internationally Recognized Government (IRG) during the first half of 2024. This blockade has hindered essential services delivery and increased reliance on imports, causing external pressures that depreciated the Yemeni Rial from 1,619 per US dollar in January to 1,917 by August.
Living conditions have worsened significantly since 2023 for most Yemenis. In July 2024, World Bank surveys showed severe food deprivation more than doubled in some regions. Economic fragmentation between Houthi- and IRG-controlled areas continues to grow, affecting inflation and exchange rates and hampering stability and recovery efforts. Regional tensions have also reduced traffic through critical waterways like Bab El-Mandeb Strait and Suez Canal by over 60 percent but haven't yet significantly raised consumer prices.
“Yemen’s economic and humanitarian challenges are growing more acute, yet the opportunity remains to reverse this downward trend with the right support,” said Dina N. Abu-Ghaida, World Bank Country Manager for Yemen. “Immediate action is required, including addressing fiscal and external imbalances, mitigating food insecurity, and fostering greater stability. We remain committed to working closely with partners to support Yemen’s recovery and pave the way for a sustainable future.”
The YEM report outlines risks facing Yemen’s banking sector amid tensions between Houthis and IRG over regulatory control earlier this year. Despite some easing due to mediation efforts, fragility persists. Strengthening institutional resilience is recommended to manage inflation and fiscal issues while improving trade routes could alleviate economic pressure.
Yemen's outlook for 2025 remains grim as regional conflicts continue alongside internal strife threatening further fragmentation and worsening crises. However, achieving peace could lead to rapid economic recovery through external assistance necessary for stabilization.