Yemen's economy remains under significant strain due to ongoing conflict, institutional fragmentation, and declining external support. The World Bank's latest Yemen Economic Monitor, titled "Persistent Fragility Amid Rising Risks," highlights the challenges facing the country. Since 2015, real GDP per capita has dropped by 58 percent. Inflation in areas controlled by the Internationally Recognized Government (IRG) exceeded 30 percent in 2024, and the Yemeni Rial depreciated from YER 1,540 to YER 2,065 per US dollar over the year.
The report identifies a blockade on oil exports by Houthi movement forces as a key issue, reducing IRG revenues (excluding grants) to 2.5 percent of GDP in 2024. Despite increased budget support and spending cuts narrowing the fiscal deficit from 7.2 percent in 2023 to 2.5 percent, economic conditions remain fragile. The division into two economic zones with separate institutions and monetary authorities continues to create disparities.
Tensions in the Red Sea have resulted in over 450 maritime security incidents in 2024, disrupting trade routes through the Bab el-Mandeb Strait and increasing shipping costs. Socioeconomic conditions are deteriorating further, with more than two-thirds of Yemenis facing inadequate food consumption and exhausting available resources.
"Yemen’s economy is being torn between fragmentation and fragility, yet the potential for recovery remains real," stated Dina Abu-Ghaida, World Bank Group Country Manager for Yemen. She emphasized that while peace is crucial for long-term recovery, actions such as supporting local institutions and protecting essential services can help reduce current economic pressures.
The outlook for 2025 is grim with an expected contraction of real GDP by 1.5 percent and a projected drop of nominal GDP per capita by 19 percent. Fiscal strain, currency depreciation, liquidity shortages, and fuel disruptions will likely worsen vulnerabilities. In contrast to inflationary pressures in IRG-controlled areas, deflation and liquidity constraints are affecting Houthi-controlled regions.
The report outlines three possible future scenarios: continuation of the status quo, escalation of conflict, or lasting peace. Under a peace scenario, Yemen's economy could potentially grow by an average of five percent annually over the next fifteen years through renewed investment and stronger institutions.