Yemen’s economy continues to face serious challenges in 2025, according to the World Bank’s latest Yemen Economic Monitor. The report, titled “Navigating Increased Hardship and Growing Economic Fragmentation,” indicates that real GDP is expected to fall by 1.5 percent this year. This decline is likely to worsen food insecurity across the country.
In areas controlled by the Internationally Recognized Government (IRG), inflation has reduced purchasing power for many households. By June, the cost of a basic food basket was 26 percent higher than it was a year earlier. The Yemeni rial also experienced significant depreciation on the Aden market, reaching a record low of YER 2,905 per US dollar in July before stabilizing at YER 1,676 per US dollar in early August after intervention measures were implemented. IRG revenues dropped by 30 percent compared to last year, which led authorities to cut spending and delay salary payments for civil servants.
In Houthi-controlled regions, airstrikes on ports and ongoing liquidity shortages have made it harder to import goods and access essentials. Banks have been moving operations from Sana’a to Aden due to sanctions and regulatory issues affecting the financial sector. International aid—vital for millions—has continued its downward trend; as of September 2025, only 19 percent of the $2.5 billion needed under the UN Humanitarian Response Plan had been secured, marking a decade-low funding level.
The combination of limited donor support, high food prices, and fewer job opportunities means that over 60 percent of households in both IRG- and Houthi-held areas do not have enough food. Many families are resorting to negative coping strategies such as begging.
"Economic stabilization in Yemen depends on strengthening the systems that keep services running and livelihoods protected," said Dina Abu-Ghaida, World Bank Group Country Manager for Yemen. "Restoring confidence requires effective institutions, predictable financing, and progress toward peace to allow economic activity to resume and recovery to take hold."
The report suggests that prospects for economic improvement remain weak due to ongoing restrictions on oil exports, limited foreign exchange reserves, and falling donor support—all factors limiting the IRG’s ability to maintain essential services or pay for imports.
Despite these obstacles, several measures could help stabilize conditions in both the short- and long-term. These include improving public financial management practices, increasing revenue collection efforts, protecting core services like electricity supply through capacity building initiatives, maintaining currency stability measures outlined in recent government plans announced in December 2024, and supporting reforms aimed at safeguarding banks.
The outlook remains uncertain unless there is movement toward peace; advancing reforms may offer a path toward eventual recovery if implemented successfully.