Yemen: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to adress the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Yemen has been involved in a conflict since early 2015. For many years the poorest country in the Middle East and North Africa (MENA), it is now experiencing the world's worst humanitarian crisis. The country is currently divided into two territories: the north and the capital Sana'a are controlled by Houthi rebels; whereas in the south there are two entities, the loyalists guided by the internationally recognised government of President Hadi and the autonomist Southern Transitional Council, led by Aidarous al-Zubaid and supported by Saudi Arabia. Yemen suffers from structural deficiencies and a current conflict that exacerbates the situation. The ongoing war has destroyed the Yemen's economy : it has essentially eliminated the country's exports, weakened the national currency, exacerbated inflation, limited food and fuel imports, and damaged infrastructure. The conflict combined with the COVID-19 pandemic has lead the country into one of the most serious humanitarian crises in the world. Coface estimated that GDP growth was negative by 8.5% in 2020 and by 2% in 2021 as private consumption, by far the main economic component, has constantly weakened because of shortages of basic goods and a steep rise in inflation. Nevertheless, progress in the oil sector should lead the way out of the recession in 2022, with a forecasted growth of 1.5%, despite the depletion of oil fields and the lack of drilling to find new ones.

Since the outbreak of the conflict, Yemen has lost more than half of its GDP. Hydrocarbon production and export were largely suspended, as well as investments. At the same time, low foreign reserves severely reduced Yemen's import capacities, causing a shortage of food, medicine and fuel. The country’s budget deficit was estimated at 5.2% of GDP in 2021 (Coface), with the United States, the European Union and other countries providing a total of USD 600 million in support. This also helped reduce the debt-to-GDP ratio from around 83% in 2020 to 75% in 2021, with the ratio forecasted to decrease to 62% this year (Coface). Public debt also benefited from the repayment facility deployed via the Paris Club debt service suspension initiative. Inflation – at 30% in 2021 – is set to remain high in 2022 (32%), particularly in the south, where monetary deficit financing and military setbacks are contributing to the collapse in the value of the local riyal, which reached its lowest level since the start of the war in July 2021.

The COVID-19 pandemic's fallout has severely affected Yemen's economy, exacerbating the extreme fragility of the population. The country has one of the lowest GDP per capita (PPP) in the world, estimated at USD 1,924 in 2021 by the IMF. Yemen ranks 179th in the UNDP's Human Development Report and 174th out of 180 countries in Transparency International's 2021 Corruption Perceptions Index with a score of 16/100.

Monetary Indicators	2016	2017	2018	2019	2020
Yemeni Rial (YER) - Average Annual Exchange Rate For 1 GHS	53.86	49.39	46.86	94.81	132.42

Source: World Bank - Latest available data.

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Latest Update: February 2023