WASHINGTON, May 21, 2026 - Yemen's economy remains under strain, having contracted again in 2025 and now facing additional pressures linked to the conflict in the Middle East, according to the World Bank's latest Yemen Economic Monitor.
The Spring 2026 edition, "Pushing Against the Tide," finds that national real GDP declined by 1.5 percent in 2025 and is projected to contract by a further 0.5 percent in 2026, weighed down by persistent structural constraints and external shocks.
Economic conditions in 2025 remained difficult. Oil exports are still blocked, and activity across sectors continues to be held back by a challenging business environment, limited access to finance, and weak domestic demand. At the same time, humanitarian financing fell sharply, with funding for the UN Response Plan covering only 28 percent of needs - down from 56.5 percent in 2024.
Fiscal pressures intensified as revenues fell to 5.6 percent of GDP, driven by reduced external grants. The resulting reduction in expenditure has affected salary payments, subsidies, and essential spending - underscoring the country's severely limited fiscal space.
Monetary developments were shaped by the Central Bank's exchange rate stabilization measures. The Yemeni rial in Aden appreciated sharply in August 2025 and has since stabilized, supported by Central Bank measures and external inflows, including Saudi financial support. While this has helped ease inflation, the situation remains fragile, particularly as remittances, exports, and aid - the main sources of income for the country - remain weak.
The escalation of regional conflict has further clouded the outlook. Since most essential goods are sourced from abroad, Yemen is highly exposed to rising global prices, supply disruptions, and increased shipping costs, all of which are expected to increase inflation and further erode households' purchasing power. Households remain highly vulnerable: nearly three-quarters of the population is estimated to live below the poverty line, and a large share does not have enough to eat.
"Yemen's economy continues to face profound challenges, with limited buffers to absorb new shocks," said Dina Abu-Ghaida, World Bank Group Country Manager for Yemen. "Sustaining macroeconomic stability, protecting basic services, and supporting jobs and livelihoods will require continued engagement from development partners, alongside progress toward peace and institutional stability."
Despite operating in an exceptionally challenging environment, the Internationally Recognized Government has taken meaningful steps toward stabilization. These include a comprehensive 2026 reform agenda and a budget that seeks to maintain fiscal discipline. These commitments offer a potential pathway toward stability and recovery, though their success will depend on continued reform implementation and sustained support from international partners.
