WASHINGTON, June 2, 2025 - Yemen's economy continues to face strain as persistent conflict, institutional fragmentation, and declining external support compound the country's long-running crisis, according to the World Bank's latest Yemen Economic Monitor. The Spring 2025 edition, "Persistent Fragility Amid Rising Risks", finds that real GDP per capita has declined by 58 percent since 2015, while inflation in areas controlled by the Internationally Recognized Government (IRG) exceeded 30 percent in 2024. The Yemeni Rial depreciated from YER 1,540 to YER 2,065 per US dollar over the year, further eroding household purchasing power.
The report highlights the ongoing blockade by Houthi movement forces on oil exports, which drove IRG revenues (excluding grants) down to 2.5 percent of GDP in 2024. While increased budget support and spending cuts helped narrow the fiscal deficit to 2.5 percent, down from 7.2 percent in 2023, the economic environment remains fragile. The country's deepening division into two economic zones - with separate institutions, monetary authorities, and exchange rates - continues to drive disparities and undermine coordinated policymaking.
Red Sea tensions, including over 450 maritime security incidents in 2024, severely disrupted trade routes through the Bab el-Mandeb Strait, increasing shipping costs. At the same time, socioeconomic conditions have worsened. More than two-thirds of Yemenis now face inadequate food consumption, while coping strategies are becoming increasingly destructive as families exhaust available resources.
"Yemen's economy is being torn between fragmentation and fragility, yet the potential for recovery remains real," said Dina Abu-Ghaida, World Bank Group Country Manager for Yemen. "While peace remains critical for long-term recovery, there are actions that can be taken - including supporting local institutions and protecting essential services - to help reduce economic pressures on Yemenis today."
Looking ahead, the outlook for 2025 remains bleak. Real GDP is projected to contract by 1.5 percent, while nominal GDP per capita is expected to drop by 19 percent. Continued fiscal strain, currency depreciation, liquidity shortages, and fuel disruptions will likely deepen economic vulnerabilities. In contrast to inflationary pressures in IRG-controlled areas, deflation and liquidity constraints in Houthi-controlled regions are driving an increasing reliance on informal and barter-based transactions. Meanwhile, decreases in donor financing and sanctions compliance risks are expected to constrain economic activity by limiting liquidity, suppressing household incomes, and weakening demand, particularly in Houthi-controlled areas.
The report concludes by outlining three potential economic trajectories for Yemen - a continuation of the status quo, escalation of conflict, or a path to lasting peace. Under the peace scenario, Yemen's economy could grow by an average of 5 percent annually over the next 15 years, supported by renewed investment, stronger institutions, and targeted reconstruction.
