World Bank Predicts Deeper Decline in Yemen’s Economy Due to Ongoing Conflict

The World Bank has confirmed a 58% decrease in per capita income in Yemen and expects the country’s real GDP to shrink by 1.5% this year. The Bank anticipated that the negative economic effects will worsen due to the depreciation of the local currency, reduced financial support, shrinking liquidity, and the ongoing fuel crisis.

In its quarterly report, the Bank warned that Yemen’s economy is under severe strain. With the conflict still unresolved, institutional fragmentation worsening, and external support diminishing, the report suggested that the country is on a path that could derail recovery efforts unless a peaceful resolution is achieved. The decade-long war, sparked by the Iran-backed Houthi coup against the legitimate government, continues to be the primary driver of this economic deterioration.

The report stated that while inflationary pressures continue in government-held areas, the economy in Houthi-controlled regions is increasingly shifting toward informality, including reliance on bartering, amid declining remittances and weak economic activity.

Warning of the severe deterioration of Yemen’s economic and social conditions, the World Bank confirmed that Yemen’s government revenues have declined to just 2.5% of previous levels, due to the Houthis blocking oil exports for the third consecutive year.

This move has led to a sharp drop in public revenues, with government income, excluding grants, falling to only 2.5% of GDP in 2024, despite the fiscal deficit shrinking to the same level, compared to 7.2% the previous year.

The World Bank report, titled “Persistent Fragility Amid Rising Risks,” stated that real per capita GDP has dropped by 58% since the beginning of the war, while inflation rates in areas controlled by the government have risen above 30% in 2024.

The report noted that the exchange rate of the local currency against the dollar fell from 1,540 to 2,065 riyals over the past year, “further eroding household purchasing power,” amid a rapid surge in the prices of basic goods.

Discussing the deep monetary division between government-held and Houthi-controlled regions, the World Bank emphasized that this split undermines efforts at national financial and monetary coordination and entrenches wide disparities in services, institutions, exchange rates, and banking systems.

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