2014 Index of Economic Freedom

Yemen

overall score55.5
world rank123
Rule of Law

Property Rights30.0

Freedom From Corruption19.4

Limited Government

Government Spending74.9

Fiscal Freedom91.7

Regulatory Efficiency

Business Freedom59.2

Labor Freedom54.9

Monetary Freedom62.1

Open Markets

Trade Freedom82.4

Investment Freedom50.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 25.9 million
  • GDP (PPP):
    • $59.1 billion
    • 0.1% growth
    • 0.8% 5-year compound annual growth
    • $2,283 per capita
  • Unemployment:
    • 35.0%
  • Inflation (CPI):
    • 11.0%
  • FDI Inflow:
    • $348.8 million
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Yemen’s economic freedom score is 55.5, making its economy the 123rd freest in the 2014 Index. Its score is 0.4 point lower than last year, reflecting declines in four of the 10 economic freedoms including monetary freedom, business freedom, and freedom from corruption. Yemen is ranked 12th out of 15 countries in the Middle East/North Africa region, and its overall score is lower than the world and regional averages.

Over the 20-year history of the Index, Yemen’s progress toward greater economic freedom has been modest, with its score improving by 5.7 points. Gains in trade freedom, monetary stability, fiscal freedom, and the control of corruption have been offset by significant declines in labor freedom, investment freedom, and business freedom. Yemen was considered a “repressed” economy during its first eight years in the Index but since 2003 has fluctuated within the ranks of the “mostly unfree.”

Despite some reform attempts, the economy remains burdened by institutional shortcomings that include political interference, corruption, and a rigid labor market. Due to the complexity of the regulatory framework and the high cost of conducting business, considerable economic activity remains in the informal sector.

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Background

Yemen is one of the Arab world’s poorest countries. Secessionists, unruly tribes, and Islamist extremists oppose its moderate foreign policy and cooperation with the United States against al-Qaeda. In early 2011, important members of President Ali Abdullah Saleh’s government defected to a coalition of opposition forces. Saleh was forced to resign in a deal brokered by the Gulf Cooperation Council. He transferred power to Vice President Abd Rabbuh Mansur al-Hadi after a February 2012 election. The government initiated an economic reform program in 2006, but declining oil production, terrorism, kidnappings, clashes between Sunni and Shia Muslims, tribal rivalries, a strong al-Qaeda presence, and growing water shortages have undermined foreign investment, tourism, and economic growth.

Rule of LawView Methodology

Property Rights 30.0 Create a Graph using this measurement

Freedom From Corruption 19.4 Create a Graph using this measurement

Corruption is endemic, and bribery of government officials may be required at every step of a project. Despite recent government efforts to fight graft, Yemen lacks most legal safeguards against conflicts of interest. The judiciary is nominally independent but susceptible to interference from the executive branch. Authorities have a poor record of enforcing judicial rulings.

Limited GovernmentView Methodology

The top individual income and corporate tax rates are 20 percent. Other taxes include a general sales tax (GST) and a property tax. The overall tax burden equals 5.3 percent of total domestic income. Government spending is 29 percent of GDP. Public debt is about 47 percent of gross domestic income. The government is still grappling with restoring fiscal balance following the uprising in 2011.

Regulatory EfficiencyView Methodology

A non-transparent and time-consuming regulatory framework hinders the emergence of a more vibrant private sector. It takes 40 days to launch a business and more than five months to obtain necessary construction permits. Employment regulations remain rigid, and the absence of a dynamic private sector results in chronic underemployment and a large informal sector. Energy subsidies are very high and represent a major drain on the budget.

Open MarketsView Methodology

Yemen’s average tariff rate is 3.8 percent. Civil unrest is a deterrent to international trade and investment. The judicial and regulatory systems may be difficult for foreign investors to navigate. The small financial system remains underdeveloped and dominated by the state. The economy is largely cash-based, and the limited availability of financing precludes more vibrant entrepreneurial activity.

Country's Score Over Time

Bar Graph of Yemen Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Yemen to other economic country groups

Regional Ranking

rank country overall change
1Bahrain75.1-0.4
2United Arab Emirates71.40.3
3Qatar71.2-0.1
4Jordan69.2-1.2
5Israel68.41.5
6Oman67.4-0.7
7Kuwait62.3-0.8
8Saudi Arabia62.21.6
9Lebanon59.4-0.1
10Morocco58.3-1.3
11Tunisia57.30.3
12Yemen55.5-0.4
13Egypt52.9-1.9
14Algeria50.81.2
15Iran40.3-2.9


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