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- GDP (PPP):
- $69.2 billion
- -28.1% growth
- -6.2% 5-year compound annual growth
- $2,375 per capita
- Inflation (CPI):
- FDI Inflow:
Numerical grading of Yemen’s overall economic freedom could not be resumed in the 2018 Index because of the continuing lack of reliable economic statistics for the country. A civil war, raging since early 2015, has devastated the economy and destroyed critical infrastructure. For the time being, economic policymaking by the Houthi rebel alliance in the North and the Hadi government in the South will focus on marshalling limited fiscal resources for the war effort.
Even before the current conflict, years of mismanagement, corruption, and depletion of natural resources, both oil and water, had led to chronic poverty and underdevelopment, with minimal access to basic services such as electricity, water, and health care in much of the country. The conflict has aggravated that situation, and significant international assistance will likely be needed to stabilize the economy, restore basic services, and restart Yemen’s oil and gas industry when the civil war ends.
North and South Yemen were unified as the Republic of Yemen in 1990, but the ongoing civil war in one of the Arab world’s least developed countries has stalled tentative efforts at modernization and integration into the global economy. The conflict’s most immediate cause is a breakdown in relations between President Abd Rabbuh Mansour Hadi and the Houthis, a Zaydi Shia rebel movement. In 2015, Saudi Arabia launched an intensive bombing campaign and ground intervention in an attempt to restore Hadi to power, but the Houthis have retained significant gains on the ground. Al-Qaeda in the Arabian Peninsula (AQAP) has exploited the conflict to seize parts of eastern Yemen and develop a working relationship with anti-Houthi tribal militias.
Property rights and business activity are impaired by insecurity and corruption. The nominally independent judiciary is weak and susceptible to interference from the executive branch. Authorities have a poor record of enforcing judicial rulings. A culture of corruption is pervasive throughout the country, and petty corruption is observed in nearly every government office.
Political turmoil and civil conflict have caused the economy to collapse. Oil and gas exports have been suspended, and the overall fiscal situation remains perilous, with the impact of the escalating cost of the war compounded by a collapse in oil and tax revenue. Limited fiscal resources have been directed toward spending on the military and public-sector wages, and millions of Yemenis are at risk of famine.
The ongoing war has stifled private enterprise, and almost all businesses are making substantial layoffs. More than 80 percent of the population is in need of humanitarian assistance. The government cannot afford to restore fuel subsidies that were cut before the civil war but probably would restore them if it could.
Trade is moderately important to Yemen’s economy; the combined value of exports and imports equals 28 percent of GDP. The average applied tariff rate is 5.1 percent. Ongoing conflict deters international trade and investment. The economy is largely cash-based, and the small financial system remains dominated by the state.