عربي English Türkçe اردو فارسى
Logo
Latest News
Arab World

World Bank: Yemen’s GDP Per Capita Declined by 54%

Houthi attacks have halted oil exports, further straining Yemen’s economy
Houthi attacks have halted oil exports, further straining Yemen’s economy
TT
TT

World Bank: Yemen’s GDP Per Capita Declined by 54%

Houthi attacks have halted oil exports, further straining Yemen’s economy
Houthi attacks have halted oil exports, further straining Yemen’s economy

Yemen’s economy continues to face significant hurdles as ongoing conflict and regional tensions exacerbate the nation's economic and humanitarian crises, according to the latest World Bank Yemen Economic Monitor.

Yemen's GDP is projected to contract by 1.0% in 2024, following a 2.0% contraction in 2023 and a modest growth of 1.5% in 2022, the report said.

Between 2015 and 2023, Yemen experienced a 54% decline in real GDP per capita, leaving the majority of Yemenis in poverty.

It also showed that food insecurity affects half the population, and youth mortality rates have surged.

The fiscal situation of the Internationally Recognized Government (IRG) deteriorated significantly in 2023.

Fiscal revenues declined by over 30%, driven by a substantial drop in oil revenues and diminished customs revenues due to the redirection of imports from Aden to Houthi-controlled ports.

In response, the IRG implemented severe expenditure cuts, impacting essential public services and long-term economic growth.

The current account deficit widened to 19.3% of GDP in 2023, up from 17.8% in 2022, the report said.

The blockade on oil exports significantly impacted the trade deficit, while foreign reserves remained relatively stable due to financial support from partners, including the conversion of IMF Special Drawing Rights (SDRs).

Meanwhile, the resumption of monetary financing by the IRG heightened inflationary pressures.

However, inflation rates varied across regions, with Sanaa experiencing deflation at 11.8% and Aden facing elevated inflation at 7.0% due to currency depreciation.

Additionally, the cost of essential goods has surged in Aden, with many families now spending over 60% of their income on food alone.

“Yemen's economic and humanitarian challenges are intensifying, yet the potential for recovery remains with the right support and strategies,” said Dina Abu-Ghaida, World Bank Country Manager for Yemen.

“The report underscores critical areas for action, including tackling fiscal pressures, alleviating trade disruptions, and stabilizing the currency. The World Bank is steadfast in its commitment to supporting Yemenis through these crises, delivering immediate assistance, and paving the way for a sustainable and resilient future,” she said.

Additionally, the report notes that continued fiscal pressures and economic fragmentation between northern and southern areas threaten to deepen the divide and further complicate recovery efforts.

For example, the redirection of imports has led to a substantial decrease in customs revenues for Aden, further straining the economic conditions in the south compared to the north.

The potential for increased aid and investment hinges on achieving a lasting truce and commitment to reconstruction from all parties involved.

The report also highlights the severe impact of escalating regional tensions, particularly Houthi attacks in the Red Sea, which have disrupted international shipping and trade.

This has led to increased shipping costs and insurance premiums, further straining Yemen's economy.

The economic outlook for Yemen remains highly uncertain.

The report said the resumption of oil exports and broader economic recovery appear remote without a lasting peace agreement.

Also, ongoing regional conflicts, currency depreciation, and fiscal pressures pose significant risks.

However, the report points out that a sustainable peace agreement could rapidly improve Yemen’s economic prospects, supported by external financial assistance and reconstruction efforts.

Most Viewed

 
 
Arab World

UN Warns of Profound Liquidity Crisis in Yemen’s Houthi-Controlled Areas

For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
TT
TT

UN Warns of Profound Liquidity Crisis in Yemen’s Houthi-Controlled Areas

For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)
For the first time, the Houthis will face difficulties in financial transfers and foreign currency supply (local media)

A UN program recently warned of low foreign currency reserves and a liquidity crisis in Houthi-controlled areas if the economic conflict with the internationally recognized government continues in Yemen.

It also noted that the poor food consumption significantly worsened in the north, increasing by 78% year-on-year, compared to a 52% increase in the south.

In its Food Security Update, the World Food Program (WFP) warned that a banking crisis is looming in Yemen, as a transaction ban has been announced between the intentionally recognized government and the Houthis-controlled areas.

“These developments, coupled with diminished foreign currency reserves in the north, could result in liquidity crisis with profound implications on markets, livelihoods, and food security situation,” it said.

The Program also noted that the current escalation in the “economic conflict” is likely to disrupt the flow of remittances and the overall financial and banking sectors, posing significant challenges for importers to procure essential food and non-food items, and ultimately impacting food supply and food price.

According to the WFP Update, this conflict comes while limited income opportunities are a key challenge to accessing food, reported by 71% in the north and 60% in the south.

It added that the depth and severity of food deprivation (poor food consumption) also peaked in May, at 32% in the north and 31% in the south.

This trend significantly worsened in the north, increasing by 78% year-on-year, compared to a 52% increase in the south.

Severe food deprivation reached an all-time high in Al Jawf, Al Bayda, Hajjah, Amran, and Al Hodeidah, WFP said.

Around 8% of households in the north reported relying on begging to meet their essential needs, compared to three percent in the south, it showed, adding that this practice was particularly pronounced in Sadah, Hajjah, Amran, and Al Bayda.

WFP also said the total volume of fuel imported via the Red Sea ports increased by 32% during Jan-May 2024 compared to the same period in 2023.

Fuel imports via the southern ports of Aden and Mukalla decreased by 41% year-on-year, as local crude oil production from Marib largely contributes to covering domestic fuel needs in government controlled areas.

However, the WFP update said it is crucial to closely monitor import flows over the coming months, especially given the increased insurance costs for Yemeni ports, the diminished foreign currency reserves, and the banking crisis.

Also, by the end of May 2024, WFP said that the Yemeni riyal (YER) depreciated to an all-time low of YER 1,749 per dollar in government-controlled areas, losing around 25% of its value against the US dollar year-on-year.

“This decline is primarily attributed to low foreign currency reserves and revenue shortages due to reduced crude oil exports,” it said.

The UN program also noted that the overall volume of food imports via all Yemeni seaports increased by 22% during the first five months of 2024 compared to the same period in 2023.

However, it showed that the Red Sea ports saw a 35% annual rise in food imports during Jan-May 2024, while the southern ports of Aden and Mukalla exhibited a 16% annual decline.