After almost a year of crisis, Yemen has embarked on a political transition based on an agreement brokered by the Gulf Cooperation Council (GCC) in November 2011. Yemen started a 565-member National Dialogue process in March 2013, which concluded in January 2014 in the decision to transform Yemen into a Federal State.
A special committee appointed by the National Dialogue Commission determined there will be six entities under the Yemeni Federal State. The Commission also approved a Guarantee Document, detailing a road map for the implementation of its recommendations, including details of the extension of the political transition period, constitutional redrafting, preparation of basic laws to support a federal state, and parliamentary and presidential elections. The security situation, meanwhile, remains fragile.
Yemen’s economic recovery is also vulnerable: after the country slipped into recession in 2011 with GDP shrinking by 12.7%, the economy grew by an estimated 2.4% in 2012. The budget deficit had widened to 6.2 % of GDP in 2012, and the current account deficit had narrowed to about 1% of GDP. Three oil grants, US$1 billion each, from Saudi Arabia helped stabilize the overall macroeconomic situation. Economic prospects will depend on progress on the political and security fronts, continued donor support, and implementation of critical reforms.
Yemen is one of the poorest countries in the Arab world. Poverty, which was already increasing prior to the latest political crisis has risen further from 42% of the population in 2009, to 54.5% in 2012. Yemen has one of the highest population growth rates in the world, and is one of the most food insecure countries globally. Approximately 45% of the population is food insecure and Yemen’s scarce water resources are far below the regional average.