Yemen has been embroiled in conflict since early 2015. For years the poorest country in the Middle East and North Africa (MENA), it is now also suffering the worst humanitarian crisis in the world. Fighting has devastated its economy—leading to food insecurity verging on famine—and destroyed critical infrastructure. The UN has estimated that 24.3 million people in 2020 were “at risk” of hunger and disease, of whom roughly 14.4 million were in acute need of assistance.
The fallout of the COVID-19 pandemic has also hit the Yemeni economy hard, exacerbating people’s extreme fragility. Socio-economic conditions deteriorated further in 2020 because of the economic impact of COVID-19, a fall in global prices, weak public infrastructure and a limited capacity to cope with extreme climate events and natural disasters.
Distortions created by the fragmentation of institutional capacity and divergent policy decisions across areas of control compounded a crisis created by protracted conflict, the interruption of basic services, and acute shortages of basic inputs, including fuel. Rising fuel and food prices in the second half of 2020 have had a devastating effect. A mobile phone survey—routinely conducted by the UN’s World Food Programme (WFP)—shows households were able to afford food at the start of the pandemic in March 2020, but struggled as the pandemic continued and as food prices in the South and fuel prices in the North surged. By the end of 2020, about 40% of households reported poor or borderline consumption, with the trend getting worse.
On top of this, some 20.5 million Yemenis are without safe water and sanitation and 19.9 million without adequate healthcare. As a result, over the past few years, Yemen has been grappling with mass outbreaks of preventable diseases, such as cholera, diphtheria, measles, and Dengue Fever. Waves of currency depreciations in 2018 and 2019 have created lasting inflationary pressure on the Yemeni riyal that has exacerbated the humanitarian crisis. The disruption of infrastructure and financial services has severely affected private sector activity. The more than 40% of Yemeni households that find it difficult to buy even the minimum amount of food may have also lost their primary source of income. Poverty is worsening: whereas before the crisis it affected almost half Yemen’s total population of about 29 million, now it affects an estimated three-quarters of it—71% to 78% of Yemenis. Women are more severely affected than men.
Economic and social prospects in 2021 and beyond are highly uncertain. A gradual recovery of global oil prices, along with increased national production and export capacity, would help ease the strain on Yemen’s public finances in southern governorates and reduce its recourse to Central Bank financing. Urgent progress—to address restrictions on access to imports of supplies and fuel through the port of Hodeida—would improve domestic food prices and access, as well as the provision of public services and the operational environment for humanitarian organizations. The scaling up of humanitarian funding and operations would likely lessen the degree of deterioration of key health and other services, although any significant improvements in socio-economic conditions for Yemeni civilians are likely to remain difficult without progress in the security situation on the ground. A cessation of hostilities and eventual political reconciliation remain prerequisites for the reconstruction of the economy and rebuilding of Yemen’s social fabric.
Last Updated: Mar 25, 2021