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Yemen’s Economic Outlook- Fall 2016

The ongoing conflict has caused a dramatic deterioration in the country’s economic and social situation. With the disruption of oil production and other economic activities, output has contracted sharply, inflation has been on the rise since 2015, and international reserves are below two months of crisis-subdued imports. The conflict has led to a catastrophic humanitarian situation, with an increasing toll of civilian deaths and casualties, massive displacement of people, destruction of infrastructure, and acute food shortage.

Economic and social prospects in 2016 and beyond will depend critically on rapid improvements on the political and security fronts. Real GDP is projected to contract further in 2016 by some 4%, while inflation would decline to single digits. Fiscal and external current account deficits are likely to edge even higher. It is possible that foreign financing could resume in the 4th quarter based on a peace settlement.

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