World Bank has warned that Yemen’s economy continues to deteriorate as conflict-related pressures, declining humanitarian aid, and ongoing structural challenges push the country deeper into crisis.
According to the Spring 2026 edition of the Yemen Economic Monitor titled Pushing Against the Tide, Yemen’s real GDP contracted by 1.5% in 2025 and is expected to shrink by another 0.5% in 2026. The report highlights persistent economic instability driven by blocked oil exports, weak domestic demand, limited financial access, and worsening regional tensions.
The report noted that economic activity across key sectors remains severely constrained due to an unstable business environment and reduced external support. Humanitarian funding has also dropped sharply, with the United Nations Response Plan receiving only 28% of required funding in 2025 compared to 56.5% the previous year.
Fiscal pressures have intensified as government revenues declined to 5.6% of GDP, largely because of falling international grants. Reduced public spending has affected salary payments, subsidies, and essential government services, leaving authorities with limited fiscal flexibility.
Monetary conditions showed some temporary improvement after stabilization measures introduced by the Central Bank in Aden. The Yemeni rial appreciated significantly in August 2025 and has since remained relatively stable due to financial interventions and external support from Saudi Arabia. While the stronger currency has helped ease inflationary pressure, the broader economic outlook remains fragile.
The World Bank warned that escalating conflict across the Middle East is adding further risks for Yemen, which relies heavily on imported goods. Rising global prices, shipping disruptions, and increased transport costs are expected to worsen inflation and reduce household purchasing power even further.
The humanitarian situation remains severe, with nearly three-quarters of Yemen’s population estimated to be living below the poverty line. Food insecurity also continues to rise, leaving many families unable to meet basic nutritional needs.
Dina Abu-Ghaida stated that Yemen has very limited capacity to absorb additional economic shocks. She emphasized that maintaining macroeconomic stability, protecting essential services, and supporting livelihoods will require continued international engagement alongside progress toward peace and institutional reform.
Despite ongoing challenges, the internationally recognized Yemeni government has introduced a 2026 reform agenda and budget framework aimed at improving fiscal discipline and supporting long-term economic recovery. The World Bank noted that sustained implementation and continued backing from international partners will be critical for any meaningful stabilization efforts.
