Yemen’s economy continued to face severe pressure in the first half of 2025, as years of conflict and institutional fragmentation were compounded by a continued blockade on oil exports, rising inflation, and declining international aid. According to the World Bank’s Fall 2025 Yemen Economic Monitor, real GDP is expected to contract by 1.5 percent this year, worsening already high levels of food insecurity across the country.
In areas governed by the Internationally Recognized Government, households are struggling with rapidly rising prices that have sharply reduced purchasing power. By June, the cost of a basic food basket had risen 26 percent compared to the previous year, reflecting the steep depreciation of the Yemeni rial, which hit a record low in July before partially recovering in August. With government revenues down by 30 percent, spending cuts have disrupted public services and delayed civil servant salaries, further straining living conditions.
In Houthi-controlled territories, airstrikes on major ports and persistent liquidity shortages have restricted imports and made essential goods even harder to obtain. The financial sector is increasingly unstable, with banks moving operations from Sana’a to Aden to avoid sanctions and regulatory pressures. International assistance has also dropped sharply; by September 2025, only 19 percent of the required funding under the UN’s Humanitarian Response Plan had been secured, the lowest level in more than a decade.
Across both regions, shrinking job opportunities, high food prices, and limited donor support have pushed over 60 percent of households into inadequate food consumption. Many families are relying on negative coping mechanisms, including begging, to survive. The World Bank stresses that restoring stability will require stronger institutions, predictable financing, and steps toward peace to revive economic activity.
Looking ahead, the economic outlook remains bleak. Limited foreign exchange reserves, declining donor contributions, and the ongoing oil export blockade continue to constrain the government’s ability to maintain essential services and import basic goods. Even so, the report outlines several measures that could support stabilization and recovery, including strengthening public financial management, improving revenue mobilization, protecting basic services, and advancing reforms in the electricity sector. It also underscores the importance of safeguarding the currency and stabilizing the banking system through the phased reforms laid out in the IRG’s 2024 economic plan.
The report cautions that without meaningful progress toward peace, Yemen’s economic recovery will remain highly uncertain. However, successful implementation of key reforms could help rebuild confidence, support growth, and lay the foundation for long-term stability.
