Yemen’s Economic Crisis Deepens as Regional Tensions Escalate

Yemen’s economy is struggling, having contracted again in 2025 and likely to decline further in 2026 due to ongoing conflict and structural issues, according to the World Bank’s Spring 2026 report. The national real GDP fell by 1.5 percent in 2025 and is expected to drop another 0.5 percent in 2026. Challenges include blocked oil exports, a tough business climate, limited access to finance, and weak domestic demand. Humanitarian funding decreased significantly, covering only 28 percent of the needs stated in the UN Response Plan, down from 56.5 percent in 2024.

Fiscal pressures have increased with revenues falling to 5.6 percent of GDP, which has led to cuts in essential spending, including salary payments and subsidies. The Central Bank’s measures have stabilized the Yemeni rial but inflation remains a concern due to weak remittances, exports, and limited aid. The ongoing regional conflict exacerbates economic vulnerability, as Yemen relies heavily on imports, facing rising prices and supply disruptions.

The report emphasizes the need for continued international support and reforms. Despite the difficulties, Yemen’s internationally recognized government is pursuing a reform agenda and fiscal discipline, aiming for stability and recovery, contingent on effective implementation and external assistance.