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- GDP (PPP):
- $103.6 billion
- -0.2% growth
- 0.4% 5-year compound annual growth
- $3,774 per capita
- Inflation (CPI):
- FDI Inflow:
Numerical grading of Yemen’s overall economic freedom has been suspended in the 2016 Index because of a significant deterioration in the quality of publicly available economic statistics on the country. Yemen’s intensifying civil war has devastated the economy, destroying infrastructure, displacing over a million people, and creating an acute humanitarian crisis.
Economic Freedom Snapshot
- 2016 Economic Freedom Score: Not Graded
- Economic Freedom Status: Not Graded
- Global Ranking: Not Ranked
- Regional Ranking: Not Ranked in the Middle East/North Africa Region
- Notable Successes: N/A
- Concerns: N/A
- Overall Score Change Since 2012: N/A
Before the current war, Yemen’s economy had already been in a dire state. With structural economic reforms largely abandoned, years of mismanagement and corruption had compounded the depletion of natural resources and led to chronic underdevelopment. The conflict has aggravated this situation.
The civil war in Yemen, one of the Arab world’s least developed countries, has brought tentative efforts at modernization and integration into the global economy to a halt. The conflict’s most immediate cause is a breakdown in relations between interim President Abd Rabbuh Mansour Hadi and the Houthis, a Zaydi Shia rebel movement. In March 2015, Saudi Arabia launched an intensive bombing campaign in an attempt to restore Hadi to power. The Houthis have retained significant gains on the ground, and Hadi has fled to Saudi Arabia. Al-Qaeda in the Arabian Peninsula has exploited the conflict to seize parts of eastern Yemen and develop a working relationship with anti-Houthi tribal militias. Yemen’s limited oil and gas production has been severely disrupted, and the prolonged conflict continues to take a heavy toll on the already fragile economy.
The network of corruption and patronage built up over 30 years under former President Ali Abdullah Saleh has remained entrenched in public institutions in the five years since he left office. Auditing and investigative bodies are not sufficiently independent of executive authorities. The nominally independent judiciary is susceptible to interference from the executive branch. Authorities have a poor record of enforcing judicial rulings.
Political turmoil and civil conflict have caused the economy to collapse. Oil and gas exports have been suspended, and the overall fiscal situation remains perilous, with the impact of the escalating cost of the war compounded by a collapse in oil and tax revenue. Limited fiscal resources have been directed toward spending on the military and public-sector wages. Millions of Yemenis are now on the brink of famine.
Given the level of ongoing political volatility, it is difficult to gauge the lasting effectiveness of earlier regulatory reforms aimed at broad-based economic expansion and dynamic job creation. Yemen slashed fuel subsidies in July 2014, increasing the price of gasoline by 60 percent and diesel by 90 percent, and could not have funded them easily in any case since the civil war has devastated the economy.
Domestic and foreign investors are treated equally under the law. State-owned enterprises distort the economy. A weak judicial system and political instability impede foreign trade and investment. In practice, the inefficient investment regime inhibits the dynamic growth of new investment. The economy is largely cash based, and the small financial system remains dominated by the state.