The economy of Yemen is weak and underdeveloped, even more so since the breakout of the Yemeni Civil War which then led to instability and a growing humanitarian crisis. At the time of unification, South Yemen and North Yemen had different but equally struggling underdeveloped economic systems. Since unification, the economy was further harmed by Yemen's support for Iraq during the 1990–91 Persian Gulf War because Saudi Arabia had expelled almost 1 million Yemeni workers, and both Saudi Arabia and Kuwait significantly reduced economic aid to Yemen. The 1994 civil war further drained Yemen's economy. As a consequence, Yemen relied heavily on aid from multilateral agencies to sustain its economy. In return, it pledged to implement significant economic reforms. In 1997 the International Monetary Fund (IMF) approved two programs to increase Yemen's credit significantly: the enhanced structural adjustment facility (now known as the poverty reduction and growth facility, or PRGF) and the extended funding facility (EFF). In the ensuing years, Yemen's government attempted to implement recommended reforms: reducing the civil service payroll, eliminating diesel and other subsidies, lowering defense spending, introducing a general sales tax, and privatizing state-run industries. However, limited progress led the IMF to suspend funding between 1999 and 2001.Yemen country profile. Library of Congress Federal Research Division (December 2006). This article incorporates text from this source, which is in the public domain.
In late 2005, the World Bank (which extended Yemen a four-year US$2.3 billion economic support package in October 2002, together with other bilateral and multilateral lenders) announced that, as a consequence of Yemen's failure to implement significant reforms, the World Bank would reduce financial aid by one-third over the period July 2005 through July 2008. A key component of the $2.3 billion package — $300 million in concessional financing — was withheld, pending the renewal of Yemen's PRGF with the IMF, which was under negotiation. However, in May 2006 the World Bank adopted an assistance strategy for Yemen providing for $400 million in International Development Association (IDA) credits in 2006-2009. In November 2006, at a meeting of Yemen's development partners, a total of $4.7 billion in grants and concessional loans was pledged for the period of the years from 2007–2010. Despite possessing significant oil and gas resources and a considerable amount of agriculturally productive land, Yemen remains one of the poorest of the world's low-income countries. In 2018, more than 80 percent (2018) of the population lived in poverty. The influx of an average 1,000 Somali refugees per month into Yemen looking for work was an added drain on the economy, which already coped with a 20 to 40 percent rate of unemployment. Yemen remained under significant pressure to implement economic reforms, lest it face the loss of badly needed international financial support.
In the north, disruptions of the civil war (1962–1970) and frequent periods of drought dealt severe blows to a previously prosperous agricultural sector. Coffee production, formerly the north's main export and principal form of foreign exchange, declined as the cultivation of khat increased. Low domestic industrial output and a lack of raw materials made the Yemeni Arab Republic dependent on a wide variety of imports.
The Yemeni Civil War and air bombing campaign by the coalition during the Saudi-led intervention devastated the Yemeni economy further.
As a result of civil war, Yemen suffered from inflation and devaluation of the Yemeni rial, and Yemen's economy contracted by 50% from the start of the civil war on 19 March 2015 to October 2018.
Macro-economic trend
This is a chart of trend of gross domestic product of Yemen (since unification) at market prices estimated by the International Monetary Fund with figures in millions of Yemeni Rials. Year Gross domestic product US dollar exchange Inflation index (2000=100) 1989 125,562 11.70 Yemeni Rials 5.10 1995 516,643 40.49 Yemeni Rials 51 2000 1,539,386 161.00 Yemeni Rials 100 2005 2,907,636 191.37 Yemeni Rials 175
For purchasing power parity comparisons, the US Dollar exchanged at 150.11 Yemeni Rials and mean wages were $1.06 per man-hour in 2009.
Remittances from Yemenis working abroad and foreign aid paid for perennial trade deficits. Substantial Yemeni communities exist in the Arabian Peninsula, Indonesia, India, East Africa, the United Kingdom, and the United States. Beginning in the mid-1950s, the Soviet Union and People's Republic of China provided large-scale assistance to the YAR. This aid included funding of substantial construction projects, scholarships, and considerable military assistance.
The following table shows the main economic indicators in 1994–2023 (with IMF staff estimates in 2025–2029). YearGDP(in bn. US$PPP)GDP per capita(in US$ PPP)GDP(in bn. US$ nominal)GDP growth(real)Inflation rate(in Percent)Government debt(in % of GDP)199024.201,84512.64n/an/an/a199126.591,95114.676.344.9n/a199229.432,07817.968.251.2n/a199331.332,13121.744.061.7n/a199434.152,23728.026.771.3n/a199536.852,32712.805.763.9n/a199639.262,3986.504.638.8n/a199742.032,4936.845.24.6n/a199845.052,5956.326.011.5n/a199947.422,6557.643.87.996200051.492,8039.686.211.061200154.652,8949.853.811.961200257.682,97310.693.912.258200361.023,06311.783.710.857200465.153,18513.874.012.552200570.963,37716.735.69.944200675.463,48919.063.210.841200780.093,59121.653.37.940200884.623,68226.913.619.036200988.433,73525.133.93.750201096.403,95330.917.711.242201185.883,42132.73 −12.719.546201285.443,30635.402.49.948201392.763,48740.424.811.048201494.193,44243.23 −0.28.249201568.452,43342.44 −28.022.058201662.632,16731.32 −9.421.377201760.512,04126.84 −5.130.484201862.372,05121.610.833.687201964.732,07721.892.115.791202060.011,88020.22 −8.521.787202162.121,90319.39 −1.031.576202267.552,02723.531.529.566202368.582,01318.81 −2.00.981202469.521,99616.19 −1.016.3852025e71.842,01716.221.520.7782026e78.302,15218.197.013.7702027e84.922,28421.056.511.2582028e91.672,41522.946.010.0532029e98.482,54224.525.510.050
Integration issues In the south, pre-independence economic activity was overwhelmingly concentrated in the port city of Aden. The seaborne transit trade, upon which the port relied, collapsed with the closure of the Suez Canal and Britain's withdrawal from Aden in 1967. Only extensive Soviet aid, remittances from south Yemenis working abroad, and revenues from the Aden refinery (built in the 1950s) kept the PDRY's centrally planned Marxist economy afloat. With the dissolution of the Soviet Union and a cessation of Soviet aid, the south's economy effectively collapsed.
Since unification, the government has worked to integrate two relatively disparate economic systems. However, severe shocks — including the return of approximately 850,000 Yemenis in 1990 from the Persian Gulf states, a subsequent major reduction of aid flows, and internal political disputes culminating in the 1994 civil war — hampered economic growth.
Industries Agriculture and fishing
Agriculture is the mainstay of Yemen's economy, which has generated more than 20 percent of the country's gross domestic product (GDP) since 1990 (20.4 percent in 2005 according to the Central Bank of Yemen). Agriculture employs more than half (54.2 percent in 2003) of the working Yemeni population. However, a U.S. government estimate suggests that the sector accounted for only 13.5 percent of GDP in 2005. Numerous environmental problems hamper growth in this sector — soil erosion, sand dune encroachment, and deforestation — but the biggest problem by far is the scarcity of water. As a result of low levels of rainfall, agriculture in Yemen relies heavily on the extraction of groundwater, a resource that is being depleted. Yemen's water tables are falling by approximately two meters per year; it is estimated that Sanaa's groundwater supplies could be exhausted by 2030. The use of irrigation has made fruit and vegetables Yemen's primary cash crops. With the rise in the output of irrigated crops, the production of traditional rain-fed crops such as cereals has declined. According to the Central Bank of Yemen, the production of khat, a mildly narcotic and heavily cultivated plant that produces natural stimulants when its leaves are chewed, rose 6.7 percent in 2005 and accounted for 5.8 percent of GDP; the consumption of khat is widespread in Yemen. According to the World Bank and other economists, cultivation of this plant plays a dominant role in Yemen's agricultural economy, constituting 10 percent of GDP and employing an estimated 150,000 persons while consuming an estimated 30 percent of irrigation water and displacing land areas that could otherwise be used for exportable coffee, fruits, and vegetables.
Although Yemen's extensive territorial waters and marine resources have the potential to produce 840,000 tons of fish each year, its fishing industry is relatively underdeveloped and consists largely of individual fishermen in small boats. After the government lifted restrictions on fish exports, production reached one-quarter of capacity, yielding revenues valued at US$260 million in 2005. Fish and fish products constituted only 1.7 percent of Yemen's GDP but were the second largest export. In December 2005, the World Bank approved a US$25 million credit for a Fisheries Management and Conservation Project in all coastal governorates along the Red Sea and the Gulf of Aden. This project was expected to improve fish landing and auction facilities; provide ice plants for fish preservation; and enable Yemen's Ministry of Fisheries to undertake more effective research, resource management planning, and regulatory activities.
Oil and gas
Yemen is an oil producer and has significant untapped offshore oil and gas deposits. Unlike many regional oil producers, Yemen relies heavily on foreign oil companies that have production-sharing agreements with the government. Income from oil production constitutes 70 to 75 percent of government revenue and about 90 percent of exports. Yemen contains proven crude oil reserves of more than , although that is falling from the country's older fields, which have been wrecked by war and corruption, both driven by the fact that oil provides around 90% of the country's exports. The World Bank predicted that Yemen's oil and gas revenues would plummet during 2009 and 2010, and would fall to zero by 2017 as supplies ran out; and then the UK's Royal Institute for International Affairs warned that instability in Yemen could expand a zone of lawlessness from northern Kenya to Saudi Arabia, while describing Yemen's democracy as "fragile" and pointing to armed conflicts with Islamists and tribal insurgents as causes of instability. As a result, Western entities and other diplomats and leaders have an interest in maintaining Yemen's stability averting adverse outcomes. According to statistics published by the Energy Information Administration, crude oil output averaged in 2005, which was a reduction from in 2004. For the first eight months of 2006, crude oil output was flat, averaging .
Following a minor discovery in 1982 in the south, an American company found an oil basin near Ma'rib in 1984. A total of was produced there in 1995. A small oil refinery began operations near Ma'rib in 1986. A Soviet discovery in the southern governorate of Shabwah has proven only marginally successful even when taken over by a different group. A Western consortium began exporting oil from Masila in the Hadhramaut in 1993, and production there reached in 1999. There are new finds in the Jannah (formerly known as the Joint Oil Exploration Area) and east Shabwah blocks. Yemen's oil exports in 1995 earned about US$1 billion. Yemen's offshore oil and gas deposits are estimated to contain billions of barrels of oil and gas.