Brief

Yemen: Economy-wide Impact of Conflict and Alternative Scenarios for Recovery

MENA RP Policy Note, 02

Economy-wide analyses of the Yemeni economy suggests that the accumulated economic losses caused by the ongoing conflict in Yemen amount to nearly one and a half times Yemen’s pre-conflict GDP. One effect of this economic collapse is that the share of Yemen’s population living below the poverty line is estimated to have reached 77 percent in 2018. Even when the conflict ends, Yemen’s GDP is projected to stay well below its 2014 levels for many years to come if any conflict resolution scenario is not accompanied by extraordinary external financial and other development support by Yemen’s partners. Under the Recovery-LowAid scenario examined using the DCGE model of the Yemeni economy, Yemen’s economy is projected to again reach the GDP level of 2014 by 2025, but poverty levels are likely to remain very high. This high poverty will pose risks to societal healing and to the formation of a new social contract post-conflict. Only under the Recovery-HighAid scenario, if accompanied by substantial improvements in absorptive capacity, will Yemen’s GDP reach the economic and poverty levels that it would have reached in 2025 without the conflict having arisen (the hypothetical Base model scenario). Under such a HighAid scenario, poverty levels will reach pre-conflict levels by 2025. To reach such a positive outcome, aside from the core work of conflict resolution, criticalmassive efforts will also be needed in the years to come to replace and upgrade the capital stock, rebuild economic institutions, and restore economic networks.

Authors

Amir M. Althibah
Tarek Al Kebsi
Clemens Breisinger
Wilfried Engelke
Mariam Raouf
Sharad A. Tandon

Info

Publication Date
DOI
10.2499/p15738coll2.133418

Related Topics