Economic prospects of a -0.5% increase in GDP in 2018, and prospects beyond, will critically depend on rapid improvements of the political and security situation, and ultimately whether an end to the on-going conflict will allow for rebuilding the economy and Yemen¡¯s social fabric. Macroeconomic stabilization is impossible in the current context of fragmented control of key economic institutions between the recognized government in Aden and the de facto authority in Sanaa.
If violence can be contained by mid-2018, with accompanying improvements in functioning of budgetary and monetary institutions, GDP is projected to begin to recover in 2019, with a projected double-digit GDP recovery growth rate of 17.9%. Restoration of more peaceful conditions will likely allow for resumption of hydrocarbon production, which will help restore government revenues.
However, even in this scenario, little of this projected growth is to translate into a substantial poverty reduction. Rather, poverty is projected to remain high at approximately 75% in 2018 and 73% in 2019. Given the bleak outlook in Yemen, massive foreign assistance would continue to be required for recovery and reconstruction in a post-conflict period. In particular, foreign assistance would be needed to help restore basic services and rebuild confidence in Yemen¡¯s institutions.