Yemen has been experiencing political instability since 2011 and open conflict since late 2014. As a result, the social and institutional fabric in Yemen has witnessed increasing disintegration. Although official statistics are no longer available, anecdotal evidence suggests that Yemen’s GDP contracted by an accumulated 40 percent since the end of 2014. The conflict has caused widespread disruption of economic activities, and has dramatically diminished employment and income opportunities in the private and public sector. Operating costs rose significantly due to insecurity and lack of supplies, while demand has fallen precipitously leading to mass layoffs in both, the formal and informal sectors. Oil and gas production and exports have come largely to a halt since 2015, running at about 10-15 percent of capacity. Remittances fell, partly due to restrictions and difficulties imposed on transfers for the Yemeni banking sectors and partly due to more restrictive immigration policies applied since early 2018 by major GCC member countries.
Imports have declined sharply as foreign reserves fell below US$1 billion in 2016 while foreign debt obligations have not been serviced since May 2016 (except for obligations to the IMF and to IDA). Essential Central Bank functions have been disrupted due to the conflict and the split of the Bank along the conflict lines added to the economic challenges. Even delivery of humanitarian assistance has therefore become more costly and cumbersome. Furthermore, the ongoing conflict has led to deep divisions and fragmentations among national institutions. Partly due to the desperate economic situation throughout the country and the absence of state authority and legitimacy, numerous violent extremist groups have been created - filling the vacated space -that carry out attacks in the South and North of Yemen. Only the eastern part of the country, foremost Marib City and Hadhramout, is largely spared, although AlQaida is active in these areas. It is believed that it will take years of recovery and reconstruction to bring peace to Yemen and establish the status-quo ante.