Yemen Country Risk Report 20 2018
The UN’s renewed push to negotiate between the main parties of the Yemen conflict is unlikely to produce a lasting resolution as neither side appears willing to compromise at this stage. The Houthi rebels will continue to fire missiles into Saudi territory over the quarters ahead, creating potential for further conflict escalation and keeping Saudi-Iranian tensions elevated.
The ongoing conflict will prevent a sustained uptick in Yemen’s hydrocarbon exports over the quarters ahead, ensuring continued depreciation of the rial and associated elevated inflation. Coupled with the government’s waning ability to pay out public sector salaries, this will cause consumption to fall.
Yemen’s economic recovery will rely on foreign assistance. This makes the country highly vulnerable to external shocks. Another drop in oil prices could for example prevent Gulf allies from financing reconstruction.
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