Yemen Country Risk Report Q4 2019
Heightened regional tensions could embolden Saudi Arabia and Yemen's Houthi militants to ramp up attacks on each other. Meanwhile, rising tensions between the US and Iran reduce the likelihood that the US Congress successfully impedes the Trump administration's support for the coalition, which may provide it with greater strategic latitude. This could combine to increase the threat to an already fragile UN-brokered ceasefire in Yemen's port city of Hodeidah.
We also believe that rising aid flows will support Yemen's economy in 2019, bringing real GDP growth up to 5.5%, from an estimated contraction of 0.8% in 2018. Most of the funding will come from Saudi Arabia and the UAE via both official and unofficial, bilateral channels. Reduced levels of violence should also encourage more private sector activity, although we note that the risks of a re-escalation in tensions remain high.
Yemen's economic recovery will rely on foreign (especially Saudi and Emirati) assistance for the foreseeable future. This makes the country's highly vulnerable to external shocks. Another drop in oil prices could for example prevent Gulf allies from financing reconstruction.
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