Summary of the Case
The ongoing humanitarian crisis in Yemen resulted from the armed conflict, which happened six years ago and still affects the lives of the citizens. Alongside thousands of killed and injured people, it worsened the situation by continuously increasing the number of internally displaced people, which has already reached about 4 million residents. All these events have a direct impact on the country’s economy since they led to the collapse of the currency, the inability of the government to provide everyone with food and other commodities, and other challenges (United Nations Office for the Coordination of Humanitarian Affairs, 2021). In addition, the escalation of the problem was complemented by the beginning of the COVID-19 pandemic, which brought Yemen to the brink of famine (United Nations Development Programme, 2020). The scarce resources of this country in this regard evoke concerns of the world organizations.
In this way, the mechanism of the described crisis implies the combination of the specified circumstances, the ongoing conflict within Yemen and the emergence of the COVID-19 threat, and their subsequent influence on the economy. As follows from the official reports, the war actions led to a drastic decline in all industries, and the present-day risks to the citizens’ health with accompanying needs prevented the country from recovering in this respect (United Nations Office for the Coordination of Humanitarian Affairs, 2021). Being one of the least favorable locations in terms of economic affairs, Yemen was marked as the most deteriorating market.
Application of Country Crisis Framework
According to the country crisis framework containing the major indicators, which contribute to the presence of an issue, the most important data are provided by economic figures. In Yemen’s case, they are primarily related to the available resources and the perspectives of further development of the field. As per the official statistics, the rapid decline in gross domestic product (GDP) growth from 2.1 to -5% over the period from 2019 to 2020 (“Yemen / Economic Studies,” 2021). It means that the economy is not developing, and the GDP reflecting the low value of produced goods and services illustrates the problems best.
Other essential numbers allowing to evaluate the crisis are the inflation rate, public debt, current account, and the principal trends alongside specialists’ forecasts for 2021. As follows from the website with official data, the average yearly inflation increased from 10.0 to 26.0%, and further growth is expected (“Yemen / Economic Studies,” 2021). This indicator means that the prices are rising, and this trend contributes to the aggravation of the crisis. It is complemented by the public debt, which changed from 76.5 to 81.5 (“Yemen / Economic Studies,” 2021). Nevertheless, the specialists believe that this figure, which demonstrates the country’s ability to receive funds and spend them on critical needs, is decreasing. The current account balance amounting to -6.5 compared to -3.9 in the previous year shows the absence of resources (“Yemen / Economic Studies,” 2021). Considering the above facts, it can be concluded that the economic position of Yemen is gradually worsening.
Relationship to the Current Case
The provided economic figures prove the interrelation between COVID-19 with the arms conflict and the country’s economy. Thus, for example, the process of manufacturing new goods and rendering services is complicated by the numerous threats for people as they cannot produce anything in the context of continuing crises. As a result, the GDP growth is slowed down, and the recovery is unlikely until the accompanying risks are mitigated. The trends in inflation rates also correspond to the low economic status of the market. These circumstances are complemented by the government’s inability to provide the citizens with sufficient resources and the lack of funds for it shown in public debt’s growth and account balance indicators, respectively.
These considerations are complemented by the existence of particular strengths and weaknesses stemming from the country’s economic position. The former includes humanitarian aid and international support, the importance of Yemen’s position for principal operations, cultural and architectural heritage, and available gas reserves (“Yemen / Economic studies,” 2021). Meanwhile, the latter are more numerous and complex and presented by the division of Yemen, poverty, dependence, demographic pressure, unfavorable business environment, and restricted access to other market’s products and foreign exchange (“Yemen / Economic studies,” 2021). In other words, the country receives sufficient aid, but the delivered goods are being stolen by the soldiers. Its location at the entrance to the Red Sea does not provide any advantages due to the maritime blockade. In turn, the available resources cannot be used because of the obstacles to their realization in the market explained by bureaucracy, corruption, and poor infrastructure.
Key Take-Away For Future Crises
The economic data provided above can be viewed through the lens of the current COVID-19 crisis complemented by the war conflict on the territory of Yemen. The former is believed to result in over 230,000 deaths, which exceeds the number of the latter’s casualties over the past five years (Karasapan, 2020). This outcome confirms the severity of the situation and presents the theoretical underpinning of similar events for future periods of economic decline. It attests to the emergence of critical conditions regarding citizens’ survival when war actions are added by the pandemic. Therefore, it can be concluded that countries with serious issues should be supported first when it comes to health threats.
This conclusion positively correlates with the ratings of Yemen published by the agencies. Thus, the sovereign status, which means the capability to address the public debt, remains the default, as per D-rate (“Yemen: Risk assessment,” 2020). The same applies to the banking sector characterized by non-performing loans stemming from the conflict and the fragile public finances, which also received a D-rate, and a C-rate of the currency means its instability (“Yemen: Risk assessment,” 2020). Economic and political risks remain high, and this fact is explained by the reliance on foreign aid and the warring parties, respectively (“Yemen: Risk assessment,” 2020). In the end, Yemen’s economic position is unfavorable, and the challenges are not expected to be overcome in the nearest future.
References
Karasapan, O. (2020). Yemen and COVID-19: The pandemic exacts its devastating toll. Brookings.
United Nations Development Programme. (2020). A strategic framework for an immediate socio-economic response to COVID-19 in Yemen (2020 – 2021).
United Nations Office for the Coordination of Humanitarian Affairs. (2021). Humanitarian needs overview: Yemen.
Yemen / Economic studies. (2021). Coface.
Yemen: Risk assessment. (2020). The Economist Intelligence Unit.