At unification, both the Yemen Arab Republic and the People's Democratic Republic of Yemen were struggling underdeveloped economies. In the north, disruptions of civil war (1962-1970) and frequent periods of drought had dealt severe blows to a previously prosperous agricultural sector. Coffee production, formerly the north's main export and principal form of foreign exchange, declined as the cultivation of khat increased. Low domestic industrial output and a lack of raw materials made the YAR dependent on a wide variety of imports.

Remittances from Yemenis working abroad and foreign aid paid for perennial trade deficits. Substantial Yemeni communities exist in many countries of the world, including Yemen's immediate neighbors on the Arabian Peninsula, Indonesia, India, East Africa, the United Kingdom, and the United States. Beginning in the mid-1950s, the Soviet Union and People's Republic of China provided large-scale assistance to the YAR. This aid included funding of substantial construction projects, scholarships, and considerable military assistance.

In the south, pre-independence economic activity was overwhelmingly concentrated in the port city of Aden. The seaborne transit trade, which the port relied upon, collapsed with the closure of the Suez Canal and Britain's withdrawal from Aden in 1967. Only extensive Soviet aid, remittances from south Yemenis working abroad, and revenues from the Aden refinery (built in the 1950s) kept the PDRY's centrally planned Marxist economy afloat. With the dissolution of the Soviet Union and a cessation of Soviet aid, the south's economy basically collapsed.

Since unification, the government has worked to integrate two relatively disparate economic systems. However, severe shocks, including the return in 1990 of approximately 850,000 Yemenis from the Gulf states, a subsequent major reduction of aid flows, and internal political disputes culminating in the 1994 civil war hampered economic growth.

Since the conclusion of the war, the government entered into agreement with the International Monetary Fund (IMF) to institute an extremely successful structural adjustment program. Phase one of the IMF program included major financial and monetary reforms, including floating the currency, reducing the budget deficit, and cutting subsidies. Phase two will address structural issues such as civil service reform. The World Bank also is active in Yemen, providing an $80-million loan in 1996. Yemen has received debt relief from the Paris Club. Some military equipment is still purchased from former East bloc states and China, but on a cash basis.

Following a minor discovery in 1982 in the south, an American company found an oil basin near Marib in 1984. A total of 27,000 m³ (170,000 barrels) per day were produced there in 1995. A small oil refinery began operations near Marib in 1986. A Soviet discovery in the southern governorate of Shabwah has proven only marginally successful even when taken over by a different group. A Western consortium began exporting oil from Masila in the Hadramaut in 1993, and production there reached 67,000 m³ (420,000 barrels) per day in 1999. More than a dozen other companies have been unsuccessful in finding commercial quantities of oil. There are new finds in the Jannah (formerly known as the Joint Oil Exploration Area) and east Shabwah blocks. Yemen's oil exports in 1995 earned about $1 billion.

Marib oil contains associated natural gas. Proven reserves of 280 to 370 km³ (10-13 trillion cubic feet) could sustain a liquid natural gas (LNG) export project. A long-term prospect for the petroleum industry in Yemen is a proposed liquefied natural gas project (Yemen LNG), which plans to process and export Yemen's 480 km³ (17 trillion cubic feet) of proven associated and natural gas reserves. In September 1995, the Yemeni Government signed an agreement that designated Total of France to be the lead company for an LNG project, and, in January 1997, agreed to include Hunt Oil, Exxon, and Yukong of South Korea as partners in the project (YEPC). The project envisions a $3.5 billion investment over 25 years, producing approximately 3.1 million tons of LNG annually. A Bechtel-Technip joint venture also conducted a preliminary engineering study for LNG production/development.

GDP: purchasing power parity - $15.09 billion (2003 est.)

GDP - real growth rate: 2.8% (2003 est.)

GDP - per capita: purchasing power parity - $800 (2003 est.)

GDP - composition by sector:
agriculture: 15.2%
industry: 45%
services: 39.7% (2003)

Population below poverty line: 15.7% (2001)

Household income or consumption by percentage share:
lowest 10%: 3%
highest 10%: 25.9% (2003)

Inflation rate (consumer prices): 10.8% (2003 est.)

Labor force: 5.79 million (2003 est.)

Labor force - by occupation: most people are employed in agriculture and herding; services, construction, industry, and commerce account for less than one-fourth of the labor force

Unemployment rate: 35% (2003 est.)

Budget:
revenues: $3.729 billion
expenditures: $4.107 billion, including capital expenditures of $NA (2003 est.)

Industries: crude oil production and petroleum refining; small-scale production of cotton textiles and leather goods; food processing; handicrafts; small aluminum products factory; cement

Industrial production growth rate: 3% (2003 est.)

Electricity - production: 3,010 GWh (2001)

Electricity - production by source:
fossil fuel: 100%
hydro: 0%
nuclear: 0%
other: 0% (1998)

Electricity - consumption: 2,083 GWh (1998)

Electricity - exports: 0 kWh (1998)

Electricity - imports: 0 kWh (1998)

Agriculture - products: grain, fruits, vegetables, qat (mildly narcotic shrub), coffee, cotton; dairy products, poultry, beef; fish

Exports: $3.92 billion (f.o.b., 2003 est.)

Exports - commodities: crude oil, cotton, coffee, dried and salted fish

Exports - partners: China 28.5%, Thailand 18.3% India 14%, South Korea 10.5%, Malaysia 5.1% (2003 est.)

Imports: $3.042 billion (f.o.b., 2003 est.)

Imports - commodities: food and live animals, machinery and equipment, manufactured goods

Imports - partners: UAE 13.5%, Saudi Arabia 10.8%, China 9.4%, US 5.2%, Kuwait 4.7%, France 4.3% (2003 est.)

Debt - external: $6.044 billion (2003)

Economic aid - recipient: $2.3 billion (2003-07 disbursements)

Currency: Yemeni rial (YER) = 100 fils

Exchange rates:

 Yemeni rials per US dollar - NA (2003), 175.625 (2002), 168.672 (2001), 161.718 (2000), 155.718 (1999)

Fiscal year: calendar year

See also : Yemen