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Yemen: the Economy and Social Unrest

Early 2011, following the Tunisian and Egyptian uprising “thousands of Yemenis have been demonstrating in the capital Sanaa, calling on Ali Abdullah Saleh, president for 30 years, to step down.”[1] Amidst all the clamor of the Arab spring uprisings, “trade and industry grind to a halt, tourism dries up and the economy in general stagnates and normal economic life ceases to function.”[2]

Social turmoil is only the climax of the country’s persistent long-term economic decline. Yemen is one of the poorest countries in the Arab world, with an income of $1,300; almost half of Yemeni population lives on less than $2 per day. The country also has a bad record on the human development front with a 54% literacy rate and a 62-year life expectancy. Its unemployment rate stands at 16.5% but is estimated to be much higher with almost half the youth unemployed.[3] Its economy is weak and has been dependent on oil, “petroleum accounts for 25% of GDP, 70% of government revenue, and more than 90% of Yemen’s exports.”[4]

“The economy is in shambles and that is not a temporary crisis. But there is something fundamentally wrong with the economy, especially when Yemen is running out of oil and water,”[5] says Marina Ottaway, a democracy expert at the Carnegie Endowment for International Peace. On top of which, is the reality that Yemen is a country that imports its food and according to the World Food Programme (WFP), “the price of wheat flour has almost doubled in the past month. And while food shortages are not an immediate danger, aid agencies worry fewer people will be able to afford basic food.”[6]

With the heightening social unrest and uprisings, Yemen becomes a high-risk environment for investors. Couple that with the threat of civil war about to break at any time and what happens is “people are hoarding. They are buying supplies for two months ahead just in case.”[7] Food prices are rising, and with too much money chasing too few goods, the inflation rate becomes higher. Since the majority of the population is involved with protests, the result would be a decreasing labor-force participation rate. And with oil running out, government revenue decreases. Ultimately, national income is hurt in all sides of the equation.

While the Arab Spring may have made the country’s economic situation worse, with an economy that is already staggering upon its heels in the first place, its people have little incentive to remain subdued. As the analysts from the Carnegie Endowment for International Peace had concluded, “it’s not surprising that Yemen has failed to achieve political legitimacy and establish a productive economy.”[8]

[1] “Yemen Protests: ‘people Are Fed up with Corruption’,” BBC News, http://www.bbc.co.uk/news/world-middle-east-12298019 (accessed February 17, 2012).

[2] Sally Kelly, “The Economic Impact of the Arab Spring On the Region,” The Palestine Telegraph,http://www.paltelegraph.com/economics/world-economics/9410-the-economic-impact-of-the-arab-spring-on-the-region.html (accessed February 17, 2012).

[3] “Yemen: Economic Roots of Social Unrest in Yemen,” LA Times,http://latimesblogs.latimes.com/babylonbeyond/2011/03/yemen-economic-roots-unrest-social-yemen-president-saleh-protests-arab-.html (accessed February 17, 2012).

[4] “Yemen: Economic Roots of Social Unrest in Yemen”

[5] Mohamed Elshinnawi, “Political Stalemate Threatens Civil War For Yemen,” Voice of America,http://www.voanews.com/english/news/middle-east/Political-Stalemate-Threatens-Civil-War-for-Yemen-131600608.html (accessed February 17, 2012).

[6] “Yemen Revolt: Collapsing Economy ‘is Major Threat’,” BBC News, http://www.bbc.co.uk/news/world-middle-east-12976946 (accessed February 17, 2012).

[7] “Yemen Revolt: Collapsing Economy ‘is Major Threat’,”

[8] “Yemen: Economic Roots of Social Unrest in Yemen”