The economic risks clearly lie to the downside as long as the armed conflict that has ravages the country continues. The downgrading in the IMF’s forecast to of a full-blown depression of minus 28.1% from a contraction of just 2.1% within the space of six months highlights the growing risk to full-scale economic disintegration (Chart 1). The clear risk is that a failure in the peace negotiations will spell further economic decline as the productive capacity of the economy is slowly but steadily destroyed. Any vestigial hope of recovery has to be based on the successful outcome of peace talks, which are now stalled, or a swift a decisive victory by either of the two factions. If neither, then further economic contraction will lead to years of negative growth that will in turn lead to an increase in the already extremely high levels of unemployment and poverty. Meanwhile soaring prices looks set to add hyperinflation to the list of problems afflicting Yemen. Oil and gas exports have been suspended, which deprives Yemen of a major source of economic activity that was already under pressure from the decline in global crude prices. The shortage of fuel and electricity is having a serious short-term impact on every aspect of the economy. Investment in much-needed transport and energy infrastructure that would help deliver sustainable growth and reduce unemployment is unlikely to get off the ground in the near future.