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Somalia

Authors : Salome Kimani, Richard Walker

  • Real GDP growth in Somalia, estimated at 3.7% for 2016, is projected to decelerate to about 2.5% in 2017 because of lower agricultural output but will recover to about 3.5-4.5% in 2018-19.
  • Creating jobs for the youth, providing social services such as education and health, and building sustainable livelihoods are the immediate key development challenges in Somalia.
  • Somalia’s entrepreneurial private sector is one of the country’s main assets and an important partner for development actors.

Somalia’s economy remains fragile as it relies heavily on the agriculture and livestock sectors, remittances and telecommunications, with no apparent manufacturing and industrial sector. The small industry that existed before the civil war has completely vanished and the machinery sold as scrap metal. Very little value is added to agricultural and livestock products before they are either exported or consumed. Dependence on primary commodities as a major source of export earnings is a structural bottleneck and reflects the country’s narrow economic base and vulnerability to market dynamics, price fluctuations and environmental shocks.

According to the IMF, real 2017 GDP growth is projected to decelerate to about 2.5%, with inflation forecast at 1-2%. The slower growth rate in 2017 will be a consequence of lower agriculture output due to a weaker rainy season. However, construction, telecommunications and service sectors are projected to continue to register decent growth. The external current account deficit is projected to remain large though remittances and grants are likely to cover this deficit. The Somali Shilling (SOS)/USD exchange rate is expected to remain around 22 200 to 23 000, the range within which it has been since January 2015.

The fiscal framework for 2017 targets a zero-cash balanced budget, underpinned by realistic revenue projections, new revenue measures and prudent expenditures. The World Bank estimates that the poverty levels in Somalia are extremely high, with about half of the population (51.6%) living below the poverty line. Poverty is aggravated by the lack of a functioning government, widespread insecurity, and natural calamities such as floods and droughts.

The World Bank estimates Somalia’s per capita income at USD 435, making it the fifth poorest country in the world. About 70% of its population of roughly 12 million are under the age of 30. Living in a country with an estimated youth unemployment rate of 67%, one of the highest in the world, young Somalis see few prospects for the future. High levels of unemployment have increased their vulnerability to militant groups and criminal activities.

Implementing the new National Development Plan (NDP) 2017-19 requires an environment more conducive to sustainable development and robust improvements in the political, security and governance situation of the country. The NDP will also involve a continuous public-private dialogue between government, citizens and the private sector.

The country’s private sector is a major asset and Somali entrepreneurs have actually flourished in a stateless conflict-ridden economy. Remittances from the diaspora have funded private sector investment in livestock, trade, money transfer services, transport and telecommunications. As outlined in the NDP 2017-19, the Federal Government aims to strengthen the national economy by putting in place the relevant regulatory frameworks that are needed to support entrepreneurship and a vibrant private sector.

Press release

Unlock the potential of African entrepreneurs for accelerating Africa’s industrial transformation, says the African Economic Outlook 2017

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