The Somalia Economic Output report was launched on March 28 in Mogadishu by the Ministry of Planning, Investment, and Economic Development with the attendance of senior government officials, Civil Society members, and international partners. The report revealed how Somalia’s economy has shown resilience in the face of the Covid-19 pandemic. Real Gross Domestic Product (GDP) growth improved to an estimated 2.9% in 2021, following a 0.3% contraction in 2020, primarily due to the pandemic.
The International Monetary Fund (IMF) predicted that growth would accelerate to 3.1% in 2023 and 3.9% in 2025. The economic outlook report seconded these sentiments stating that the economy’s strength stems from livestock exports and remittances, which have supported increased economic activity, leading to GDP growth.
According to the report, housing, water, electricity, and gas inflation rose from 0.43 percent to 12 percent between May 2020 and May 2022 as a result of the drought and rising petrol and gas prices. The Ukraine-Russia war also contributed significantly to high food prices due to disrupted imports of wheat, fertilizer, and oil products.
However, despite persistent global price shocks, overall monthly inflation rates remained relatively stable at around 4% from 2020 to 2022. The IMF predicted that annual inflation would fall to 3.5% in 2025.
The report also discussed the impact of remittances during the COVID-19 pandemic. It explained that they made households more resilient to economic shocks, allowing them to maintain their standard of living while also saving more.
As a result, diversification of exports was recommended to increase revenue and reduce reliance on livestock exports. In addition, it was suggested that domestic processes and the country’s fisheries sector be revamped. This is because Somalia’s fisheries capacity is significantly underutilized. It has the ability to produce 200,000 metric tons of fish per year but only produces about 6000 metric tons for local fishing vessels and 13000 metric tons for foreign fishing vessels.
On top of that, the report revealed that internal (taxes and fees) and multilateral and bilateral organizations are the primary sources of revenue for Somalia. It indicated a drop in tax revenue from 2.6% of GDP ($154.7 million) in 2019 to 2.3% of GDP ($139.5 million) in 2020. On the other hand, overall revenue rose from 5.7% to 8.3% of GDP in 2019 and 2020, respectively. The decrease in domestic revenue in 2020 was primarily due to the COVID-19 pandemic, while the increase in overall revenue was due to grant inflows during the pandemic period.
The outlook report also stated that the country’s current account was running at a deficit. The deficit increased to 17.1% of GDP in 2021, up from 10.4% in 2019, due to a growing reliance on imports over exports and reduced foreign direct investment due to the 2022 parliamentary elections.
On the plus side, Somalia’s debt gradually decreased from 94% in 2015 to 73% in 2021, with the debt relief agreement as well as the debt restructuring agreement with the Paris Club’s creditors, being credited for the significant debt reduction.
Ultimately, Somalia’s economy has faced numerous challenges in recent years, including insecurity, political instability, and the COVID-19 pandemic. However, the Economic Outlook report indicates that the economy has shown resilience and is on the mend. Livestock exports and remittances have been critical in driving growth, and there are optimistic projections for future growth. The challenge now is for the government to continue to implement policies that promote economic growth and stability while also addressing the country’s underlying issues.
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