A blueprint for economic transformation was inaugurated early this month; the target? Middle-Income Somalia at 2050
On the 4th of this month, the National Economic Council of Somalia (NEC), which is a Principal Advisory Council to the Federal Government of Somalia, charged with the formulation and execution of national economic and social policies, inaugurated the Growth and Economic Transformation Strategy (GETS) for Somalia.
Speaking during the ceremony, Dr. Ali Issa, who is the Executive Director of NEC, said that the Strategy builds on the current National Development Plan and extends it into a 30-year execution span till 2050, and that GETS is aimed at transforming Somalia into a lower-middle-income status that provides wellbeing to all citizens on a sustainable basis.
“Growth and Economic Transformation Strategy is a broad-based, multi-sectoral vision with the goal of creating a prosperous, secure, democratic and inclusive country with a high quality of life,”Dr. Ali Issa, Executive Director of National Economic Council (NEC)
He further noted that in the coming months the NEC economic advisors and associated researchers will prepare objective studies, directed by an Inter-Ministerial Steering Committee that will provide necessary support and guidance to the preparation of the GETS vision while ensuring continued involvement, evaluation, and interpretation of the findings from a public policy perspective.
From 2021 economic status to 2050
The economic baseline for GETS, upon which this initiative will build on, is the current domestic economy, which, as per the Quarterly Economic Review of 2021, Quarter One, by the Central Bank of Somalia, is impressive in its recovery process.
An assessment of the domestic economy during the first quarter of 2021 points to recovery from the negative impact of the COVID-19 pandemic, which significantly affected the third and the fourth quarter of 2020. However, despite the slump in commercial activity occasioned by COVID-19, economic performance presented an improvement during the first quarter of 2021 compared with the trend of the last two quarters of 2020.
“The Real GDP growth of the Somalia economy is projected to move a positive growth trajectory, as it’s estimated to grow to 2.4 percent in the fiscal year 2021, up from the economic contraction of 0.3 percent in 2020 caused by the COVID-19 containment measures including lockdowns coupled with desert locust infestation and droughts,” Quarterly Economic Review of 2021, Quarter One.
The report revealed that there are potential risks to this growth trajectory. The underperformance of government domestic receipts in the first quarter of 2021 and continued low absorption of grant projects remain a concern. Economists understand that these issues will lead to a widening fiscal deficit. These issues are of concern to NEC too, as it embarks on the preparation towards implementing GETS.
State of the economy
The current state of the economy, driven by the current National Development Plan, indicates that domestic revenue mobilization efforts continue to enhance government revenue (Taxes and Non-taxes). The Quarterly Economic Review of 2021, Quarter One report shows that total government revenue in the first quarter of 2021 was US$76.9 million and that the Federal Government of Somalia continued to negotiate with Paris Club creditors.
At the end of the first quarter of 2021, the total debt stock was recorded at US$4,509.7 million, with Multilateral Creditors accounting for 25 percent, equivalent to US$1,103 million, while the Bilateral Creditors amounted to US$3,404 million, equivalent to 75 percent of total debt stock.
Despite being a holistic strategy towards economic growth, GETS focuses on three thematic vision areas. These areas include; Sustainable Economic Development, Climate Change Adaptation and Building Resilience, as well as Sustainable Blue Economy in Somalia.
Inclusive economic growth
Among the speakers at the event to inaugurate GETS was H.E Khalif Abdi Omar, Minister of Commerce and Industry, who stressed the need for inclusive economic growth and creating a conducive business environment where productive sectors of Somalia’s economy can thrive.
He said that he hopes, “The Growth and Economic Transformation Strategy (GETS) development reinforces the capacity of the state at the federal and local level to support the development of Somali productive sectors by improving Somalia productive sector’s policy regulators’ capacities to create a business environment that will lead to sustainable and inclusive economic growth and decent job opportunities.”
Looking at both imports and exports at the moment, it is clear that there is much to be done if sustainability is to be achieved. Per the Quarterly Economic Review of 2021, Quarter One, the total value of the country’s imports in the first quarter of 2021 surpassed US$1,137 million, exhibiting an increase of 10 percent compared to US$1,039 million of the same quarter in the previous year (2020Q1).
This means that foodstuffs, which dominate the total share of imports in Somalia, will, over time, have ceased being the main import products. Products like sugar, rice, flour, pasta, oil, and others will have to be farmed and produced in the country if the GETS vision of sustainable growth is to hold.
The country’s domestic export on the other hand will have to increase in volume. Somali products that fall in these distinct categories; livestock, Animal Skin Products, Crops & Vegetable Oil, and forest products, in addition to small segments of used items & scraps form Somalia’s major exports.
In 2021Q1 Quarterly Economic Review, the total value of the country’s exports presented a significant increase of about 50 percent, amounting to US$163 million, up from US$109 million in the corresponding period of 2020Q1.
“Live Animals topped Somalia’s total exports with a share of 68 percent, followed by 15 percent of Crops & Vegetable Oil. Moreover, Animal skin products represented 8 percent while the share of forest products was the least, showing only 1 percent of total exports,” Quarterly Economic Review of 2021, Quarter One.
Value of the shilling against the dollar
Of concern to the execution and sustainability of GETS is the performance of Somali shilling against the dollar. It is evident from the report that exchange rates remained relatively stable in the first quarter of 2021. The strength of the shilling (indicative of the state of the economy) will very much play an integral role in the 30-year plan.
The Executive Director of NEC, Dr. Ali Issa, called for consensus-building and inclusion among all Somali public and private stakeholders including women and youth, the diaspora and civil society so as to provide a sense of national commitment to GETS.