Somalia is progressing its policy reform agenda while leveraging the momentum created by the Heavily Indebted Poor Countries (HIPC) Initiative. Despite multiple climatic shocks and a complicated security situation, Somalia maintained progress on structural reforms. In addition, Somalia maintained a track record of sound macroeconomic management as evidenced by the satisfactory implementation of the International Monetary Fund (IMF) Extended Credit Facility (ECF) program. A new 3-year ECF arrangement started in January 2024 to support Somalia’s post-HIPC economic agenda with the Executive Board of the IMF concluding the first review under the new program in June 2024.
Political relations in the region are experiencing dynamic change, with new opportunities for Somalia to benefit from regional trade integration as it became the eighth member of the East African Community in March 2024. As Somalia moves out of fragility, it needs to gradually transition from relying on humanitarian aid to sustainable development approaches.
Economic Development?
As Somalia continues to rebuild economic governance institutions, it has several opportunities—rapid urbanization, the growing use of digital technologies, planned investments in energy, ports, education, and health—so building resilience to shocks is a priority to support economic growth and job creation. However, severe droughts, floods, locust infestation, the pandemic, volatile global prices, as well insecurity and conflict have slowed the transition from fragility. Real GDP growth has been low and volatile, averaging only 2.1% per year in 2019–23 with an average negative real GDP per capita growth of 0.7%.
In 2024, sustained favorable rains improved agricultural production and led to better food security and higher private consumption, accelerating economic growth to an estimated 4.4% from 4.2% in 2023. Exports recovered faster than imports, as livestock exports rebounded. Private sector credit growth contributed to strengthening investment, particularly in construction and real estate. Remittances increased significantly, bolstered by the moderation of global inflation and the uptick in economic growth in several host countries. The trade deficit is estimated to slightly narrow to 60.2% of GDP in 2024 compared to 62.6% in 2023, as livestock exports improved.
Repeated shocks have eroded households’ assets and purchasing power, increasing the risk of more people falling into poverty. In 2022, an estimated 54% of the Somali population lived below the national poverty line. According to the 2022 Integrated Household Budget Survey, poverty rates are larger among the nomadic population, however, due to the country’s high urbanization, the majority of the poor are in urban areas. Labor force participation rates are exceptionally low, with significant gender gaps. Only one-third of men and 12% of women participate in the labor market. Almost half of those employed are living below the poverty line, indicating that jobs are of low productivity. Therefore, accelerated momentum in building institutions and developing resilience is fundamental for growth, poverty reduction, and transition from fragility.
The African Union Transition Mission in Somalia’s (ATMIS) mandate ends in December 2024 with the Government of Somalia proposing a new security arrangement as the drawdown is in full force. African Union Support Mission in Somalia (AUSSOM) will replace ATMIS.
Last Updated: Oct 23, 2024
