Economic Outline

flag Somalia Somalia: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Somalia’s formal economy remains fragile and the informal sector, essentially made up of livestock farming, camel trade (over 40% of its exports) as well as remittances from abroad (a fifth of the country’s GDP), plays a crucial role in the economy. In 2020, the country was affected by the triple shock of floods, a locust invasion and the COVID-19 pandemic, pushing the economy into recession. After contracting by -1.5%, economic growth recovered to an estimated 2.9% in 2021, and is expected to strengthen to 3.2% in 2022 (IMF). The recovery will be supported by remittances, foreign direct investment, and increased public spending (IMF). Downside risks include the evolution of the pandemic, political and geopolitical uncertainty, climate shocks and the resurgence of desert locust infestation (IMF).

In 2021, Somalia’s economy started to recover from the combined shocks that hit the country in 2020. Indeed, Somalia's already fragile economy was hurt by flooding, desert locusts invasions and the outbreak of the Covid-19 pandemic. In addition, in September 2020, a regional ban on imported livestock was imposed by the Gulf countries following the outbreak of Rift Valley Fever (RVF). Crucial remittances from the diaspora decreased sharply, worsening the effects of the domestic containment measures. Supported by the international community, the authorities adopted supporting measures to mitigate the effects of the crisis, including the provision of temporary tax relief on basic food commodities, expanding the social safety net, and providing credit to enterprises (IMF). Somalia became eligible for interim debt relief under the Heavily Indebted Poor Countries (HIPC) initiative in March 2020, process which will significantly reduce Somalia's total debt and provide access to new resources to restart growth and reduce poverty. However, even with the interim debt relief, Somalia will remain in debt distress, as its debt will still be about 43.3% GDP in 2024, above the 30% sustainability threshold (AfDB). Due to revenue shortfalls caused by the suspension of donor budget grants until the completion of elections, Somalia’s authorities restrained expenditures and overall deficit decreased to 1.2% GDP in 2021 (IMF). As revenues and budget grants recover, the fiscal deficit is expected to narrow to 0.5% GDP in 2022 (IMF). Inflation was estimated at 2.5% in 2021, and is expected to increase to 6.5% in 2022 due to higher food and energy prices (IMF). In March 2020, the IMF approved three-year arrangements under the Extended Credit Facility (ECF) and Extended Fund Facility (EFF) to support the implementation of the authorities’ Ninth National Development Plan (NDP9). This plan's main objective is inclusive growth and poverty reduction. The IMF judged the implementation of the program satisfactory, but the economic reality of the country is dire both in terms of politics and security and the country is extremely dependent on international aid. If political uncertainty is not resolved timely, the IMF-supported program will automatically lapse, jeopardizing access to grants and debt relief (IMF). Key challenges include infrastructure constraints, weak state institutions and capacity, weak public financial management systems, continued insecurity linked to incursions by Al-Shabaab and ISIS insurgents, limited resilience to environmental extremes.

The economic growth is too weak to significantly reduce the widespread poverty (more than half of the population lives in poverty according to the World Bank), unemployment among young people is high (total unemployment was 19.7% of the workforce in 2020 according to the World Bank, modeled ILO estimate) and the social needs are important. The Covid-19 pandemic has likely increased poverty, as real per capita income decreased by 4.4% (AfDB). Due to the prolonged drought, 1.4 million persons are at risk to be displaced.

 

 
Monetary Indicators 20192020
Somali Shilling (SOS) - Average Annual Exchange Rate For 1 MUR n/a654.71

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 80.3 2.4 17.3

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 3,817,3253,953,1414,065,294

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 49.16%49.28%49.42%
Men activity rate 76.15%76.21%76.28%
Women activity rate 22.66%22.85%23.06%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
N/A/100
World Rank:
N/A
Regional Rank:
N/A


Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
7/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
161/180

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Sources of General Economic Information

Main Online Newspapers and Portals
Allafrica, Somalia News
Somalia Newspapers and News Sites
Somalia Newspapers online
BBC profile
Useful Resources
Ministry of Finance
Ministry of Fisheries
Ministry of Trade and Industry
Ministry of Agriculture and Irrigation
Ministry of Oil and Mines
Central Bank
 
 

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Latest Update: October 2022