The World Bank has scaled back its economic growth projection for Somalia in 2023 to 2.8%, a significant dip from the initial forecast of 3.6%. This downward adjustment stems from the country's susceptibility to external shocks, prominently its overdependence on international trade and financing, minimal economic diversification, and vulnerability to natural disasters. Despite these hurdles, Somalia's economic growth is poised to rebound, with predictions of a gradual rise to 3.7% and 3.9% in 2024 and 2025, respectively.
Recovery efforts in Somalia continue to be hampered by the lingering effects of previous shocks, including drought, the disruption of grain supplies from Ukraine, and the global pandemic. The compounded impact of these events has aggravated poverty levels and triggered cost-of-living surges in the country. However, on the brighter side, Somalia's consistent commitment to reforms aimed at strengthening its economic institutions and promoting recovery offers a glimmer of hope.
Joining the East African Community
In a move signaling renewed regional integration, Somalia was admitted into the East African Community (EAC) on November 23. This development, marking the end of years of civil unrest and isolation, presents a significant opportunity for Somalia to rebuild its connections with regional and global partners. Somalia's inclusion is expected to be mutually beneficial, offering the EAC access to Somalia's longest-in-Africa coastline and abundant blue economy resources, while Somalia stands to gain from the EAC's extensive road, rail, and energy networks.
Despite the harsh shocks that have assailed its economy, Somalia has remained steadfast on its path of economic reform. The World Bank acknowledges Somalia's progress toward meeting the conditions for the High Indebted Poor Countries (HIPC) Completion Point by December 2023. The country's public finances have shown improvement, with domestic revenues surpassing pre-COVID levels since 2022. This upward trend has enabled a shift in government expenditure toward social welfare and regional grants. The continued commitment to economic reforms and investments in human capital is critical for attracting foreign investment and boosting economic growth.