Improved confidence, on the back of the continued implementation of reforms, and strong donor support continue to support economic activity, especially in the telecom, trade, construction, and financial sectors. However, poor rainfall in Spring weighs on the outlook and threatens food security.
GDP growth is estimated at 2.8 percent in 2018 after 1.4 percent in 2017. If normal rains resume later this year, GDP growth could remain broadly unchanged at around 2.9 percent in 2019. Inflation is expected at 3.0 percent in 2019, following 3.2 percent in 2018.
The Federal Government of Somalia’s (FGS) continued efforts to broaden the tax base and strengthen tax administration has been reflected in increased domestic revenue (almost 30 percent higher than in 2017). This has supported a small expansion in spending on health and education.
However, expenditures continue to be dominated by spending on salaries and other operating costs, especially on security-related expenditures, with little space for critical social and development programs.
Despite stronger growth and the improving fiscal position, per capita incomes remain very low and more resources are needed to achieve greater economic resilience and reduce poverty. With debt at unsustainable levels (at about $4.7 billion or 100 percent of GDP in 2018, of which 96 percent is in arrears), Somalia will need the continued support of the international community to help meet much-needed humanitarian and development needs.
Somalia’s fourth SMP (May 2019–July 2020) will support the authorities’ continued reform efforts, laying the foundation for greater self-sufficiency and higher and more inclusive growth. The program will expand and deepen measures to build fiscal sustainability, across the FGS and the Federal Member States, further improve financial stability, address residual anti-money laundering and combating the financing of terrorism (AML/CFT) gaps, and strengthen governance and the fight against corruption.