Somalia economy- GDP slowed, budget surplus with sporadic terrorism

6 min readMar 1, 2018

How does one review the economy of a fragile state like Somalia and measure its national accounts? IMF reviews its economy;

In 2017, Somalia faced a severe drought and sporadic terrorist attacks. These developments hurt economic activity, particularly in the north of the country and in rural areas, and temporarily impacted the tax collection efforts of the Federal Government of Somalia. However, the authorities have navigated through these challenges and, with sustained national and international community support, the country avoided a severe humanitarian crisis and a significant economic slowdown.
Nevertheless, economic activity in 2017 is expected to have slowed. The drought that hit the country since late 2016 has receded, but it took a considerable toll, particularly in the remote areas. GDP growth is projected to have remained subdued at 1.8 percent in 2017 (down from 2.2 percent in 2016). Driven by higher food prices, year-on-year inflation increased to 5.2 percent (compared to a 4 percent annual average) at the end of December 2017.
Meanwhile, a small budget surplus was achieved by the end of September 2017, even though domestic revenue fell short of the program target. The surplus of $3.8 million was due in part to a slower-than-expected pace of budget execution. For the period ending in December, preliminary information indicates that implementation of critical tax measures, and higher-than-programmed bilateral grants, have helped generate a budget surplus of about $1.8 million. Domestic revenue is also estimated to have met the program target.

World Bank assesses the difficulty of estimating its GDP;

Data constraints make it difficult to comprehensively assess the macroeconomic situation in Somalia. Somalia does not have a national accounts statistical framework and prevailing estimates of nominal GDP are based on sparse expenditure side information, notably a survey-based estimate of household consumption and trade partner exports and imports. Thus, macroeconomic statistics are not comprehensive enough to capture growth of the economy accurately. While it is possible to produce one-off projections of GDP growth, these are highly qualitative and by necessity based on a few sectors where some proxy indicators for activity are possible, such as for ICT, construction, and trade. But such estimates will miss much of the rural sector and non-marketed output such as water, fodder, and food grown for own-consumption. Furthermore, lack of price data, including the GDP deflator, makes it difficult to estimate real GDP growth.

For Discussion: How does one estimate better a GDP of fragile state like Somalia? What can Somalia learn from other fragile countries like Afghanistan in reforming public sector including fiscal reforms? Critique the Doing Business assessment of Somalia? How effective have been technical assistance that are being provided and how can it be delivered better in fragile states?