The Somali economy is expected to slow down with GDP growth of 3.4 percent and 2.5 percent in 2016 and 2017, respectively, according to the International Monetary Fund (IMF).
“Economic activity is projected to decelerate in 2016–17. The deceleration in growth mainly reflects the impact of the drought on the agriculture sector, which will be partially offset by activities in the construction, telecommunications, and service sectors. Meanwhile, inflation is estimated to be 1.5 percent in 2016 and projected to pick up to 2.7 percent in 2017,” IMF said.
The economy will continue to be sustained by donors’ grants, remittances, and foreign direct investment, mostly by the Somali diaspora.
The annual trade deficit during 2014–15 was about 55.5 percent of GDP and was largely financed by remittances and grants. For the same period, the current account registered an annual deficit of 8.6 percent of GDP and was covered mostly by foreign direct investment, mainly by Somali diaspora.
The fiscal position was strained in 2016. Budgetary grants and tax revenue fell short, reflecting delayed disbursements and weak tax collection performance. Meanwhile, expenditure on goods and services continued to increase, in part due to the election and security spending, according to IMF.