Despite facing a prolonged drought from 2020 to 2023 and global economic shifts, Somalia's economy demonstrates resilience, according to the World Bank's 8th Somalia Economic Update. The drought, severely impacting agriculture and exports, led to significant migration as people sought food and water. This situation resulted in a decline in GDP growth to 2.4% in 2022, down from 3.3% the previous year.
However, the forecast predicts an increase in GDP growth to 3.1% in 2023, with a potential rise to 3.8% by 2025. The positive outlook is attributed to implementing reforms under the Heavily Indebted Poor Countries (HIPC) initiative, which is expected to result in modest improvements in per capita income.
Kristina Svensson, the World Bank Country Manager for Somalia, emphasized the importance of ongoing reforms for sustainable growth. "Achieving the HIPC Completion Point is pivotal for Somalia, bolstering investor confidence and necessitating continuous efforts in creating a conducive environment for foreign investments," she stated.
The report also focuses on the importance of water management in Somalia's development strategy. Efficient water resource management is crucial for mitigating the impacts of climate variability and stabilizing the economy, as noted by Chantal Richey, a World Bank Senior Water Supply and Sanitation Specialist.
Somalia's public finances have improved, with domestic revenues surpassing pre-COVID levels since 2022. This increase has allowed for a shift in government expenditure towards social welfare and regional grants. Stella Ilieva, World Bank Senior Economist, asserts that economic reforms and investments in human capital are vital to attracting foreign direct investment and enhancing economic output growth.
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