Somalia's Economy to grow 5 to 7%

[merka]

Somalia Economic Update: Mobilizing Domestic Revenue to Rebuild

MOGADISHU, August 1, 2017- Somalia’s economy is projected to grow at a steady, nominal annual rate of 5% to 7% over the medium-term, according to the second Somalia Economic Update to be published by the World Bank Group. "Mobilizing Domestic Revenue to Rebuild" assesses the prospects for domestic revenue mobilization to support crucial public services and expand economic opportunity.

“Sustainable and reliable domestic revenue is critical for Somalia’s delivery of the National Development Plan,” says Hugh Riddell, World Bank Country Representative for Somalia. “The new government is already working to establish legal and technical capacities for revenue generation.”

To support sustainable development spending and reduce Somalia’s reliance on external funding, “the government and the business community need to work together to find ways to increase domestic revenue without undermining a vibrant private sector, which has been an engine for Somalia’s development over the past two and half decades.”

The report shows that Somalia’s gross domestic product (GDP) growth continues to be urban-based, consumption-driven, and fueled by remittances and donor support. Over 70% of GDP is generated in urban areas. Nominal GDP is estimated to have grown by 5% in 2015 and by 6% in 2016, but data constraints make it difficult to comprehensively assess the macroeconomic situation, especially the rural sector and non-marketed output, such as water, fodder, and food grown for household consumption.

Growth in 2017 will decelerate to 2.5% in real terms, although it is expected to pick up in subsequent years, and grow steadily over the medium-term. “This growth is driven by aggregate demand, fueled by the private sector, remittances, lower oil prices, and improved security,” explains John Randa, Senior Economist at the Bank’s Macroeconomic and Fiscal Global Practice, and Lead Author of the report. “Reconstruction efforts are likely to continue to underpin growth as the new government consolidates peace and security.”

A special focus of the report identifies priorities for improving revenue mobilization and provides a timetable for action and reform. It includes a historical analysis of Somalia’s tax system and legal framework, as well as examples of revenue performance from other countries and potential policies and measures that could be implemented by Somali authorities. The Bank simulation shows that a gradual implementation of tax administration and customs reforms could raise domestic revenue from around 2% of GDP in 2015 to more than 13% of GDP (US$1.1 billion) in 2022.

Raising revenue is crucial to reducing aid dependency, finance service delivery, strengthen a sense of contract between a state and its citizens, and fortify intra-society relationships. The Bank identifies a series of revenue mobilization actions that can be taken by the Government of Somalia in the short- and medium-terms. This includes streamlining the tax laws and increasing tax compliance by large companies.

The World Bank’s Somalia Economic Update series sets out to provide regular, comprehensive analysis of the Somali economy. Editions include recent economic developments and policy recommendations. This edition of the report coincides with Somalia’s worst drought in decades, with over half its population—an estimated 6.7 million people—in need of humanitarian assistance. The drought reflects Somalia’s continued vulnerability to climate-related shocks, which is resulting in considerable urbanization. Resilience to future shocks requires longer-term investments in rural and urban livelihoods, services, and infrastructure.

The report was prepared in close partnership with Somali stakeholders, and aims to contribute to government policy-making and a national conversation on the economy.

PRESS RELEASE NO: 2018/009/AFR

Contacts
Mogadishu
Hassan Hirsi
somaliampf@worldbank.org
Washington
Daniella Van Leggelo-Padilla
dvanleggelo@worldbank.org

http://www.worldbank.org/en/news/pr...-revenue-to-rebuild?cid=EXT_WBSocialShare_EXT

 

[Apollo]

To the moon

 

[MadNomad]

Finally some good news

 

[oday1kenobi]

I was actually going to make a thread about this article


The continued reliance on remittances and urban-based consumption (this goes for SL as well) is most concerning:

The report shows that Somalia’s gross domestic product (GDP) growth continues to be urban-based, consumption-driven, and fueled by remittances and donor support. Over 70% of GDP is generated in urban areas.

“This growth is driven by aggregate demand, fueled by the private sector, remittances, lower oil prices, and improved security,” explains John Randa, Senior Economist at the Bank’s Macroeconomic and Fiscal Global Practice, and Lead Author of the report. “Reconstruction efforts are likely to continue to underpin growth as the new government consolidates peace and security.”

Remittances aside, for a nation that's blessed with large fish stocks and arable land (as well as other resources), 70% of the GDP being generated in urban areas is not sustainable. Obviously large chunks of the fertile south are still controlled by the loathsome Al-shabaab + the nation is still reeling from decades of war, but once the govt consolidates these lands, they should implement large-scale agricultural initiatives to diversify the economy.

 

[DR OSMAN]

Somalia economy should grow far more then just a mere 5-7%. The growth rate should be 50% and above. It's not like it has any developed sectors, everything is just so under-developed, you would expect investments in so many sectors yearly. Poorer countries should grow their gdp rates at a much higher rate then developed countries as they have exhausted their sectors and looking to either source new markets for their sectors or create new sectors.

 

[DR OSMAN]

Somalia economy doesn't grow that much because the investments they make are into sectors such as hotels, malls, etc. This won't create job opportunities for thousands of people. It will hire at best 5 people. Thats 5 people spending money in the economy. They should seriously consider investing into farms, fishery, factories. You want to pump out consumers so they spend money in the market place which will fuel business growth and require more people to be hired as a result to service the extra demand.

The problem with our economic growth is our leaders. It is them who should specify to businesses where to invest by making it appealing such as low tax rate incentives, free land, creating a targetted workforce for agriculture or fishery, subsidize farming equipments by govt bringing in the equipments as part of it's economic plans, investing into energy sources needed for that industry, raising up taxes in undesirable sector investment(hotels) to keep BUSINESSES away from going there.

You know what they say regulate the hell out of a sector you don't want investments in and de-regulate a sector you want investment to the point where businesses come running into.

If we hired 500 agricultural workers to work on a farm. Thats 500 extra customers coming to the market to buy goods and services because they have an income to spend. That is going to create knock-on jobs in different sectors in the economy to service these new consumers, It will bring the govt new taxation revenues not only from the workers but also the businesses across the market place who will see their bottom line go up which means higher taxes coming in.

These new consumers will need to pay rent or buy property(real estate starts to boom), they will need clothes, food, electronics, etc retail booms, they need services like telephone, internet, electricity, water. U see how the economy as a whole starts to grow because the govt targetted investment strategically into a sector thru regulation or deregulation which creates extra growth in other areas of the economy.

 

[Xooshdheere]

There's more potential.

 

[DR OSMAN]

By investing in farm, fishery, livestock. You create lots of jobs for unskilled people. Growth for an economy needs to come from unskilled people having an income and spending. It's pointless having a few rich and 90% poor, the economy will never grow cause only a few people are spending. If u invest in farms, fishery, factories you can hire poor people who are unskilled and give them a job while also addressing food shortage supplies in the nation and at the same time giving 'fuel' and 'demand' for other sectors to enjoy a new customer base coming into the market. We need strategic economists in our government that sees that fancy looking hotel is just cheap bricks, u know how much a brick costs? it's not an expensive commodity that's for sure.

 

[Canuck]

I never mentioned here, but lot of people ask Somali traders in ME about means and sectors to invest in Somalia.

 

[XamarCade]

By investing in farm, fishery, livestock. You create lots of jobs for unskilled people. Growth for an economy needs to come from unskilled people having an income and spending. It's pointless having a few rich and 90% poor, the economy will never grow cause only a few people are spending. If u invest in farms, fishery, factories you can hire poor people who are unskilled and give them a job while also addressing food shortage supplies in the nation and at the same time giving 'fuel' and 'demand' for other sectors to enjoy a new customer base coming into the market. We need strategic economists in our government that sees that fancy looking hotel is just cheap bricks, u know how much a brick costs? it's not an expensive commodity that's for sure.

Yup, it would be great if we did a pool funding for major projects like highways where we make our own mega factories that produce asphalt, concrete and steel, this alone will create tons of jobs, then u would have the proper roads which will open up other sectors. A nationwide cheap electric grid will be a game changer for us, it'll attract lots of investors especially Somali investors, we wouldn't need foreign countries investing in us like neighboring countries.

 

[SomaliWadaniSoldier]

I never dreamed to see a day where northerner post this thread. Where all northerners and southerners are getting excited and happy from reading this.
There is still hope for us.