NAIROBI, June 30, 2025—Somalia’s economy continued its overall strong performance in 2024, with growth at 4.0 percent supported by improved performance of agriculture, enhanced private consumption reinforced by sustained growth in remittances, and declining commodity prices.
The 2025 Somalia Economic Update, Edition 10, issued by the World Bank today, says the outlook remains positive, but growth is set to slow down in 2025 due to increased aid uncertainty, which has intensified recently, given Somalia's heavy reliance on external assistance. This comes as Somalia is navigating a pivotal moment in its development journey, emerging from decades of conflict with renewed hope and strategic vision.
“It is important for Somalia to continue building its economic institutions, capable of navigating the complexities of its socio-economic landscape and supporting sustained and long-term growth,” said Kristina Svensson, World Bank Country Manager for Somalia. “Somalia needs to double its efforts to strengthen its domestic revenue mobilization and lay the foundations for a more resilient and self-sufficient state.”
Somalia's economic performance in 2024 was buoyed by declining global commodity prices that led to continued easing of inflationary pressures. The annual average inflation rate fell below 6 percent in 2024. The Federal Government of Somalia budget also recorded a small fiscal surplus driven by prudent expenditure management and improvements in revenue collection, but reliance on external financing for service delivery continues.
Reforms implemented in the context of Heavily Indebted Poor Countries (HIPC) Initiative, as well as post-HIPC reforms, are paying off and support sustained growth, albeit at modest pace due to continuing fragility. Declining foreign aid in 2025 and high uncertainty about the magnitude of foreign aid in the future have dampened the growth outlook. Real GDP growth is expected to stay between 3 and 4 percent over the medium term. Other risks to the outlook include climate vulnerabilities, political challenges, and security threats.
Nevertheless, sustained reform efforts are needed to promote economic resilience and job creation, with a particular focus in the near term on more sustainable public finances and resilient private sector development. In line with Somalia’s National Transformation Plan (NTP) 2025-29 and the Centennial Vision 2060, sectors such as digital technology, agribusiness, fisheries, energy, and manufacturing are expected to experience significant economic growth, thereby creating numerous job opportunities, and contributing to economic diversification and resilience. Reforms to promote sustainable public finances will increase the fiscal space needed for productivity enhancing investments in human capital development and infrastructure to foster economic growth, jobs, and poverty reduction.
Somalia's journey toward stability and growth hinges significantly on its domestic revenue mobilization capacity, which in turn is a function of sustained private sector-led economic growth, economic diversification, and job creation. By strengthening its ability to generate its own resources, Somalia can build stronger human capital, ensure security and justice, and develop a robust state infrastructure, enhancing the social contract that paves the way to sustained economic growth and reduced fragility.
“Recent revenue mobilization efforts show promising results, but domestic revenue to GDP ratio remains one of the lowest in the world,” said Abdoulaye Ouedraogo, World Bank Country Economist for Somalia. “The largest gains in revenue mobilization are expected to come from expanding the tax base and deepening customs reforms.”
The report recommends ways to expansion the tax base, such as implementation of the Income Tax Law and sales tax across the Federation, among others. Customs reforms can also assist this and should target ways to do this such as aligning customs legislation with the East African Community protocols and expanding digitalization efforts.
The Somalia Economic Update (SEU) assesses key economic developments, prospects, and policies in Somalia. It looks at recent macroeconomic and poverty developments and assesses the risks and opportunities for the medium-term growth outlook. In its special topic, it focuses on policies for domestic revenue mobilization.
Contacts
In Nairobi: Vera Rosauer, vrosauer@worldbank.org
In Washington: Daniella van Leggelo-Padilla, dvanleggelo@worldbank.org
