Somalia’s economy is recovering from the “triple shock” that devastated the country in 2020: the COVID-19 pandemic, extreme floods and the locust infestation. Real GDP growth of 2.4 percent is forecast for 2021. This dynamic growth should continue in the medium term and reach the pre-COVID-19 level of 3.2 percent in 2023.
The World Bank’s most recent Somalia Economic Update reports that the economy contracted 0.4 percent in 2020, less than the 1.5 percent decline forecast at the start of the global pandemic. Higher than expected aid flows, financial policy measures by the Somali government to support companies, social protection measures to cushion vulnerable households and unexpectedly high remittance inflows all mitigated the negative effects of the triple shock.
The report finds that the disruptions due to COVID-19 containment measures have reduced federal and state revenues while increasing pressure to spend more on health and disaster relief. Large increases in external grants have enabled the federal government to begin reallocating public spending to economic and social services and allocating funds to new social programs and emergency projects to increase resilience.
“As Somalia moves towards recovery from the triple shocks, policy interventions that increase productivity, create jobs and expand programs for the poor will be crucial,” said Kristina Svensson, World Bank Country Manager for Somalia. “Job creation and ensuring that the most vulnerable are supported during the crisis must be at the center of political action and private sector response.”
Interventions to improve the investment climate and encourage the formalization of businesses to attract more private investment would include reforms that focus on lowering electricity costs and improving their reliability, leveling the playing field for private businesses, cutting red tape and expanding electricity focus on financial inclusion.
The report particularly focuses on the health sector. He underlines that Somalia’s health system is the second weakest in the world after 30 years of political instability. The COVID-19 pandemic has brought the sector into focus, making investment in Somalia’s health system an urgent political and economic issue, fundamental to reducing fragility.
“Supporting the health sector is an integral part of resilient and inclusive development, and investing in health care will enable Somalia to generate significant demographic dividends from improving life expectancy and decreasing fertility,” said John Randa, World Bank Senior Economist. “These investments should contribute to improved health outcomes and strengthened governance systems.”
The report also notes that strengthening Somalia’s health system is one of the greatest direct influences in improving human development and promoting the country’s economic development. The report recommends health funding, health service delivery and administration opportunities to improve Somalia’s health sector. The World Bank’s incoming funding is designed to help Somalia focus on high-impact, cost-effective interventions that target the primary disease burden.
Distributed by the APO Group on behalf of the World Bank Group.
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September 14, 2021 at 3:26 pm GMT
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