Somalia’s economy grew 4% in 2024, but 2025 faces slower growth as foreign aid drops. Reforms and local revenue are now more critical.
Somalia Grows 4% in 2024 but Faces Aid Cut Risks in 2025
Nairobi, June 30, 2025 — Somalia’s economy grew by 4.0% in 2024, driven by a strong harvest, steady remittances, and falling global commodity prices. But in 2025, growth is expected to slow due to uncertainty around foreign aid, warns the World Bank.
This is highlighted in the newly released 10th edition of the Somalia Economic Update, which shows the country’s heavy reliance on donor support continues to pose a risk to its recovery.
“Somalia must strengthen its economic institutions to support long-term growth,” said Kristina Svensson, World Bank Country Manager.
📉 Inflation and Budget:
Inflation fell below 6% in 2024, thanks to lower food and fuel prices. The federal government recorded a small fiscal surplus by cutting spending and improving tax collection. But Somalia still depends heavily on foreign aid to fund basic services.
🔍 Key Challenges in 2025:
- Falling donor support
- Climate risks
- Political instability
- Security threats
🔧 Reform Focus:
To stay on track, Somalia needs to raise more money from within. Reforms tied to the HIPC Initiative have helped, but more is needed. The report pushes for:
- Full rollout of the Income Tax Law
- Expansion of sales tax
- Customs reform aligned with EAC protocols
- More digital tools for tax collection
“Domestic revenues remain among the lowest in the world,” said Abdoulaye Ouedraogo, World Bank Economist. “Expanding the tax base is crucial.”
🌱 Sectors with Growth Potential:
Aligned with Somalia’s National Transformation Plan (2025–2029) and Centennial Vision 2060, these sectors offer major job and investment opportunities:
- Agribusiness
- Digital tech
- Fisheries
- Energy
- Manufacturing
These industries are expected to reduce poverty, diversify the economy, and create jobs.
The Somalia Economic Update provides insights into macroeconomic trends and key reforms needed to build a stronger, self-reliant Somali economy.
