Somalia Economic Update reports aim to contribute to policymaking and the national conversations on topic issues related to economic recovery and development. The report contains three main messages. The COVID-19 pandemic exposed the costs of not investing in a public health system. The near-term economic prospects for Somalia depend on the pandemic’s path. Public spending on health is crucial to support testing and tracing and ensuring that the logistical, administrative, and financial requirements of mass vaccination are in place. The slower the pace of vaccination and the larger the unvaccinated population, the greater the possibility that new variants of the virus will develop, increasing the prospect of a more protracted pandemic.
FOREWORD
Somalia continues to contend with an unprecedented health and economic crisis that began in 2020. The country grappled with the triple shock of the COVID-19 pandemic, floods, and locust infestations which led to an economic contraction of about 0.4 percent in 2020. The contraction was milder than expected thanks mainly to official aid flows; fiscal policy measures put in place by the government to aid businesses; social protection measures to cushion vulnerable households; and higher than expected remittance inflows. Still, the triple shock pushed more people into poverty and joblessness. One out of every five Somalis had to stop working following the outbreak of COVID-19, and four out of every five households reported reduction in their income from wages.
Against this backdrop, I am pleased to present the sixth edition of the World Bank Somalia Economic Update series. These reports aim to contribute to policymaking and the national conversations on topic issues related to economic recovery and development. The report contains three main messages. The COVID-19 pandemic exposed the costs of not investing in a public health system. The near-term economic prospects for Somalia depend on the pandemic’s path. Public spending on health is crucial to support testing and tracing and ensuring that the logistical, administrative, and financial requirements of mass vaccination are in place. The slower the pace of vaccination and the larger the unvaccinated population, the greater the possibility that new variants of the virus will develop, increasing the prospect of a more protracted pandemic.
The disruptive impact of the COVID-19 crisis on workers, labor markets, and livelihoods has further underlined the importance of the jobs’ agenda. In Somalia, one year into the crisis, employment had contracted 37 percent, with medium-size, large, and older firms shedding most of the jobs. Even though the FGS responded quickly to address the immediate jobs challenges of COVID-19, by using liquidity support for firms with the Gargaara facility, and income support for vulnerable households Baxnaano program, it will need to address the medium and long-term effects of the pandemic by stimulating job creation, re-employment, and economic inclusion. This could be done by addressing two main challenges of: creating better jobs that increase productivity and earnings for the growing workforce; and supporting access to better jobs for the youth and women. This could be achieved economic integration, digitization, and enhancing agricultural productivity through improving water management.
Programs that support vulnerable populations build the economy’s resilience to shocks. Extending the reach and responsiveness of social programs through the innovative and cost-effective use of mobile money, electronic cash transfers, and virtual engagement is key to supporting Somalia’s vulnerable population. Building on the Baxnaano program to enhance Somalia’s safety nets is key. It could be done by adopting a national social safety net strategy that clearly sets out target populations and delivery mechanisms and is capable of being scaled up rapidly in response to economic shocks or reforms. Investments in Somalia’s health sector are expected to contribute to economic growth in Somalia in the long term. Targeted investments in health service delivery, financing, and sector stewardship would strengthen the health sector, improving health outcomes and increasing emergency and epidemic preparedness toward economic stability and growth.
Kristina Svensson
Country Manager, World Bank Somalia