For a long period of time, Kenya was the dominant economy in East and Central Africa controlling both local and Foreign Direct Investments (FDI). While this has not significantly changed, new entrants have presented their case with Ethiopia overtaking Kenya as the largest economy in Eastern and Africa.
While the story of the rapid turn of Ethiopia has been told, that of rise of Somalia as an economic hub has barely been mentioned with economic pundits often ignoring the country based on the past never ending conflicts.
However, Somalia has been on a turn-around since the current President Mohamed Abdullahi Mohamed Farmajo took over reigns of power early last year. While the first year has been dominated by ensuring stability against militant groups, the second year seem to have prioritized diplomacy and trade.
The country’s GDP stands at USD 6.2 billion and a five percent nominal growth with 2 million Somalis living in the diaspora send approximately $1.4 billion back home, according to the World Bank.
Kenya is a great trade partner, with data from Kenya Bureau of Statistics (KNBS) placing Somalia as the third largest importer of Kenyan goods in 2017 doing better than more economically stable countries like Egypt and Rwanda.
Beyond Kenya, Somalia has reached out to Djibouti, Eritrea and Ethiopia in a new effort to boost trade in the horn of Africa. President Farmajo is leading efforts to consolidate gains made at the Forum on China-Africa Cooperation by facilitating the prospect of a tripartite agreement on economic Integration between the countries of the Horn.
Somalia wants to play a major role in the economic and social integration of the Horn of Africa, to accelerate trade and investment, and to promote the social and economic integration of the Horn of Africa.
A recent summit held in Djibouti was one of the efforts by Somali to bring together countries in the horn of Africa which share common geography, history, culture, religion, and values.
Next year, Somalia will assume the chairmanship of the Arab Foreign Ministers Council, allowing it to host the council session in 2019 in Mogadishu and informing the world that they are ready for business.
In Beijing, Somalia signed the Belt and Road Initiative that enhances connectivity and promotes economic development, and an agreement on improving Economic and Technical Cooperation between China and Somalia.
Key economic achievements include drafting the first National Development Plan (NDP) 2017– 19, which fully articulates economic reconstruction and development priorities. The private sector demonstrated impressive resilience in telecommunications, financial services, and construction.
The diaspora played a major role by investing funds from abroad and returning with critical skills. Continued political stability, focused implementation of the NDP, and sustained interest of the diaspora in key growth sectors are expected to drive growth in 2018.
According to Africa Development Bank, the main drivers in 2017 were construction, telecommunications, and financial services. The rise in GDP growth in 2018 and 2019 is expected to be driven by a recovery in the agriculture, higher private-sector investment, and improved security.
Inflation, which has been contained by use of US Dollar and the sharp decline in oil prices, is predicted to remain around 2.7% in 2018 and 2019.