Somalia’s economy slowed in 2025, with growth moderating to 3 percent compared to about 4 percent in 2023–24. The decline was driven by reduced foreign aid, drought conditions affecting agriculture and livelihoods, and rising living costs that left real GDP per capita stagnant. Inflation also accelerated, reaching 3.7 percent in 2025, mainly due to higher food, utility, and transport costs.
The World Bank’s Somalia Economic Update 2026 highlights that while the country has made progress in strengthening macroeconomic management and institutions, overlapping shocks are putting pressure on jobs and household welfare. Poverty reduction stalled in 2025 as food insecurity worsened, with future improvements expected to remain gradual and highly dependent on rainfall, aid flows, and price stability.
Looking ahead, Somalia’s growth is projected at 2.8 percent in 2026 and 3.1 percent in 2027, constrained by continued aid reductions, climate variability, global price shocks, and limited productive capacity. Inflation is expected to rise to 6 percent in 2026 before easing over the medium term as conditions stabilize.
The report emphasizes the urgent need to reduce costs for households and firms, particularly through more sustainable electricity generation. With electricity almost entirely diesel-based, global fuel price increases quickly translate into higher domestic inflation, production costs, and household expenses, disproportionately affecting poorer families.
A special focus of the update is household access to reliable and affordable electricity. While 71 percent of households report having access, only 21 percent receive more than eight hours of supply per day. This limited access constrains productivity and resilience. The report calls for stronger governance, scalable renewable energy investment, and modernized infrastructure to lower costs, reduce vulnerability to fuel shocks, and support competitiveness and livelihoods.
