Page 12 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.74, # 2, 2017, pp. 4-31

is no reliable national statistics that collected and/or disseminated by the national statistical
authority so far, it has estimated that the per-capita income in Somalia is about $418, in nominal
term, in 2014, with an estimated GDP growth rate of 3.7 percent in real term, for the same year.
However, in 2016, it is expected that the GDP growth rate to decline by a margin of 0.5 to 1.00
percentage point, to be about a rate of 3 percent during 2016. This, by and large, due to severe
draughts particularly in the North of the country. Such adverse events may have a direct impact
on agro-pastoralist communities. In the south, River Shebelle have dried up creating water
shortages and affecting both human and animals. Therefore, animal and crop production may
have a direct hit, which consequently, downward, affecting the overall economic performance in
the country. Moreover, with the Somali population is growing at a natural growth rate of 2.8
percent, the growth of the per-capita income would, accordingly, be a little less than 0.2 percent.
Livestock is the backbone of the economy; about 60 percent of the population derives a
livelihood from pastoralism-based livestock production. The export of livestock and meat
generates over 80 percent of total exports value of Somalia. These and the Somali abroad
remittance transfers are the main sources of foreign currency of the economy, the latter (i.e.
remittances) have estimated to reached about $1.4 billion in 2015 and projected to rise to $1.5
billion by the end of 2016. However, in the absence of an international standard, formal and
credible commercial banking systems, remittance companies have enabled the Somali Diaspora
to remitting to families in Somalia, rather than through a well-established formal banking
systems. This, notwithstanding, demonstrating that Somalia, at present, a nation that is heavily
relying on remittances and international aid.

The Assumed Growth Scenarios during National Development Plan Period (2017-2019)

Given the reality of the existing paucity and unavailability of the minimum national Somali
collected and driven statistical data, to feasibly quantify the main variables and to realistically
applying some appropriate techniques to forecast future growth patterns and trends, in the
economy and by different sectors and activities. As these statistical gaps have restricted the use
of any logical approach to analyze and then quantify the likely trends of various macroeconomic
variables in a consistent and coordinated interrelated manner. With these constraints in mind, the
plan, therefore, has opted to utilize an alternative development scenarios approach, to determine
the likely growth and development path and movements of various macroeconomic and sectoral
variables within the Somali economy, during 2017-2019.

Given the above reality, it is advisable, at this stage of development in the national economy, to
adopt an approach based on two specific Scenarios for growth, during the plan period. And then
deriving other main macroeconomic variables behaviour, using rudimentary aggregated
macroeconomic model (as we shall see later in this paper). These two scenarios are:

The Baseline Scenario

The baseline scenario assumes the continuity of the status quo conditions of 2016. The GDP real
compound growth rate is projected to be, during the NDP period 2017-2019, as the same as the

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