Page 18 - Azerbaijan State University of Economics

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

It is worth mentioning that growth in investment will, mostly, come from private investment,
where such component of investment is expected to grow at annual rates of 27.0 percent and 38.2
percent during the SNDP period, for each of the Baseline and Hopeful Scenario respectively. This
is including domestic private investment, remittance from diaspora [Remittances grew from $1.3
billion in 2013 to estimated $1.4 billion in 2016 (IMF Financial Indicators 2013-2017). This
indicates 2.5 percent annual compound growth rate, and equivalent to 23 percent of GDP in 2015.
More importantly, remittance now far exceed official development aid and FDI. Remittance from
Somalis Diaspora are crucial to Somalia’s economy, providing a lifeline to large segments of the
population. Remittances have been important in cushioning household economies, creating a buffer
against shocks (drought, trade bans, and inter-clan warfare). They fund direct consumption,
including education and health, and some investment, mostly in residential construction, allowing
Somalia to sustain its high consumption rates and to finance a large trade deficit. Remittance also
play a very significant role to reduce the balance of payment (BoPs) deficit for the last few years.]
and foreign direct investment (FDI). In contrast, there would be very minimum public investment,
as there is no investment in the government budget at present and would continue for the next
couple of years unless and until there is going to be an operational and effective aid coordination
mechanism, where all aid given to the economy considered part and parcel of the federal budget, as
well as there would be budget support programmes accepted and financed by various donors [It is
worthwhile to mention that there is much public good investments being supported by external
donors. However, these are totally outside government direct control, not using country finance
systems, and hence, are not part of the budget neither recorder in the public accounts. Besides,
statistical data on the totality of such an investment are difficult to determine.]. The Contribution of
investment to GDP will increase from less than 8.0 percent in 2016 to 15.0 percent and 18.0
percent of GDP in both assumed scenarios, at the end of SNDP period.

Final Demand Categories Structural Behaviour During SNDP
Period

150

100
50

0
Private Government Investment Exports Imports
-50 Consumption Consumption

-100
2016 2017 2018 2019

Source: Integrated Macro Modelling Results

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