NAIROBI, May 13, 2026: Somalia's economic growth moderated to an estimated 3 percent in 2025, down from about 4 percent in 2023-24, as declining foreign aid, drought conditions, and rising living costs weighed on demand and left real GDP per capita broadly stagnant. These findings are highlighted in the Eleventh Edition of the Somalia Economic Update (SEU) 2026: Navigating Shocks, Powering Growth, released today by the World Bank Group.
The economic slowdown reflects reduced humanitarian and security-related assistance, drought impacts on agriculture and livelihoods, and higher costs that constrained household spending. Inflationary pressures accelerated with consumer price inflation reaching 3.7 percent in 2025 compared to 3.3 percent in 2024, driven mainly by food, utilities, and transport costs.
"Somalia has made important progress in strengthening macroeconomic management and institutions under difficult conditions," said Hideki Matsunaga, World Bank Group Country Manager for Somalia. "However, overlapping shocks are slowing growth and putting pressure on jobs and household livelihoods, underscoring the importance of addressing key structural constraints, particularly in expanding access to reliable, affordable, and sustainable electricity."
The SEU notes that poverty reduction stalled in 2025 as the reduction in aid, drought conditions, and rising food prices worsened food insecurity and constrained household welfare. Looking ahead, poverty reduction is expected to remain gradual and constrained, with food insecurity highly sensitive to rainfall outcomes, aid flows, and price shocks. The outlook has weakened and risks to the outlook have worsened. Real GDP 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 projected to rise to 6 percent in 2026 before easing over the medium term as shocks dissipate and conditions stabilize.
Recent global oil price shocks and the deterioration in the outlook reinforce the urgency of reducing costs for households and firms, and transitioning to more sustainable electricity generation. With electricity generation nearly entirely diesel‑based, increases in global fuel prices transmit quickly to domestic inflation, production costs, and household welfare, raising the cost of electricity, transport, and food and weakening firm competitiveness, disproportionately affecting poorer households.
A special focus of this edition is access of households to reliable, affordable, and sustainable electricity. The SEU draws on recent data from the World Bank's Multi‑Tier Framework (MTF) Survey, conducted in 2025. While 71 percent of households report access to electricity, only 21 percent receive more than eight hours of supply per day, limiting productivity and resilience. The report highlights the importance of strengthening sector governance and regulations, promoting scalable renewable energy investment, and modernizing transmission and distribution infrastructure to lower costs, reduce vulnerability to fuel price shocks, and support competitiveness and livelihoods.
