Somalia Economic Structure

Somalia has suffered severe economic reverses for several years due to the lack of natural resources as well as a stable government. Civil wars and political outbreaks have proved extremely detrimental to the economic well-being of the country. It is largely due to the scarcity of the natural resource base that social, political and economic development has been adversely impacted. The mineral base of Somalia is also largely unexploited. The agricultural base is also not well-developed to make the country strong in terms crop production and exports. Moreover, Somalia's trade deficit has perpetually been in the negative zone due to the poor export scenario.

Heavy imports from other countries only deteriorated the financial standing of Somalia, leading it to seek more funds from organizations such as the International Monetary Fund (IMF) and so on. This created more debts and trade deficits for Somalia. In 2006, the country recorded arrears to the tune of $498 million. Added to the trade imbalance, the nation also suffered serious development challenges due to which the economic structure of the country has not been very strong. In fact, it is due to the lack of government stability and natural, mineral base that Somalia is the world's poorest and least developed nations.

Somalia frequently experiences floods, droughts and other natural hazards. The combined force of natural perils and civil strife leaves the economic structure of Somalia in a pitiable state. The economic structure is largely dominated by agricultural and pastoral industries, which are the primary sectors of the country. These two key sectors account for approximately 65% of the gross domestic product (GDP) of Somalia. Livestock sector largely includes cattle, sheep, camels and goats. In Somalia, banana plantation is practiced in most regions. However, agricultural production suffers most times of the year due to floods, civil wars, violent outbreaks and irregular, scanty rainfall. One major disadvantage faced by most farmers engaged in the agriculture sector is that farming is restricted to some coastal regions.

Industrial sector of Somalia also does not enjoy a very strong financial standing as there are very few large-scale, stable business houses. Somalia's industrial sector is largely made of small-scale units. However, revenue contributed by these small units does not amount to much. A mere 10% of the nation's GDP comes from the country's industrial sector. Majority of the large-scale enterprises are engaged in the food processing sector, including processing of milk, skins and hides. Most of the small-scale units of the country can be found engaged in the manufacturing sector of Somalia. However, manufacturing sector is in a dismal state. It accounts for a meager percentage of Somalia's GDP largely because of its inefficiencies in the sector.

Although the growth of manufacturing and agriculture sectors of Somalia have suffered due to civil wars and in competencies, the service sector has managed to grow steadily over the last few years. Today, it accounts for a quarter of its GDP. Service sector, including telecommunications and hotel industry, have seen many new entrants, which have eventually lead to a much steadier growth of the sector.