Effect of agricultural output on economic growth of Somalia (1989-2021)

Abstract

Somalia's agricultural sector, comprising livestock, fisheries, and cereal production, significantly contributes to employment and GDP, ensuring economic stability and growth. main objective of the study was to investigate the effect of agricultural output on economic growth in Somalia using annual data for the period 1989 to 2021 obtained from World Bank development indicators (WDI) and the Statistical, Economic, and Social Research and Training Centre for Islamic Countries (SESRIC). The study used the autoregressive distributive lag (ARDL) approach to estimate both short-run and long-run effects of agricultural output on economic growth, and the Granger causality test was applied to test for causality effects. The variables that were examined in this study included Gross Domestic Product, livestock production, fishery production, and cereal production. The long-run results showed that fishery production and livestock production had a positive long-run effect on Gross Domestic Product. It implies that a 1% increase in livestock and fishery production leads to about 7.6% and 1.8% increases in Gross Domestic Product, respectively, at a 5% level of significance. On the other hand, short-run coefficients of livestock production were positive and significant. It implies that a 1% increase in livestock production was associated with a 0.3 percent increase in Gross Domestic Product. The Error Correction Term results showed adjustments towards equilibrium of about 9.9% within a year. The Granger causality tests revealed that there exists a unidirectional Granger causality that goes from livestock production to Gross Domestic Product. Based on the results of the study, the main conclusion is that livestock production had a short- and long-run significant effect on Gross Domestic product, while fishery production had a long-run significant effect on Gross Domestic product. Therefore, we recommend that the Somali government prioritize investments and policies that support the development and sustainability of Livestock production and fishery production. This might include improving infrastructure for transportation and storage, providing training and technical support to farmers and fishermen, and implementing measures to prevent overfishing and ensure responsible resource management. And this can be done through Infrastructure Development, Value Addition and Agro-Processing, Agricultural Cooperatives and Attract Foreign Investment.