The Agricultural Output-economic Growth Nexus in Somalia

Abstract

The Government of the Federal Republic of Somalia has identified agriculture as among th'e sect'ors to drive econo'mic gro'wth. This implicitly assumed a causal link from agricultural output to economic growth. However, in contrast to this assumption, causality could run from economic growth to agriculture or there maybe bi-directional causality. The study objective was examining the causal relationship betwee'n levels of agricultura'l outpu't and gross domestic product in Somalia. The stu'dy use'd aggregate data fo'r the perio'd 1989 to 2020 and apply Ordinary Least Square test. Economic growth is an important goal for Somali’s economy for poverty reduction. Descriptive statistics (means, standard deviation, minimums, maximums, Skewness and Kurtosis) was utilised for describing the data. Inferenti'al statisti'cs entailed time series models to be estimated after undertaking tests to reveal the appropriate mode'l t'o determining the effe'ct of agricultural output on econo'mic grow'th. Th'e study established that levels of agricultural output and gros's domes'tic produc't has bee'n increasing over the last 32 years between 1989 and 2020. This could be attributed to efforts by the transitiona'l federa'l govern'ment (TF'G) (200'4-201'2) an'd federal government (2012 to date) to revolutionize the economy of the country by investing in major sectors like Agriculture. The study also revealed that there is bidirectional causali'ty betwee'n the levels of agricultur'al outpu't and gros's dome'stic produ'ct. The study found that 89.7% of the changes in gross domestic product in Somalia could be attributed to changes in levels of agriculture output and vice versa. The study conclude'd tha't ther'e exis'ts a bi'directional causality be'tween levels of agricul'tural output and gross domestic product in Somalia. This is an indication that levels of agricultural output and gross domestic product affect each other directly. The stu'dy recommended that the federal govern'ment of Somalia sh'ould come with strategies to promote agriculture in the country. These policies should address the provision of agricultural input subsidies to encourage more people to practice agriculture. The study also recommends that the federal government of Somalia sho'uld ad'dress the c'ountry’s chal'lenges curre'ntly facing the agricultural sector. The study also recommends that the government should allocate more funds for agricultural research.