According to the update, the reduction in foreign aid and security-related assistance has significantly impacted demand and limited the country's productive capacity. Agriculture and livelihoods have been particularly affected by climate variability, leading to heightened food insecurity. Consumer price inflation rose to 3.7 percent in 2025, driven by the costs of food, utilities, and transport. The World Bank projects that inflation could climb to 6 percent in 2026 due to global oil price shocks before potentially easing in the medium term.
Hideki Matsunaga, World Bank Group Country Manager for Somalia, noted that while the country has made progress in institutional management, overlapping shocks are placing immense pressure on jobs and household welfare. The report emphasizes an urgent need for structural reforms, specifically in expanding access to affordable and sustainable electricity. Currently, only 21 percent of Somali households receive more than eight hours of electricity per day, a factor that continues to hinder national productivity and economic resilience.