With annual GDP growth of 100% since 2011, Somaliland economic profile is mainly based on the free market economy and livestock export that significantly relies on the stable climatic and political conditions. Recently, cyclic droughts decreased the number of livestock which led to excessive economic collapse.
1. Poverty and Chronic Disease
Poverty and chronic diseases threaten the lives of thousands of people living in urban areas. As a result, the purchasing power of the individual economy decreased due to income inequality. Regarding this, the analysis of a household and enterprise survey carried out by the World Bank and the ministry of planning and development in early 2013 indicates that the uneven distribution of wealth is a major challenge for Somaliland, according to the World Bank Country Director for Somalia, Bella Bird.
2. High Unemployment
High unemployment absolutely raises questions that are unanswered by local economists as there are no strong institutions to serve both unemployed and underemployed peoples. As a result, there are no policies, procedures, and laws that govern and authorize employment institutions which are favorable to employment conditions of new graduates and the overall unemployment rate of the country.
3. Resource Mismanagement
Resource management of capital assets including human capital and natural capital are underestimated leaving untapped resources underutilized. Absences of technical and vocational institutions that drive industrial force are completely ineffective. The country demands to turn both renewable and nonrenewable energy to drive national and sustainable development plans and targets but unable to climb the stairs of development if resources are not regulated.
Inflation has been the only prominent macroeconomic problem that most of the people are aware as there is no fixed exchange rate stabilizing the economy. This occurs because the country's central bank has no regulatory function over the repetitive currency crisis during the last two decades. The dollarization of goods and services devaluates Somaliland shilling because the prices of goods are tagged in the dollar. In a nutshell, the aforementioned macroeconomic ailments of poverty traps, high and persistent unemployment, resource mismanagement and inflation are currently worsening Somaliland economic background which if not diagnosed and treated early can lead to catastrophic and undesired outcomes that can jeopardize country’s path of development.