The impact demographic factors on economic growth in Somalia

Abstract

Demographic factors significantly influence economic growth by shaping labor markets, productivity, and overall economic performance. This study investigates the short- and long-term effects of demographic variables on Somalia’s economic growth using the ARDL model and a 38-year time-series dataset (1985–2023). The findings reveal that life expectancy positively impacts economic growth in both the short and long run, highlighting the role of improved health and longevity in enhancing productivity. The dependency ratio has a positive long-term effect on economic growth, suggesting that Somalia’s socio-economic structure, characterized by extended family networks and informal economic activities, mitigates the economic burden of dependents. In the short run, however, the dependency ratio has a negative but statistically insignificant effect on GDP per capita. Population growth has a significant negative impact on economic growth in both the short and long run, indicating that rapid population expansion strains resources and hinders development. Additionally, internal conflict adversely affects economic growth, underscoring the consequences of political instability. The study recommends investing in healthcare, promoting education and job creation, enhancing governance, and fostering entrepreneurship to improve labor market participation and drive long-term economic growth. Strengthening political stability is crucial for sustainable development.