The Price of Corruption: A Consequence-based Analysis of Economic Growth in Somalia

Corruption acts as a major barrier to Somalia's overall social, economic, and political progress. Tackling corruption requires holistic, multi-pronged approaches that strengthen transparency, accountability, and the rule of law across all sectors. Thus, this study examines the intricate relationship between corruption and economic growth in Somalia, emphasizing the profound impact of corrupt practices on institutional integrity and economic development. By employing a comprehensive analysis of the theoretical frameworks and empirical studies, this research highlights how corruption diverts resources from productive activities, undermines institutional quality, and distorts market dynamics. The paper utilizes a dataset spanning from 2005 to 2021, applying vector autoregression, the Granger-causality test and Johansen co-integration test to investigate the causal relationships and long-term associations between Gross Domestic Product (GDP), Foreign Direct Investment (FDI), and corruption. The findings reveal that corruption has a significant and negative impact on Somalia's economic growth, deterring foreign investment and exacerbating poverty and inequality. Despite ongoing efforts to combat corruption, it remains pervasive, hindering Somalia's progress towards stability and prosperity. This study underscores the urgent need for enhanced governance structures, transparency, and accountability to mitigate the detrimental effects of corruption and foster sustainable economic growth in Somalia.*Clinical trial N/A