The impact of Foreign Direct Investment on Economic Growth, The Case of Somalia

The purpose of this research is to look at the influence of foreign direct investment on Somalia's economic growth. Economic growth, as defined by the Real growth of GDP, is one of the macroeconomic variables considered in the study (RGDPGR). Foreign Direct Investment (FDI), Unemployment Rate (UemplR), which is also a dependent variable for measuring changes in employment levels, and finally Import of Goods (IMPG) and Export of Goods (EXPG) for further measuring the country's surplus or deficit, and finally Gross Capital Investment (GCI), which is an independent variable that indicates fixed and project investment in the country. The study which is time series study data covering period of 32 years starting from 1989 to 2021. These study employed unit roots test mainly, the Augmented Dickey-Fuller (ADF) and Phillips Perron (PP) tests to check for stationarity. Following that was a cointegration test utilizing Johansen (1990) and Juselius's Vector Error Correction Models (VECM) approach (1995). The result of the study indicates that FDI had a strong beneficial influence on employment, implying that increased FDI inflows may increase the opportunities for local people to work, reducing unemployment and poverty in Somalia in the long run. Furthermore, it has been established that FDI has a positive significant influence on product export by boosting capital domestic investment, which in turn actually intensifies elements of production, namely labor and capital, in the long term, which is vital for production and real GDP growth.