Predictive analysis of Somalia’s economic indicators using advanced machine learning models

Abstract

Accurate Gross Domestic Product (GDP) prediction is essential for economic planning and policy formulation. This paper evaluates the performance of three machine learning models—Random Forest Regression (RFR), XGBoost, and Prophet—in predicting Somalia's GDP. Historical economic data, including GDP per capita, population, inflation rate, and current account balances, were used in training and testing. Among the models, RFR achieved the best accuracy with the lowest MAE (0.6621%), MSE (1.3220%), RMSE (1.1497%), and R-squared of 0.89. The Diebold-Mariano p-value for RFR (0.042) confirmed its higher predictive accuracy. XGBoost performed well but with slightly higher error, yielding an R-squared of 0.85 and p-value of 0.063. In contrast, Prophet had the highest forecast errors, with an R-squared of 0.78 and p-value of 0.015. For enhanced interpretability, SHapley Additive exPlanations (SHAP) were applied to RFR, identifying lagged current account balance, GDP per capita, and lagged population as key predictors, along with total population and government net lending/borrowing. SHAP plots provided insights into these features' contributions to GDP predictions. This study highlights RFR's effectiveness in economic forecasting and emphasizes the importance of current and lagged economic indicators.

Keywords

• GDP forecasting
• machine learning
• random forest regression
• SHAP
• economic indicators
• Somalia