Since the collapse of the state, Somalia has transformed from what Siad Barre referred to as "Scientific Socialism" to a free market economy.

Agriculture is the most important sector, with livestock accounting for about 40% of GDP and about 65% of export earnings. Nomads and semi-nomads, who are dependent upon livestock for their livelihood, make up a large portion of the population.

After livestock, bananas are the principal export; sugar, sorghum, maize, and fish are products for the domestic market.

The small industrial sector, based on the processing of agricultural products, accounts for 10% of GDP.

American and Chinese oil companies are also excited about the prospect of oil and other natural resources in Somalia. An oil group listed in Sydney, Range Resources, anticipates that the Puntland province in the north has the potential to produce 5 billion to 10 billion barrels of oil.

While millions of Somalis receive food aid, according to a study by the UNDP and the European Commission, it is estimated that as much as $1 billion USD is annually remitted to Somalia by Somalis in the diaspora via money transfer companies—far more than the amount of development funding flowing into the country.