Ethiopia Economic Outlook
- In 2011 Ethiopia sustained its high growth of the last few years but momentum is likely to slacken slightly in 2012 and 2013.
- The country’s five-year growth and transformation programme should promote high and broad-based growth.
- So far growth has not provided adequate employment opportunities for the young.
In 2011 the Ethiopian economy continued on the high growth trajectory of the past six years. Growth has been broad-based, with the services and the manufacturing sectors growing at faster rates than the other sectors. This growth momentum is expected to continue in 2012 and 2013. Ethiopia’s five-year Growth and Transformation Plan (GTP) over 2010/11-2014/15 emphasises agricultural transformation and industrial development as drivers of growth. In 2010/11 macro-management proved highly challenging, as evidenced by rising inflation. Domestic and exogenous factors were responsible for the rebound in inflation. These included loose monetary policy, rising prices of imported inputs, drought, malfunctioning of the domestic market, and supply constraints. Rises in food prices have been the major cause of current inflation. However, inflation is expected to decline markedly in 2013. The government has been pursuing prudent fiscal policies which have focused on domestic revenue mobilisation and a reduction in domestic borrowing. This led to improvements in its fiscal position in 2011.
However, the fiscal deficit is expected to increase during the GTP period. The balance of payment position improved in 2010/11, reflecting strong export growth and increases in private transfers and external financing.
Ethiopia has made considerable progress in social and human development. For instance, it is among the few countries in sub-Saharan Africa making fast progress toward the Millennium Development Goals (MDGs) but youth employment is a major problem. The unemployment rate is higher for young people, at 27%, compared with other age groups.
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