Ethiopia Economic Outlook

  • Estimated growth of 6.9% in 2011/12 made Ethiopia one of Africa’s best performing economies.
  • The government has brought down inflation but it remains at 10.3% in February 2013.
  • Ethiopia does not have major natural resources and the government wants growth from industrialisation.

Ethiopia’s economy saw a ninth straight year of robust growth in 2012, which was estimated at 6.9%. The growth was broad based with an increasing role for services and industry. This momentum is expected to continue in 2013 and 2014, at a slower pace though.

In an effort to combat inflation, the government implemented a tight monetary policy stance. This measure, aided by slowdown in global food and fuel price inflation, saw consumer price inflation decelerate to 10.3% in February 2013 from 31% in November 2011.

The government’s determination to hold down prices was further reflected in its prudent fiscal policy focusing on strengthening domestic resources and reducing domestic borrowing.

The strong fiscal stance, particularly measures to improve tax administration and enforcement, resulted in a fiscal surplus of 0.2% of gross domestic product (GDP) in 2011/12 from -1.6% the previous year. The balance of payments worsened, partly because of strong import growth relative to export growth. Between 2010/11 and 2011/12, the value of goods imports grew by 34% compared to a 15% growth in exports. Though external debt has been growing, the country will maintain a low risk of external debt distress in 2013.

Rebuilding official foreign reserves is a challenge, however, as reserves have fallen to less than two months of import coverage.


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