Ethiopia Lingering with Economic Growth

The International Monetary Fund (IMF) ranks Ethiopia among the five fastest growing economies in the world. According to the World Bank Group, economic growth is expected to grow by 10.5% in 2016 keeping inflation under a single digit.

Depicting this fact, Ethiopia’s economy grew by 10.3% for the last ten years listing the country as one of the top performing economies. Supported by a slowdown in global commodity prices, the country succeeded in minimizing the annual consumer price inflation down to 7.1% in 2014 from 39.2% in 2011.

Shifting from dependence on agriculture, changing structures have emerged due to the growth in services and industrial manufacturing. As a result, more measures to support the growth of industry especially manufacturing have been put in place. Expansion of the services and agricultural sectors account for most of this growth, while the manufacturing sector performance was relatively modest. Private consumption and public investment registered growth with the later assuming an increasingly important role.

The service sector attracted giant international companies such as, Ernst & Young, Boeing Commercial Airplane Company, IBM, and Ford. On the other hand, the International Finance Corporation (IFC) re-established its role in developing the private sector. The Multilateral International Guarantee Agency (MIGA) also explored new opportunities to build its portfolio.

Similarly, the expansion of mining activity contributed to reducing Ethiopia\’s dependence on agriculture. Until recently, little had been invested in mapping the country’s mineral resources, but the last decade has seen intensified interest from global mining companies such as Vale, BHP Billiton and Petronas. These investments resulted in new discoveries of gold, tantalum and potash reserves. Since 2008, the government began exporting opals which Ethiopia is now the second largest producer in the world.

The strategy of diversification and focus on comparative advantage are paying off. Ethiopia’s achievements in the economic sphere are all the more impressive when considered alongside with poverty reduction priorities. The poverty gap is a measure used to indicate the average percentage shortfall in income for people living in poverty. On this basis, Ethiopia has also made enormous strides, narrowing the gap from 21% in 1995 to just 8% by 2011.

The main challenge is to continue and accelerate the progress made in recent years. The government is already devoting a very high share of its budget to pro-poor programs and investments. The growth strategy is geared towards achieving middle income status in the coming decades. The target was to have 11% average annual growth aspiring to double this figure by the end of 2015.

By Eden Sahle

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