Growth rebounds but pre-pandemic growth rate unattainable before 2024
The World Bank (WB) projected Ethiopia’s economic growth for 2022 to reach 4.3 percent. It is an optimist projection made based on assumption that the soar in price commodities in the global market would help economies like Ethiopia to register a better growth this year.
World Bank’s latest projection is far below the 8.7 percent and eight percent projections made by the Ethiopian government and the Africa Development Bank (AfDB) respectively.
Even though the country is showing signs of recovery from the lowest rate achieved in 2021, the bank stated that there are more obstacles before Ethiopia’s economy regains the nine percent growth rate recorded in 2019.
The Bank included Ethiopia in its latest ‘Global Economic Prospects’ which covers up to 2023, unlike the International Monetary Fund, which blanked Ethiopia’s projection due to political uncertainties.
World Bank’s report projected Ethiopia’s growth rate to further climb to 6.5 percent by 2023.
According to the report, Ethiopia, the largest Low Income Country (LICs), saw a sharp deceleration of growth, to an estimated 2.4 percent in 2020/21 fiscal year, or nearly below two-thirds of the pre-pandemic average, compounded by worsening security situation in the Tigray region. In contrast, the Government of Ethiopia’s growth report for 2020/21 was 6.3 percent.
Even though World Bank projected the economy will show a slight recovery in 2022, it explained that armed conflicts and insecurity could weigh heavily on the outlook, including increasing uncertainty and deterring private investment. Policy uncertainty, social unrest, and insecurity are likely to hold back or delay investments in Ethiopia, according to the institution. Experts agree.
“The supply chain is still disrupted because of the conflict, which prevent Ethiopia to capitalize on the opportunities created by the soar in price of commodities in the international market. Productivity can only increase if only peace prevails. Otherwise the Bank will likely to revise its projection,” says an Economist who has been active in the policy sphere.
The economist also fears that the surge in price of oil in the international market is another factor that could prolong the economic recovery of Ethiopia. “To be optimist on Ethiopia’s economy, the war has to end,” he added.
Ethiopia’s projection in the latest WB report, which stood at 4.3 percent in 2022, is lower than the 4.5 percent average set for ‘fragile and conflict affected LICs. The bank attributes the reasons for the low projection to the governments’ weak capacity to address pandemic-related challenges, amid elevated levels of violence and insecurity.
Regionally, growth in Sub-Saharan Africa (SSA) reached an estimated 3.5 percent in 2021, supported by a rebound in commodity prices and a gradual easing of social restrictions. Nevertheless, recurrent virus flare-ups in several countries and low vaccination rates slowed the pace of recovery.
In some of the region’s most populous countries, such as Nigeria, Ethiopia, DRC, and Tanzania—only about two percent or less of the population have been fully vaccinated. Inflation has remained in double digits in Nigeria, Ethiopia, Angola, partly as a result of large currency depreciations.
Poor vaccination rate, debt, inflation, war, violence and political uncertainty have also dampened activities in Ethiopia, according to the Bank. But prioritizing on boosting agricultural output is the low hanging fruit for Ethiopia to benefit from the growing price of commodities in the international market, the Bank said.
Last month, Eyob Tekalign, state minister of finance, in an interview with the Reporter, said that the government is devising a mega reconstruction program to rebuild the economy.
“No doubt, especially the war has inflicted huge damages on the economy. The damage we saw in areas freed from TPLF indicates a huge rehabilitation work waiting ahead of us,” he said during the interview.