The International Monetary Fund (IMF) has predicted a 7.2 percent economic growth for Ethiopia in the year 2020. The government had previously forecasted a 7.4 percent economic growth for the same period.
Released on Thursday, the International Monetary Fund Regional Economic Outlook of Sub-Saharan report, indicated that growth is expected to ease over medium term to about 6.5 percent, reflecting efforts to address large external imbalances through fiscal and monetary policy tightening.
According to the report, growth was expected to be steady last fiscal year which ended in July. The most recent data available shows that exports dropped in the third quarter of FY 2018, while electricity rationing in May–June also affected activities. That said; growth should have remained among the fastest in the region thanks to a robust infrastructure spending.
Meanwhile, the government’s positive steps towards liberalization should bode well for investment this year. In September, the administration took the first steps towards selling a stake in Ethio Telecom, by appointing a transaction advisor. The move follows July’s announcement that it will award two telecom licenses to multinational companies, which should help improve the country’s connectedness and infrastructure.
IMF further indicated that, ahead, the economy is seen growing robustly, thanks to a booming infrastructure and government reforms to encourage the private sector. However, risks from security concerns, weather and the sustainability of government finances linger in the backdrop.
FocusEconomics panelists see the economy growing by 7.7 percent in FY 2019, which is unchanged from last month’s forecast, and a 7.4 percent growth in FY 2020.
The report further noted that Ethiopia is among the countries in Sub-Sahara region with a narrow tax base. However, nine countries that region, including Ethiopia, accounting 16 percent of the regional GDP, are also at high risk of debt distress.
According to the report, growth in Sub-Saharan Africa (SSA) is projected to rise to 3.6 percent in 2020 from the 3.2 percent in 2019. It also indicated that growth is forecasted to be slower than what was previously envisaged; for about two-thirds of the countries in the region.
IMF Division Chief of African Development, Papa N’diaye said: “growth is projected to remain strong in non-resource-intensive countries, averaging about 6 percent, while growth is expected to move in slow gear, in resource-intensive countries.”
Some 24 countries, home to about 500 million people, will see their per capita income rise faster than the rest of the world, he added. N’diaye pointed out that inflation is expected to ease going forward.
Elevated public debt vulnerabilities and low external buffers will continue to limit policy spaces in several countries while the average Sub-Saharan debt burden stabilizes.
Near-term downside risks including climate shocks, intensification of security challenges, and the potential spread of the Ebola outbreak are mentioned by the report.