Ethiopia: IMF sees 8.5% growth as political climate clears up

by Engidu Woldie
ESAT News (December 5, 2018)

The International Monetary Fund (IMF) says Ethiopia will grow by 8.5 percent as the political unpredictability subsides and foreign direct investment improves in 2019.

“Growth is expected to step up in 2018/19 to 8.5 percent, supported by stronger confidence as the political uncertainty of previous years recedes, and external financial inflows, including FDI temporarily ease external financing constraints and foreign exchange shortages,” the IMF says.

The report by the IMF also commended Ethiopia’s reformist Prime Minister for opening up the economy. “Prime Minister Abiy Ahmed took office in April 2018, catalyzing a drive for reforms, including towards economic opening.”

“The authorities succeeded in reducing the external current account deficit to 6.4 percent of GDP in 2017/18 through determined policies to restrict public sector imports and borrowing and a tight monetary policy stance.”

The Bank said growth has been slowed in 2017/2018 due to “appropriately restrictive macroeconomic policies.” The growth in the real GDP for the 2017/18 was 7.7 percent, owing to favorable harvests and rapid growth in air transport and manufacturing exports. “However, political uncertainty, foreign exchange shortages, and adverse terms-of-trade trends hampered economic activity,” the IMF said.

The Bank commended the decision by Ethiopian authorities and their commitment to “prudent expenditure control, refraining from non-concessional financing for new projects and a shift to ongoing projects to concessional financing when possible, among factors that would help depict positive economic outlook in the future.

As soon as he took control of political power in April, Ethiopia’s young prime minister promised to open up key economic sectors to local and foreign investors. Dr. Ahmed announced air transport, logistics and telecom were among key sectors his government would open up for private investment.

As the political uncertainty settles, the Bank envisions Ethiopia to turn its economy around.