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World Bank Sees Ethiopia GDP Grow at 7 Percent for Medium Term
Source: VOA News
ADDIS ABABA — Ethiopia's economy is likely to grow seven percent a year over the next three to five years, below its average of the last decade, and to push that rate higher, the government needs to change policy to encourage private investment, the World Bank said.
While seven percent GDP growth would be the envy of finance ministers in Western economies, it would fall short of an average rate of 10.6 percent that Ethiopia said it achieved in the last 10 years with its state-interventionist policies.
It would also be insufficient to meet Ethiopia's target of reaching middle-income status by 2025. The bank says that goal is still within reach, however, if the government shifts the balance from public to more private investment.
”We still think growth could be robust - in the order of seven percent in the medium term would not be unexpected,” said Lars Christian Moller, the bank's lead economist in Ethiopia, in an interview on Monday.
The World Bank estimates Ethiopia's economy grew seven percent in the fiscal year July 8, 2012 to July 7, 2013, below the government's 10 percent estimate.
Moller said Ethiopia's $43 billion economy would need to repeat its performance of the last decade to become a middle income country - defined by the bank as one with a gross national income (GNI) per capita of around $1,430 - in 12 years.
The World Bank put Ethiopia's GNI at $410 in 2012.
Ethiopia is banking on massive state-supported energy and transport projects to help transform its agrarian economy.
Infrastructure spending required financing equivalent to 19 percent of Ethiopia's GDP in fiscal 2011-2012, the World Bank estimates.
But while public investment in Ethiopia is the third highest in the world as a percentage of GDP, private investment is the sixth lowest.
Major sectors including retail, transport, banking and telecoms are closed to foreign investors.
Double-digit inflation again?
Growth has been driven by an expansion in services, now the largest economic sector, and agriculture. Ethiopia's main exports include coffee and horticulture products, and it is also a big aid recipient.
Two thirds of Ethiopia's 8.5 percent GDP growth in 2011-2012 could be ascribed to public investment, the World Bank said.
Even though the public investments are intended to benefit the private sector in the long run, they are depriving the private sector of finances in the short term, Moller said. “And that is where a deliberate choice is being made,” he added.
”Maybe there are some really good private investment projects out there that could deserve to get that credit, that could actually make the economy grow even faster,” Moller said.
He added that Ethiopia should keep monetary policy tight to head off inflation, which could quickly return to double digits.
The annual inflation rate accelerated to eight percent in July from a 2013 low of 6.1 percent in April. It exceeded 40 percent in 2011.
A loose fiscal stance and periodic external price shocks have left Ethiopia vulnerable to price spikes. Its public investment program has injected liquidity into the market, fueling inflationary pressures.
”We are a little bit wary that inflation is going up and perhaps could hit double-digit levels again,” within the next six to 12 months, Moller said.
So far, Ethiopia has managed to keep down inflation by using its foreign exchange reserves to mop up liquidity.
That has raised questions within Ethiopia's private sector over how easily the government can sustain its spending program and keep inflation in single digits at the same time.
”The fiscal stance is loose, and so that is contributing to inflationary pressures,” Moller said. “So that would be another benefit of slowing down on public investment; you could maintain a lower level of inflation.”
they need to be careful on the inflation
This is cold news from World Bank.
Thus, there will be no funding for it whatsoever especially for Abbay Project.
I am not sure Chinese will take the vacuum with so much inflation especially on dollar reserve.
It is also not known if Wayane opens up Private sector it will sustain curbing on religious rights of its people banning Muslims, subsidizing Churchs, an appointing its own political officers. We really will witness collapse of the economy soon without Public investment. At any rate we do not need our people to suffer, but clearly investors are not showing confidence.
To hear this news from World Bank only reflects its bad record on the “use of terror law” to infringe on Muslim rights. Thank you World Bank for being supportive of opposition. Once democracy comes, private investment is possible, under Wayane revolutionary development, democracy is none existent.
what 10% or 7%…..may be in Tigrey.but the good news is the Neftagn Groups are also isoleted from tigrey’s 10% growth.naftagns kno how to complaint when they arent part of it but i bet they would say any negative thing if Oromo and Ogaden were starving and they were getting their share…. hodamoch!!!
If ain`t broke why change it? Every economist,every news paper,every think tank and all African nations are praising its growth and development.In fact,many African nations are copying its model.This country is doing fine.What is this scratching the head is all about?Total nonsense.
But the Agazi bandits with their puppet PM and Bandas are still anouncing the Fake Double Digits Economic Growth .0.5% ,1% or 7% of course there is still an economic Growth anywhere in the world ,only like Grece confronted to State Bankrupcy .But concerning third world countries like ours ,the minority ruling class is monoplising even looting the whole economic activities while the peoples in their majority are starving . For your Information the actual crypto economic growth in Ethiopia is more the result of US and EU Financial assistances than True Econmic activities .Ethiopia Under the rule of these bandits has received 100 Times more International Aids from Donator Countries in less Time than 17 years of Derg Military Junta Regime .Agazi Bandits and Tigre Mafiosis are actually accused of deposing more than 11 Billions $ in Foreign Banks .
LOL…DESPERADO OPPOSITION DIASPORA TRYING TO PAINT 7% GDP AS BAD.
European Union GDP growth = -0.3% !!!
@ TEDDY [Visitor],
Keep crying broken ass nigga! You always have time to whine and complain everything about Ethiopia,but you never have time and courage to do something about it.
As you collecting your welfare checks,eating your fried chicken,drinking your kool-aid and smoking your crack,Ethiopians back home have made impressive progress in tackling poverty.
Like Meles said, when the whloe world economy was tumling hit by a storm, our little boat was floting fine cos we have no ties. Opening business for private sectors stated above can make us dependent what happens elsewhere. Elsewhere ..where things are not regulated and the rich make their money and run.
That said, the textile business would create lots of jobs for the poor. we have man power so we should open that part. still..not bad
Lars Christian Moller of World Bank commented based on his spreadsheet that probably may or may not represent the real numbers. The West is habitually inclined to shed bright light always on the bad side of everything Africa. Even if there is good NEWS, they often find ways to spin and twist it to their customary way of dismissive and condescending narrative. Sometimes I wonder if they still feel nostalgic of the news of misery from the 70s and 80s. One doesn’t need to be a whiz in economics to appreciate a 7% growth. Ethiopia sets itself for higher goal of 10% per se, and it has managed to accomplish 7%. I would say kudos to Ethiopia. At the time anything above 0% is considered as positive accomplishment, again the West finds it easy to dump cold water on our achievements. I am just angry at ourselves why we let that happen for such a long time. While we kept ourselves busy killing each other, engaged in bitter, protracted wars to secede and fragment, not only we lost track of our priorities badly but we also failed our country miserably in the process. We left her unattended, unkempt, and neglected for so long. The results, she slid into depth-less destitution, lost her young and bright, lost her forests, lost her ports and her ecological and environmental balance were severely affected.
Ethiopia slowly but surely has started to emerge. Her children are determined to change the course of destruction, poverty and backwardness for good. I was not fazed at all when I noticed Gragn Ahmed was the one comes out salivating and grinning with a smile that couldn’t even be covered by his paprika-red beard as if the NEWS was bad. The Government must continue investing in infrastructure building and I don’t see any issue with that. It should also control the banking system until the country has the capacity to manage complex financial systems, has the important regulations in place and most of all a competent oversight that can monitor and stop illegal monetary outflows/inflows that could potentially bankrupt the country and its citizens. I wouldn’t let a guest in my house who might shamelessly claim my house and wife the next day for sure.
I felt the same way how Solomon stated on his comment and you made me feel my time I spent on reading on this report worth at the end. Tnxs
The World bank is expert at Glamourizing potential nations when it is about to or already had loaned money!!!
The World bank, in order for it to run as a business entity (created by the rich nation to exploit the third world by charging sky-high interest) has to fabricate a huge lie such as ” Moderate growth” , ” 10% growth” etc.
We don’t get easily fooled by such trickery
The dimwits AKA Cyber cadres for the weyane Shifta regime will dance at such outright lie!!!
It is good to see the argument from the “Neo-Liberals” has changed although they still don’t seem to see the full picture.
The argument has gone through a metamorphosis of sorts from
1st. You can’t grow an ecomomy with these policies. Your country will collapse…to
2nd. Your policies have created some temporary growth in some areas and continued application of these policies will not get you anywhere ….to
3rd. Yes your policies are creating growth that is real but you can’t keep it up for long … to
4th(current article included) Your policies can sustain a growth of 7% but if you want 11% then you have to change….
We must relay on ourselves not world bank OK.
One of the first thing that can libarate us from the yog of the economical colonialisim is to build our dams big and small all over our land and irrigate our low lands such Anafar and Hararge.
It is very sad that I sow some people who call themselves as Ethiopian citizens made demonstration againist fund raising and event of the marketing to find share holder to our dams in Saint Paul , Minnesota United States. they are saying no to Wayni.
How foolish and stupid is it for Ethiopia or only for wayani.
Wayani are Ethiopians but building to motherland is not only for them it is for all Ethiopia. They are not against only wayani but they are against all Ethiopia. working for enemies who wants Ethiopia never be developed, to keep us poor forever.
Ethiopian should know who is anti-Ethiopian or who is not.
During the last years, when the GOE was saying about the 11% growth, citizens were acquainted with deficiencies, deficits , famines, inadequacies, insufficiencies, lacks, poverty, scarceness, shortages, and undersupplies.
Now more frustrating is, when they say growth goes down to 7 % do we have to expect more misery?
I hope this will not change to looting , robbing, mugging, and ripping of more!…..
BTW even if the above lie is taken as true analysis, this means our homeland which is one of “15 poorest nations” on the “Planet” will be tad better to go to the next level. Which this means if it was the 14th poorest,it will be less poor to take the next level that is 13th stage LOL!!!
This means one “Gursha” for one’s lunch will coast less than Birr
What a tragedy.
On that account there will be “three meal” per day for an average Ethiopian
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