The following article is written by: Admit ZERIHUN WONDIFRAW, Senior Macroeconomist, AfDB Ethiopia Field Office.
Haile KIBRET, Economics Specialist, UNDP
James WAKAIGA, Economic Advisor, UNDP
- Ethiopia is a member of the Common Market for East and Southern Africa (COMESA) and the Intergovernmental Authority on Development (IGAD). The country has signed all regional integration protocols, including the COMESA Free Trade Area Protocol, and in 2014 it submitted its accession instruments to the COMESA Free Trade Area. It also continues to negotiate an Economic Partnership Agreement (EPA) with the European Union and negotiations to join the World Trade Organization are ongoing.
- In 2013/14, Ethiopia’s economy grew by 10.3%, making the country one of Africa’s top performing economies and this strong growth is expected to continue in 2015 and 2016.
- The International Monetary Fund (IMF) ranks Ethiopia as among the five fastest growing economies in the world. After a decade of continuous expansion (during which real GDP growth averaged 10.8% per annum), in 2013/14 the economy grew for its 11th consecutive year posting 10.3% growth. Over the 12 months from July 2013 (the country’s fiscal year runs from July-July), all of the economy’s main sectors performed well. Agriculture (which represents 40.2% of GDP) grew by 5.4%, industry (14% of GDP) expanded by 21.2% and services (46.2% of GDP) rose by 11.9%. This positive growth should continue for the coming two years.
- Merchandise exports expanded in value by 5.6% in 2013/14, to reach USD 3.25 billion, although their GDP share decreased from 6.5% to 5.9% year on year. Imports, mainly from Europe and Asia, rose from USD 11.5 billion in 2012/13 to USD 13.7 billion in 2013/14, causing the trade deficit to deteriorate (from USD 8.4 billion to USD 10.5 billion). The effect on the overall balance of payments however remains contained, with the deficit down to USD 91.5 million in 2013/14 from minus USD 6.5 million the previous year, mainly due to a good performance in other accounts (non-factor services, private transfers and a surplus in the capital account).
- The service sector grew by 11.9% in 2013/14, mainly driven by an expansion in hotels and tourism (up 26.4%), financial intermediation (17.8%), wholesale and retail trade (14.9%), and transport and communications (13.7%). Over the same period, the industrial sector grew by 21.2% (14.4% of GDP, up 1.3 percentage points year on year) driven by construction, mining and manufacturing. The outlook for the sector remains positive with government measures to boost jobs and increase value added (through provision of industrial shelters access to finance, etc.) targeting both the export-oriented light manufacturing industries (garment, textile and leather) and small and medium manufacturers. Ethiopia has strong potential to rapidly transform its economy, link increasingly into global value chains and become the African manufacturer of the future.