Finding the fine balance.

Author:Minney, Tom
Position:Economy - Statistical data
 
FREE EXCERPT

Only in recent years have outside investors started to become aware of the size of Ethiopia's economy and the potential for business. The IMF forecasts imports of goods will be $13.8bn by 2014/15 and exports of goods will grow from $l.4bn in 2008/09 to $4.4bn in 2014/5.

Gross domestic product (GDP) at current prices is estimated at birr 470bn ($29.7bn) for 2011, up 23% from birr 383bn. However high inflation and devaluation against the dollar means that in dollar terms, GDP was at the same level, $29.7bn, in 2009 and down from $32.2bn in 2009. There is also change in the structure of the economy, which had long been dominated by the subsistence agriculture that provides a livelihood for up to 85% of the population.

In 2008/9, the contribution of services to GDP (45%) surpassed that of farming (43%): in 2009/10, services contributed 46% and agriculture 41%. Activities classified as services include real estate, hotels, transportation, communication, banking, health and education.

Economist Helaway Tadesse, Senior Vice-President of Zemen Bank, said that it had been a major contributor to growth in the past seven years and "can continue to grow strongly for many years as the basic elements of a modern economy are rolled out on a nationwide scale."

Other signs of the changes included outstanding revenues for Ethiopian Airlines ($1.26bn) in the year to June 2010, compared to the main export crop, coffee, which grew strongly to earn $842m, and gold overtook oil seeds as the second-biggest export earner in the first half of the July 2011 year.

Industrial growth projected

Industry has only played a small role so far but the GTP forecasts it will grow by 20% a year. Government is to create incentives for import-substituting industries and encouraging foreign investors in these sectors.

China, India and Turkey are among those rising to the challenge, with impressive plans for massive industrial parks. Work is moving ahead on a $5bn Chinese plant at Dukem--and a wide range of industries.

The government forecasts that exports of textiles will surpass $lbn by the end of the plan period and cement output will grow tenfold. It also foresees big growth in sugar, leather products, steel/ metals and mining.

Despite the drive, many local businesses are complaining as regulation gets more tightly enforced. Many small, medium and micro-enterprises (SMMEs) have been finding it hard to meet tighter regulations set for licences to trade. These include requirements...

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