Ethiopia Economic Update – Laying the Foundation for Achieving Middle Income Status

4 mins read

By Meraf Leykun

19 June 2013

world bankOver the past decade, Ethiopia has attained high economic growth, averaging 10.7 percent per year.  In 2012, Ethiopia was the 12th fastest growing economy in the World.  If the country continues its historically impressive growth performance, it could potentially reach middle income status by 2025, according to the latest Ethiopia Economic Update report.  This, in turn, may require an adjustment in economic policy to phase in the private sector as an additional engine of growth.

“Ethiopia has been implementing a growth strategy, which emphasizes a strong expansion of public investment. So far, this has delivered positive results. However, the public investment rate of Ethiopia is the third highest in the world, while the private investment rate is the sixth lowest. In order to sustain high economic growth, the development of a strong and vibrant private sector is essential.” says Guang Zhe Chen, World Bank Country Director for Ethiopia.”

In addition, the report argues that Ethiopia needs to make progress on two interrelated and equally important fronts: enhancing domestic savings, and resolving the bottlenecks of the trade logistics system.

Ethiopia’s savings rate is at its lowest in 30 years declining from 10 percent of GDP in 1980s to 6 percent of GDP in the 2000s. This level of savings is much lower than expected given its stage of development.  In order to increase savings, the report recommends offering savers higher interest rates, expanding access to both private and public financial institutions, and taking advantage of remittances from the diaspora, estimated at half a billion dollars in 2011.

“Increasing the domestic savings rate in Ethiopia is desirable given the substantial investment proposals embedded in the Growth and Transformation Plan (GTP) and the limits and risks associated with external sources of savings.  Ensuring that savers get a good return on their investment is a key element in a strategy to achieve this.” says Lars Christian Moller, Lead Economist and Sector Leader for Ethiopia.

When it comes to efficient trade logistics, according to the report, Ethiopia’s ranking in the World Banks’ Trade Logistics Index has slipped from 104th  in 2007 to 141st   in 2012. It takes an average of 42 days to import a container of goods to Ethiopia compared to 31 days for Rwanda – another landlocked country. The report recommends: developing a national strategy for trade logistics, improving selectivity of inspections to reduce cost, transit time, and corruption, and providing warehouses with better technology as possible solutions to improve trade logistics.

“There is consensus that the trade logistics system in Ethiopia can improve considerably so that Ethiopia can reap the benefits of cheap and timely shipment of goods traded across borders. There is no panacea to achieving this, however, as this is a highly complex system with numerous actors and a plethora of interdependent factors.” says Michael Geiger, the Bank’s Country Economist for Ethiopia and one of the lead authors of the report.

The Economic Update is the 2nd report launched this fiscal year and is a key element of the World Banks’ programmatic knowledge services, prepared as part of its economic policy dialogue with the Government of Ethiopia to complement the substantial volume of concessionary lending services to the country.  Such Economic Update reports for Ethiopia will be prepared every six to eight months along with other tailored knowledge products in close collaboration with the Ministry of Finance and Economic Development.

5 Comments

  1. IT IS TIME SHINE.

    Finally , Ethiopia moving the right direction to eliminate centure old mismanagement, misgovernance and poverty. If Ethiopia contents the same path as it did for the past two decades Ethiopia may become the shining economic power house and set a precedent to the rest of Africa.
    I also impressed by the new mega hydro project that is under construction, when the project finalized it will be the biggest hydro dam project in Africa, and produce more than six nuclear plant combined, which in this case Ethiopia be able to provide hydro export to its six neighbouring countries.

  2. Lies at its best. The report is ridiculous and it shows the absurdity of corrupted world bank and IMF oficials who are making huge fortune out of aid and loan that Ethiopia has made from their respective orgnanisations. The officials who came forward to witness for TPLF regime are already implicated by corruption by sharing the fund belongs to the poorest nation on the planet with the government for the last two decades. So these officials are indiffernet to the plight of our nation. Do they like to tell us the idicators of growth and development are high number of unemployment,alarming number of prostitutes spilling over the streets of every cities,exporting young girls for domestic slavery in asia,eviction of peasants from their farm to sell their land to countries like china from which the world bank official is coming from,huge number of people almost 25% of the general public are relying on HANDOUTS or food safty program supported by WFP, and many more untold miseries and hardships.

    Let alone the north and south african countries which one of the east african countries are remaining behind in development from Ethiopia for the last tweo decades. The truth is any of east and central african countries are far better than Ethiopia and the life standard of their citizen is completely differnet from Ethiopians. That is why millions are taking economic refuge in sudan,kenya,uganda and even djibouti so where does that Woyanes growth are coming from? To prove my assertion go and watch YOUTUBE for the miseries of Oromo refugees in Yemen.

    I am deeply disappointed by the international community who are giving a blind eye or condoning the crime of their officials committed in the poorest nation on earth. Any ways time will tell.

    Stop mocking on the people of Ethiopia that couldnot feed itself once a day. We had never been hungry and impovereshed in such magnitude even during dictatorial derg era food was not a question rather we were complaining about human rights like speaking,writting and gathering. No body criticises Derg with corruption,treason,ethinicism and except power monopoly. We were proud nation during derg unlike today.

  3. Dear editor what happen to you? why did you refuse my comments to get posted?

    This repport is nothing but a wittness from the IMF and World Bank offcials who are implicated by corruption in sharing funds with TPLF that the poorest country on earth has got in Aid and making Loans form their respective organizatioans.

    Is that a development indicators registring huge number of economic remfugees in neighbouring kenya,sudan,uganda and ofcourse djibouty. What about offcially exporting Ethiopian young girls for domestic slavery in Asia? What about eviction of peasants from their farm and selling to countries like China from where one of the wittness is coming from? Forget the outside world even with in Africa let alone north and south african countries Ethiopia is far behind from Kenya,Uganda,Sudan and other central african countries in developemnt.In these country food is not a matter of question(not a big deal) as ours in the Derg era but now under TPLF rule citizens couldnot manage to feed themselves once a day where the fake double digit growth is announced.

  4. Mr. Woradoch,

    Are you Eritrean or hidden Egyptian agent operating in Ethiopians web site to spread poison ?

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