Economic growth in Ethiopia will remain upbeat over the next 18 months despite adverse weather and social unrest presenting modest headwinds to growth. The government's commitment to the second phase of its Growth and Transformation Plan will see continued state infrastructure investment buoy growth.
Inflation in Ethiopia will reaccelerate over the remainder of 2016 and will remain elevated over 2017 as adverse weather likely raises food insecurity. In addition, continued high growth of money supply, as the central bank keeps policy loose, will drive non-food inflation over the next 18 months.
Ethiopia's fiscal balance will remain firmly in deficit over the coming quarters as the government continues to invest in improving its infrastructural backbone to promote economic diversification. That said, economic and manufacturing sector activity will increasingly support revenue growth over a multiyear horizon, slowly narrowing the country's fiscal deficit over the next several years.
Ethiopia's current account deficit will begin narrowing, but will remain sizable, over the next 18 months as rising global coffee prices boost export revenues. In addition, we expect foreign aid will continue to support Ethiopia's current account deficit, as the government maintains key donor relations due its continued involvement in stemming regional terrorism.
Continued economic and political exclusion of non-Tigrayans in Ethiopia will remain a key driving factor behind protests and will continue to weigh on the country's political stability. Economic growth in Ethiopia will remain upbeat in the years ahead despite the increased likelihood of violent clashes between Ethiopian police and ethnic protestors.
While inflation has slowed markedly from the high levels witnessed in 2011/12, inflation will continue to represent a key risk to macroeconomic stability. Food price inflation in particular will remain a concern, with unpredictable weather a constant threat.
As is the case for many African nations, Ethiopia is highly susceptible to volatility in global markets, particularly commodity prices (notably coffee and gold), which can in turn pose both upside and downside risks to export revenues and headline growth.
Public sector debt levels have risen dramatically since the implementation of government's Growth and Transformation Plan and the need for government financing will increase. Government financing needs will rise as public sector investment continues under Ethiopia's aggressive growth strategy.
|e/f= BMI estimate/forecast. Source: National Sources/BMI|
|Nominal GDP, USDbn||53.2||61.4||68.4||76.8||86.1||96.5||107.8||119.7||133.1||148.1||164.9||183.7|
|Real GDP growth, % y-o-y||10.3||8.0||6.3||7.4||7.7||7.5||7.2||6.6||6.6||6.6||6.7||6.7|
|Consumer price inflation, % y-o-y, eop||7.1||11.8||8.5||8.5||8.5||8.0||8.0||8.0||7.0||7.0||6.7||6.4|
|Exchange rate ETB/USD, eop||20.20||21.18||22.23||23.26||24.28||25.30||26.32||27.35||28.37||29.39||30.41||31.44|
|Budget balance, % of GDP||-2.6||-2.7||-3.1||-3.1||-3.0||-2.9||-3.0||-3.0||-3.0||-2.9||-2.8||-2.7|
|Current account balance, % of GDP||-8.0||-12.2||-12.5||-12.1||-11.3||-10.9||-10.6||-10.2||-9.9||-9.5||-9.1||-8.7|
Assess your risk exposure in Ethiopia with our 100% independent forecasts assessing the pace and stability of this key market. Backed by trusted data from BMI Research's 52 million data point economic forecast model, this report will allow you to measure political, economic, business environment and operational risks in Ethiopia with confidence.
Your subscription service includes:
- Delivery of the report in print and PDF
- Online access for 12 months
- The functionality to translate your online report into your choice of 10 languages - Arabic, Chinese, French, German, Italian, Japanese, Korean, Portuguese, Russian and Spanish
- The ability to export data and graphs from the online report directly into your workflow
- The support of a dedicated Account Manager to answer any questions you might have about your subscription
- Access to our team of leading analysts who will be happy to answer any questions you might have about the data and forecasts included in this report