Ethiopia sees GDP growth at 10.1 pct in 09/10 fiscal
by Duncan Miriri

Reuters    Translate This Article
7 February 2010

ADDIS ABABA (Reuters) - Ethiopia sees its economy growing by 10.1 percent in the 2009/10 fiscal year compared with 9.9 percent previously as it shakes off the effects of the global downturn and a power shortage, a senior finance ministry official said on Thursday.

Although it relies on agriculture and commodities like coffee, the Horn of African nation with an estimated annual GDP of 350-400 billion Ethiopian birr, has posted some of the fastest growth rates in sub Saharan Africa in recent years.

'The projection for 2009/10 is real GDP (growth) 10.1 percent, out of which agriculture is projected to increase by 6 percent, industry by 10.2 percent and service by 14.5 percent,' Getachew Adem Tahir, head of development planning and research at the ministry told, reporters.

The International Monetary Fund forecasts Ethiopia's economy to grow by 7-7.5 percent this fiscal year (July-June), based on an assessment carried out last September.

Getachew said growth for the preceding year came in lower than expected.

'Our earlier growth projection was 11.2 percent but owing to the financial and economic crisis, there was impact,' he said adding the industrial sector was affected, a situation compounded by electricity outages during the period.

He said in the previous fiscal year, agriculture grew by 6 percent, industry 9.9 percent and services sector—including tourism and finance—expanded by 14 percent.

'The economy for the coming five years is expected to maintain the momentum it has been growing for the past five years, so it is going to be more than 10 percent, on average 10.4 percent per year,' he said.

Despite the fast expansion, the government was still battling inflation after it went out of control in 2008, when average annual overall inflation peaked at 44 percent.

'During the past five or six years, especially after 2005/06, the government has encountered two critical macroeconomic challenges, one is inflation and the other is balance of payments pressure, shortage of foreign currency,' he said.

Inflation is now expected to fall under 6 percent by the end of this year after sliding to an annual average of 8.5 percent in December thanks to falling crude oil prices and government food provision programmes aimed at stabilising local prices.

Aware that food accounts for 57 percent of total household spending, the government started importing grain in 2008, concentrating on staple wheat and distributing it at lower prices.

Non-food inflation was however still a challenge, Getachew said, after it only edged lower to 18.2 percent last year from 21.9 percent at the end of 2008.

He said the country was rebuilding its foreign currency reserves after the food and fuel price jumps of 2008 nearly wiped them out.

'Our reserve was around 0.9 months. Now we have reached at least 2.1 months of import cover,' he said.

Like other countries in the region, Ethiopia wants to join the league of middle-income countries in the next 15 years. The government budget stands at 55 billion birr this fiscal year.

The government tax collection in the previous fiscal year stood at 30 billion birr, Getachew said, adding that further liberalisation of the economy would be undertaken on a need-to basis.

The country is yet to open up its banking and telecoms sectors.

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