ETHIOPIA

Economic performance in Ethiopia

Abstract

In this study we try to explore the concept of Economic performance in Ethiopia in a holistic context. The research also analyzes many aspects of Economic performance in Ethiopia and tries to gauge its effect on Ethiopia's economy. The economy of Ethiopia is very fragile because it is essentially based on the agriculture. But the country has often been affected by drought, food shortages, and by the political disputes that have contributed to slow economic development.

Economic performance in Ethiopia

Outline

The following research papers contain the following things that are mentioned below.

1. Introduction

2. Recent Trend in Real GDP Growth

3. Sectoral Sources of Growth and Structural Shift

4. Growth and Poverty Reduction

5. Explaining Ethiopia's Recent Growth

6. Challenges of Sustaining Growth

Introduction

Ethiopia has experienced strong economic growth in recent years. With real GDP growth at or near double digit levels since 2003/04, the country has consistently outperformed most other countries in Africa and expanded much faster than the continent-wide average (Figure 1). At the same time, the country still faces some structural weaknesses that present significant challenges in the medium term.

The economy of Ethiopia is very fragile because it is essentially based on the agriculture. But the country has often been affected by drought, food shortages, and by the political disputes that have contributed to slow economic development. Today, despite some improvements, Ethiopia is still among the poorest countries in the world. It is not a member of the World Trade Organization (Selassie, 1999).

Figure 1: GDP Growth Rate Comparison

“The last major shock to growth was in 2002/03 when the economy suffered a major decline in real GDP growth on account of severe drought.”

Economic Structure

Since the beginning of the twenty-first century, Ethiopia is experiencing unprecedented economic growth. Between 2002 and 2007 the growth rate exceeded the average annual 11%, although it is anticipated a slowdown in 2008. The leading economic indicators, however, remain cautious. First, the inflation continues to be important and food prices rise sharply. Then, in recent years, Ethiopia has benefited from favorable weather conditions, a situation that might not last. Finally, the country is subject to the oil price increase which has direct impact on the balance of payments.

Trade

Although Ethiopia is open to international trade, it is still quite undeveloped compared to other neighboring countries. One of the brakes is probably related to tariffs remain relatively high. Despite the absence of formal trade barriers, some areas remain closed to private investors, such as sector banks and that of the assurances. In addition, clearance is slow and all the imports in the direction of the country must go through Ethiopian nationals registered as agents import or distribution from the Ministry of Trade and Industry.

Foreign Investment

The foreign direct investment (FDI) has increased steadily since 2003. In 2006, they accounted for 23.5% of GDP. Although the government has embarked on a program of economic reforms and liberalization, it keeps control over the services sector. In addition, foreign investment is hampered by poor infrastructure, difficulty in acquiring land, strict control of trade ...