Fourth Ethiopia Economic Update : Overcoming Constraints in the Manufacturing Sector
The Ethiopian economy continued its strong expansion in FY14 with real GDP growing by 10.3 percent. Growth was driven mainly by the services sector from the supply side and public investment from the demand side. At the same time, inflation has rem...
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| Language: | English en_US |
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Washington, DC
2015
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| Online Access: | http://documents.worldbank.org/curated/en/2015/07/24756616/fourth-ethiopia-economic-update-overcoming-constraints-manufacturing-sector http://hdl.handle.net/10986/22317 |
| Summary: | The Ethiopian economy continued its
strong expansion in FY14 with real GDP growing by 10.3
percent. Growth was driven mainly by the services sector
from the supply side and public investment from the demand
side. At the same time, inflation has remained in single
digits for the last two years on account of tighter monetary
policy and lower international commodity prices. However, in
recent months in 2015, domestic food prices are increasing
partially as a result of shortage rainfall during the short
rainy season. On the fiscal side, the budgetary stance at
the general government level has been cautious. In an effort
to adjust for the rising cost living, the FY15 budget
incorporates an increase in public sector salaries after
years of no increases which could also be the first step to
adjust the balance between capital and recurrent
expenditure. The salary increase accompanied by a
supplementary budget in the middle of the fiscal year could
potentially increase the budget deficit. The current account
balance weakened. The deterioration is on account of a
worsening trade deficit which was driven by weak export
performance and large imports of capital goods for public
investment programs. Goods exports showed positive growth in
2013-14 but rates remained far below their historical
growth; furthermore, export growth fell into negative
territory again in the last quarter of 2014 and first
quarter of 2015. The strong economic growth in the past
decade helped to reduce poverty significantly. The poverty
headcount, measured by the national poverty line, fell from
38.7 percent in 2005 to 29.67 percent in 2011. Measured with
the international poverty line (US$1.25 per day) Ethiopia
saw the second fastest rate of reduction in Africa. Economic
growth, particularly in agriculture, has been an important
driver of poverty reduction in the last decade. Favorable
weather conditions and improving terms of trade for rural
producers have been reasons of this past trend supported by
strong improvements in access to basic services and rural
safety nets. Low levels of inequality have been maintained
with the Gini coefficient remaining stable at 0.30. |
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