Thursday, October 6 2022 Sign In   |    Register
 

News Quick Search


 

News


Front Page
Power News
Today's News
Yesterday's News
Week of Oct 03
Week of Sep 26
Week of Sep 19
Week of Sep 12
Week of Sep 05
By Topic
By News Partner
Gas News
News Customization
Feedback

 

Pro Plus(+)


Add on products to your professional subscription.
  • Energy Archive News
  •  



    Home > News > Power News > News Article

    Share by Email E-mail Printer Friendly Print

    Ethiopia 10-Year Forecasts


    July 29, 2022 - Fitch Solutions Sector Intelligence

     

      THIS COMMENTARY IS PUBLISHED BY FITCH SOLUTIONS COUNTRY RISK & INDUSTRY RESEARCH and is NOT a comment on Fitch Ratings' Credit Ratings. Any comments or data are solely derived from Fitch Solutions Country Risk & Industry Research and independent sources. Fitch Ratings analysts do not share data or information with Fitch Solutions Country Risk & Industry Research.

      Ethiopia 10-Year Forecasts

      • 29 Jul 2022
      • Ethiopia
      • Economy

      Key View

      • Ethiopia will remain one of the main engines of economic growth in East Africa across our 10-year forecast period.
      • Increasing productive capacity, building on an already-strong infrastructure project pipeline (particularly in hydropower, road and rail) and reforms to the business environment will drive growth over the coming years.
      • However, deeply entrenched ethnic divisions will pose persistent risks to the outlook, threatening policymaking and leading to sporadic instability.

      We believe that Ethiopia will continue to post robust growth rates in the long term, remaining one of the fastest-growing economies in East Africa. We forecast average real GDP growth of 6.5% between 2022 and 2031. While this marks a slowdown from 9.1% over 2011-2020, we believe that growth will become more sustainable and supported by greater strength in the private sector in the long term. We believe that steady growth in the agriculture sector, the largest exporting sector in Ethiopia, will support the economy in the long term.

      At the same time, the manufacturing sector will see rapid growth in the coming years – albeit from a low base – on the back of public investment, generating increasing export output and demand for local labour. The infrastructure sector will continue to serve a vital role in Ethiopia, given a solid project pipeline, particularly in the road, rail and power sub-sectors. While growth in these sectors has historically been highly dependent on the government and financed through heavy uptake of loans – particularly through bilateral arrangements with Chinese financial institutions – we expect a boost in private sector activity in the coming years, with wide-reaching reforms and privatisation of state-owned enterprises (SOEs) to improve transparency, draw in investment and reduce pressure on the government’s fiscal accounts.

      A Key Outperformer
      Sub-Saharan Africa - Real GDP Growth, %

      e/f = Fitch Solutions estimate/forecast. Source: National sources, Fitch Solutions

      However, elevated political risk in Ethiopia will pose persistent threats to the growth outlook in the coming years. Prime Minister Abiy Ahmed’s political reform plan has opened up space for contestation by Ethiopia’s many ethnic minorities and caused divides among the ruling elite. While our core view is that the prime minister will succeed in navigating this transition, this may be a bumpy process, with periods of intensified violence spooking investors (the Tigray conflict since November 2020 has tarnished the country's reputation as an attractive destination for foreign investment, which will take years to restore).

      Agriculture And Manufacturing Will Boost Productive Capacity And Labour Demand

      The agricultural and manufacturing sectors will be key contributors to economic activity over the long term. Agricultural exports, particularly coffee and horticulture, have long been an important source of foreign currency inflows for Ethiopia. According to the World Bank, two-thirds of Ethiopia’s population is employed in agriculture. While this figure has steadily dropped since 2004 as a result of greater economic diversification, we expect that production in the coming years will overall increase given a greater share of higher-income commercial farming compared to low-yielding subsistence farming.

      Meanwhile, government efforts to target growth in the manufacturing sector, particularly textiles, will yield results in the coming years, despite headwinds from the country's temporary removal from the US' African Growth and Opportunity Act. A number of industrial parks housing multiple manufacturing units have begun operation in recent years – as of 2020, 19 public and private industrial parks had been built – and we expect overall production in such parks to rise, supported by increasing investment by foreign firms drawn to Ethiopia’s cheap electricity and labour costs. This will drive further economic diversification and provide additional opportunities for export earnings in the long term.

      Power And Transport Developments To Draw In Investment And Improve Operating Environment

      After multiple years of heavy investment, infrastructure development will remain a key driver of economic growth in the coming years. Power, road and rail projects will dominate, supported by larger investments. The Grand Ethiopian Renaissance Dam will be the flagship hydropower project, significantly boosting power capacity in the long term. Meanwhile, continuing construction of a network of rail projects, including the Awash-Weldiya Railway line, which will be connected to the Addis-Ababa railway line, will improve links to Djibouti’s port. Regional integration will also boost prospects for infrastructure expansion. The peace deal between Eritrea and Ethiopia agreed in July 2018 opened up the possibility of Ethiopia diversifying its port traffic to Eritrea. According to the Ministry of Foreign Affairs, Eritrea is currently renovating the port facilities at Massawa and Assab with a view to facilitating Ethiopian shipment. This will reduce the reliance on Djibouti for shipping.

      Greater Intraregional Integration Offers Upside Risks To Growth

      Horn Of Africa - Map Of Region

    TOP

    Other Articles - International


    TOP

       Home  -  Feedback  -  Contact Us  -  Safe Sender  -  About Energy Central   
    Copyright © 1996-2022 by CyberTech, Inc. All rights reserved.
    Energy Central® and Energy Central Professional® are registered trademarks of CyberTech, Incorporated. Data and information is provided for informational purposes only, and is not intended for trading purposes. CyberTech does not warrant that the information or services of Energy Central will meet any specific requirements; nor will it be error free or uninterrupted; nor shall CyberTech be liable for any indirect, incidental or consequential damages (including lost data, information or profits) sustained or incurred in connection with the use of, operation of, or inability to use Energy Central. Other terms of use may apply. Membership information is confidential and subject to our privacy agreement.