According to the analysis of CEHPEUS research and analytics on Ethiopian trade performance, the research firm forecasts that this year the performance of Ethiopia’s export will show a 14 percent growth and is set to generate 3.4billion dollars.
The expectation of large volumes for gold, coffee shipment and a strong performance from the horticulture sector is said to provide this significant role on growth.
CEHPEUS research stated that in the last fiscal year Ethiopia had changed its market with by driving its export mix to the EU market rather than the USA and China.
According to the analysis three European nations, namely; The Netherlands, Switzerland and Germany increased their purchase of Ethiopian goods by over 300 million dollars from the entire export of the last fiscal year 2019/20. Unfortunately, USA and China, two of the biggest Ethiopian buyers, reduced their purchasing order by 25 percent each.
“The shift in Ethiopia’s top export markets reflects a gradually changing product mix, especially in the sharp rise of gold exports as well as in flower exports,” stated CEHPEUS research. The uncertain performance of manufactured goods indicates the fall in exports to the US and China which are the primary buyers.
The policy reform at the central bank has helped the rise of gold exports, while the well-established cargo services of Ethiopian airlines aids in the timely delivery of flowers. Non-traditional exports, like electricity has also risen in its export by generating 66 million dollars. Electronics exports have also generated 38 million dollars.
According to the analysis, export has generated only 15 percent to the total foreign currency flow in Ethiopia in the last fiscal year 2019/20 which was 20 billion dollars. Other significant sources include; services totaling to 4.7 billion dollars, remittances 4.7 billion dollars, grants 1.5 billion dollars, loans 2.7billion dollars and FDI 2.4billion dollars.
However the Government forecasts 3.9billion dollars in exports for the coming fiscal year which is a growth of more than 25 percent.
The analysis further forecasts 7 percent growth for import substitutions since the chunk of governments’ budget is in infrastructure. However, government expectation in import substitution this coming year is at 4.5 percent.
According to the research even if there is a shift in export destination China still remains the dominant origin of Ethiopia’s import. Around a quarter of Ethiopia’s total imports, are sourced from China, and the share is even larger if we are looking at just non-oil imports alone. Other leading sources of imports are India, Kuwait, US.
Imports of Capital Goods and Consumer Goods are nearly the same. Based on an end-use classification of imports, imports of capital goods and consumer goods were each nearly 4 billion birr last year and together accounted for 60 percent of total imports. Though both have shrunk relatively to the GDP, capital goods imports have shown a relatively sharper fall over the years from 11 percent of GDP five years ago (when overall investment was 39 percent of GDP) to just 4 percent of GDP last year (when the ratio was close to 34 percent of GDP).
Imports to GDP fell to just 12.8 percent of GDP last year, down from around 30 percent of GDP a decade ago. This decline relative to GDP continues to support country’s external adjustment, most notably by helping reduce the current account deficit, at 4 percent of GDP in 2019-20, the lowest level in eight years.