Favorable external environment to boost growth, IMF report indicates


The latest economic outlook of the International Monetary Fund (IMF) forecasts an improved external environment will support key exports and foreign direct investment and remittance inflows of Ethiopia.
Despite the 2020 outlook that was published in October 2020 projecting the country’s real GDP growth to be zero for 2021, improvements have been recorded which now stands at two percent.
“Ethiopia’s growth forecast for 2021 remains unchanged at 2.0 percent, with growth in 2022 facing headwinds from the slow pace of vaccination, a possible pickup in COVID-19 infections, and the Tigray conflict,” it said.
Meanwhile the forecast for 2022 did not give a numerical estimation on the latest report.
Similarly a year ago, the IMF had projected that the government debt shall stand at 58.5 percent of the GDP, however the latest report that was issued on Thursday October 21 forecasts it will stand at 57.1 percent over one percent lower than the preceding projection. Similar to GDP, IMF did not forecast the 2022 projections owing to an unusually high degree of uncertainty.
For the 2021 Ethiopia’s reserve was estimated to be 1.8 months of imports of goods and services. The reserve amount has declined from two months estimation for 2020. The country reserve amount was on its peak to 2.2 months in 2019 which in comparison was stated that it would be better to be at least three months similar to the global standard.
Most of sub Saharan African countries reserve has estimated to show reduction in the 2022.
On its outlook IMF stated that Sub-Saharan Africa is projected to grow by 3.7 percent in 2021 and 3.8 percent in 2022, “a welcome but relatively modest recovery, suggesting that divergence with the rest of the world will persist over the medium term.”
It said that the Sub-Saharan Africa’s economy is set to recover in 2021 – a marked improvement over the extraordinary contraction of 2020. This rebound is most welcome and primarily results from a favorable external environment, including a sharp improvement in trade and commodity prices. In addition, improved harvests have lifted agricultural production, “yet, the outlook remains highly uncertain as the recovery depends on the progress in the fight against COVID-19 and is vulnerable to disruptions in global activity and financial markets.”
“As sub-Saharan Africa navigates through a persistent pandemic with repeated waves of infection, a return to normal will be far from easy,” stressed Abebe Aemro Selassie, Director of the IMF’s African Department. In the absence of vaccines, lockdowns and other containment measures have been the only option for containing the virus.
At 3.7 percent this year, the recovery in sub-Saharan Africa will be the slowest in the world—as advanced markets grow by more than 5 percent, while other emerging markets and developing countries grow by more than 6 percent. This mismatch reflects sub-Saharan Africa’s slow vaccine rollout and stark differences in policy space.