By Muluken Yewondwossen
During the inaugural World Economic Outlook (WEO) presentation event in Africa at the National Bank of Ethiopia (NBE), the International Monetary Fund (IMF) provided insights into Ethiopia’s economic prospects and challenges. The presentation, led by Tobias Rasmussen, the Resident Representative, Jean-Marc Natal, the Deputy Chief of the WEO Division, and Martin Stuemer, the Economist of the Commodities Unit, showcased the report’s findings released in conjunction with the joint annual event with the World Bank in Marrakesh, Morocco.
The presentation shed light on Ethiopia’s economic conditions, regional dynamics, and global trends. Rasmussen acknowledged Ethiopia’s significant economic progress while emphasizing the need to overcome remaining obstacles. The country has been experiencing robust and steady growth at a rate of approximately 6 percent, with projections indicating that this growth trajectory will continue. IMF forecasts estimate that Ethiopia’s GDP will increase by 6.1 percent this year and 6.2 percent in 2024, surpassing global and regional growth rates.
Rasmussen also highlighted a notable disparity in growth rates between oil-importing and oil-exporting nations, suggesting that greater diversification leads to more resilient economies. In this context, Ethiopia has outperformed even among oil-importing countries, which further underscores the positive trajectory of its economy.
However, the WEO report indicates that 2023 has been a challenging year for economic activity in sub-Saharan Africa. Global inflationary shocks resulting from Russia’s war in Ukraine have led to higher interest rates globally, resulting in reduced global demand, increased spreads, and persistent pressure on currency values. As a result, growth in the region is expected to decline for the second consecutive year, from 4 percent to 3.3 percent in 2023, with a projected recovery to 4 percent in the following year.
According to the estimates, sub-Saharan oil-importing nations are predicted to experience growth rates of 3.7 percent and 4.5 percent in 2023 and 2024, respectively, while oil-exporting countries are expected to see growth rates of 2.6 percent and 3.1 percent in the same period.
In terms of fiscal management, Ethiopia has exhibited a more significant decline in government deficits and public debt compared to the rest of the region. Rasmussen highlighted a sharp reduction in the ratio of public debt to GDP, projecting a decline from 54 percent in 2021 to 37.9 percent in 2023, with further reduction to 31.2 percent anticipated in the coming year. This reduction has been achieved through measures such as identifying external debt and addressing funding and debt challenges. The external debt has decreased from 29.1 percent of GDP in 2021 to 17.9 percent in 2023. Additionally, the current account deficit is expected to decline from 4.3 percent in 2022 to 2.4 percent in 2023.
However, the IMF report highlights certain difficulties. While inflation has somewhat decreased, average annual inflation rates remain high. The government’s declining revenue poses budgetary challenges, particularly in the context of ongoing fiscal consolidation. The IMF report indicates a decrease in government revenue to 7.7 percent in 2023, compared to 8.5 percent in 2022 and 11 percent in 2021.
Apart from inflation and declining government revenue, Ethiopia faces other economic challenges, including a decline in exports and limited foreign reserves equivalent to less than one month’s imports. NBE Governor Mamo E. Mihretu, who attended the WEO presentation, expressed concerns about the impact of inflation and global economic issues on Ethiopia’s economic progress.
The IMF predicts that macroeconomic imbalances in sub-Saharan Africa are improving, with declining inflation rates and efforts to establish more sustainable state finances. However, uncertainties persist, and development may be hindered by stalled reform initiatives, increased political unrest, and external risks such as China’s economic downturn. The region continues to face challenges, including high inflation rates in many countries, exchange rate pressures, elevated debt vulnerabilities, and widening economic disparities, particularly in resource-intensive nations.
The WEO event held in Addis Ababa on October 20 marks a significant milestone as the first of its kind in Africa, according to IMF experts.
