Ethiopia’s economy is likely to grow 7 percent a year over the next three to five years, below its average of the last decade, and to push that rate higher, the government needs to change policy to encourage private investment, the World Bank said. While 7 percent GDP growth would be the envy of finance ministers in Western economies, it would fall short of an average rate of 10.6 percent that Ethiopia said it achieved in the last 10 years with its state-interventionist policies.

It would also be insufficient to meet Ethiopia’s target of reaching middle-income status by 2025. The bank says that goal is still within reach, however, if the government shifts the balance from public to more private investment. “We still think growth could be robust – in the order of 7 percent in the medium term would not be unexpected,” said Lars Christian Moller, the bank’s lead economist in Ethiopia, in an interview on Monday. The World Bank estimates Ethiopia’s economy grew 7 percent in the fiscal year July 8, 2012 to July 7, 2013, below the government’s 10 percent estimate.

Moller said Ethiopia’s $43 billion economy would need to repeat its performance of the last decade to become a middle income country – defined by the bank as one with a gross national income (GNI) per capita of around $1,430 – in 12 years. The World Bank put Ethiopia’s GNI at $410 in 2012. Ethiopia is banking on massive state-supported energy and transport projects to help transform its agrarian economy. Infrastructure spending required financing equivalent to 19 percent of Ethiopia’s GDP in fiscal 2011-2012, the World Bank estimates. But while public investment in Ethiopia is the third highest in the world as a percentage of GDP, private investment is the sixth lowest.

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7 comments on “Ethiopia’s GDP to Grow 7 Percent!

    1. I recently atdeetnd a presentation of these findings by Vodaphone at the World Bank here in Washington. The presenter pointed out the equally high correlation between white wine consumption and GDP growth, jokingly adding that the logical perscription this implied was to send more white wine to Africa. His point was that rich people tend to buy more phones, so it is hard to tell which way the “arrow of causality” points; do mobile phones make people richer, or do rich people buy more phones? There is compelling evidence (not sponsored by Vodaphone, natch) to indicate that fixed-line penetration might be a better predictor of GDP growth, which in my view captures some of the property-rights attributes that Hernando de Soto has written about. Even if they can, squatters don’t pay to have fixed lines installed, but if someone does have a fixed line installed, this implies that they can, first of all, and also that they have clear enough legal rights to a piece of property to make it worth the investment.

  1. income in equality is also increasing even in gov’t wortkers and other society eg.
    a person gradute from unversity working in different office earn great difference salary regardless to their potencial,positin acadamical status and so on by chance other way aperson graduate from university at degree level erns less salary than who gradute from TVET(level IV) by the same field of study working the same area……..In the country working together but benfit for some people who get the chance only no fare distribution of economy in society level but what we her from our media is so different from our life ,

    1. please don’t expect the national development/growth in terms of your benefit. When I say this I am not different from those low wage earners .

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