IMF Projects Slower Growth for Ethiopian Economy

ADDIS ABABA – The International Monetary Fund (IMF) said it expects Ethiopia’s economic growth to slow in 2022 due to the impacts of internal conflict and pandemic.

The Fund has issued its Regional Economic Outlook for Sub-Saharan Africa on Thursday.

In the report, the multilateral group sees the Ethiopian economy expanding 3.8% this year, down from 6.3% last year.

The report attributes the slowdown mainly to military conflict in the first half of the fiscal year, the lingering effects of the pandemic amid low vaccination rates, and the spillovers from the war in Ukraine.

High food and commodity prices and elevated debt risks also cloud IMF’s outlook.

“The country is highly dependent on wheat imports from Russia and Ukraine, adding pressure on food prices,” says the IMF.

Looking beyond 2022, the report says Ethiopia’s medium-term growth prospects are better.

The country’s economy is also forecasted to expand by 5.7% in 2023.

However, it says “uncertainty is very high because of internal conflict and global geopolitical tensions”.

– Africa’s recovery Disrupted –

The recovery in sub-Saharan Africa picked up in the third quarter of 2021 and held up despite the onset of a fourth COVID-19 wave at the end of the year.

Estimated growth in 2021 has been revised upward from 3.7 to 4.5%.

“This year, however, the progress has been jeopardized by the Russian invasion of Ukraine which has triggered a global economic shock that is hitting the region at a time when countries’ policy space to respond to it is minimal to nonexistent,” IMF says.

Surging oil and food prices in particular are straining the external and fiscal balances of commodity-importing countries and have increased food security concerns in the region.

Moreover, the shock compounds some of the region’s most pressing policy challenges, including the COVID-19 pandemic’s social and economic legacy, climate change, heightened security risks in the Sahel, and the ongoing tightening of monetary policy in the United States.

Because of this, the IMF says the growth momentum for the region has weakened this year with economic activity expected to expand by 3.8%.

The economic recovery is projected to accelerate in 2023 to about 4% over the medium term.

This pace, however, is not enough to make up for lost ground from the pandemic, the report claims.

Beside accelerating the COVID-19 vaccination campaign, the Fund calls for immediate policy priorities including helping the most vulnerable households cope with high food and energy costs without adding to existing debt vulnerabilities, containing inflation pressures, and managing exchange rate adjustments.