Economy on Track to Attain Growth Target, says MoPD

ADDIS ABABA – Ethiopia is on track to achieve its annual economic growth despite global and domestic headwinds, the Planning and Development Minister (MoPD) said on Monday.

The economy remains under pressure stemming climate shocks, declining yet high inflation rate, and high debt payment.

Despite challenges, Minister Fitsum Asefa says progress in key macroeconomic indicators in the first nine months of the current fiscal year show that the economy is on the path to 7.9% growth.

Agricultural productivity, in particular, saw a substantial increase in the first three-quarters of the budget year ending in June, the minister told reporters on Monday.

According to her report, the total crop output in the nine months was 100 million quintiles higher compared to the same period last year.

A combined 6.5 million hectares of wheat harvested from the Meher and Summer farming seasons, up from 4 million hectares last year, while gains from Rice production rose from 8 million to 38 million quintiles.

Fitsum says productivity in livestock resources also spiked with the support of the ‘Yelimat Tirufat’ initiative, increasing the production of milk by two billion liters, eggs by 1.4 billion, meat by 100,000 tons and honey by 110,000 tons.

The overall agricultural gain, the minister argues, is boosting the sector’s contribution to the Gross Domestic Product (GDP) growth and the target set for this year.

The minister has also reported promising performances of services – such as transport and rebounding tourism – and industry sectors.

Due to expanded access to loans, inputs and energy, the average average manufacturing industry utilization capacity has now reached 56%.

Revenues Generations

Meanwhile, the minister said the government revenue generation has outpaced the increase in its expenditure.

About 374 billion birr (about 6.5 billion U.S. dollars) has been collected in the nine month period, up by 15% from last year. Its total spending at the same time has jumped by 8% to 495 billion birr (about 8.6 billion dollars), and capital expenditure accounting for a substantial 15.5 percent of the total.

Buoyed by a 25% increase in Ethiopian Airlines’ nine-month performance, the service industry brought in 5.8 billion US dollars in export revenue, per MoPD.

The earnings from export of goods, however, was relatively the same as last year’s. About $2.5 billion was secured from commodities shipped to the global market over the course of the three quarters during which the nation attracted $2.8 billion in foreign direct investment.

The Planning and Development Minister says inflation is cooling and stating that it reached 23.3% in April from 33.5% this time last year. Decline in non-food commodity prices, and impacts of monetary tightening and fiscal consolidation are contributing to a lower rate of inflation.

Challenges remain

Despite the broad positive outlook, the economy still faces challenges such as unemployment, elevated food inflation, high debt repayment.

According to MoPD, the growth Ethiopia is witnessing is not generating enough job opportunities for new job seekers joining the labor market.

Over 2.1 million new jobs were created in the first nine months of the fiscal year – a figure the minister said was unsatisfactory.

In the same period, close to 280,000 Ethiopians were able to get jobs overseas, per MoPD report.

High-debt service repayment is also a risk to the economic outlook of the country whose current external debt stands at 27.8 Billion US Dollars.

Declining yet high Inflation

Despite inflation receding to the lowest level in nearly three years, Fitsum says it is still high and requires extensive work as the cost of food items in particular, continues to affect the public.

Food inflation drops only slightly, according to the central bank, and remains elevated at 27.0%, while non-food inflation dropped by 18 percentage points to 18% in April.

Weak transport networks, traders’ incompetence and policy issues, demand-supply mismatch, and conflict are among the major causes of inflation in Ethiopia.