Ethiopian GDP to Grow 8 Percent, Foreign Currency Reserves Dangerously Low
November 14, 2018 - The World Bank Group is forecasting that the Ethiopian economic GDP is projected to grow 8 percent for the current fiscal year 2018/19.
According to the Bank, Ethiopia's GDP grew 7.7 percent for fiscal year 2017/18, and foreigh currency reserves are hovering around dangerously low levels.
Although the forecasted growth rate is a marked decline from previous years, it is still one of highest growth rates in the world.
Earlier this month, the International Monetary Fund (IMF) also forecasted similar growth rates for the Ethiopian economy. The IMF report indicated that Ethiopia's GDP will grow by 8.5 percent this Ethiopian fiscal year which will end on July 7, 2019.
According to the IMF’s outlook seen by Ezega.com, Ethiopia will continue to be the fastest growing economy in Sub Saharan Africa followed by Rwanda with predicted growth rate of 7.8 percent and Senegal 6.7 percent.
The World Bank commended strict application of fiscal and monetary policy by Ethiopian authorities. According to the bank, this has resulted in the narrowing down of the Current Account Balance .
A 30 percent increase in export revenue was cited as major reason behind the narrowing down of the Current Account. Air transport services and exports in manufacturing have registered the biggest growth rates.
The World Bank also saw a slight pickup in Foreign Direct Investment (FDI) for the current fiscal year, compared to decline last year.
Imports remained high throughout the year despite slowdown in imports to government mega projects, the Bank said.
The bank commended Ethiopia's “taming down of” headline inflation and external debt accumulation in last fiscal year. By “avoiding non-concessional borrowing” the government has limited the increase of external debt levels of Ethiopia, the report says.
However, the bank warned the dangerously low level of foreign currency reserves at the National Bank of Ethiopia (NBE). For last fiscal year, the reserve was only adequate to cover 1.6 month of imports, or USD 2.8 billion.
Ethiopia has been struggling with foreigncurrency shortages for the better part of the last two decades. Many businesses wait an average of six months to import necessary goods and services. Recently the government went on a major crackdown on black market currency traders in the capital city, sending black market exchange rates to levels comparable with official rates.