Country Report Ethiopia

Outlook for 2008-09

• The Economist Intelligence Unit expects the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) to remain firmly in power over the forecast period.
• Following the peaceful completion of by-elections in April, we expect the political situation largely to normalise as all parties begin to regroup and plan for the next general election, due in 2010.
• Relations with Eritrea and Ethiopia’s involvement in Somalia will continue to dominate the foreign policy agenda throughout the forecast period and tensions in the region will remain high.
• Sustained growth in agriculture, horticulture and services will keep real GDP growth robust, at 9.5% in 2008 and 8.6% in 2009, supported by healthy inflows of donor aid and foreign direct investment.
• Inflation will remain high, at 24% in 2008, reflecting rising food and oil prices. Monetary tightening and lower food prices should bring the rate down to 14% in 2009.
• Although growing in nominal terms, the current-account deficit is forecast to narrow as a percentage of GDP, to 8.5% of GDP in 2008 and 8.2% of GDP in 2009, owing to strong economic growth.

Monthly review

• Final election results from the National Election Board of Ethiopia have confirmed a sweeping victory for the ruling EPRDF in the April elections.
• The government is pushing ahead with two controversial bills—a new press law and a new law regulating non-governmental organisations (NGOs)—and aims to pass them before the parliamentary recess in July.
• An IMF mission, visiting Ethiopia for 12 days in May for annual Article IV consultations, reiterated that curbing surging inflation, without undermining GDP growth, remains the main policy challenge for the government.
• The government is preparing a new, stricter, banking law, to replace legislation dating from 1994, but some aspects of the latest bill are controversial.
• The state-run Commercial Bank of Ethiopia (CBE)—the country’s largest bank—has reported a strong performance in the first three quarters of 2007/08 (July-March), and has reduced its level of non-performing loans to under 10%.
• The state-run Ethiopian Electric Power Corporation (EEPCo) has increased load-shedding to five days out of every 14 (from four previously), and to 15 hours a day (from 14).
• Ethiopia has signed a host of new international licensing deals for its coffees.