Country Report Ethiopia February 2009

Outlook for 2009-10

• The ruling Ethiopian People's Revolutionary Democratic Front (EPRDF) is expected to remain firmly in power over the forecast period.
• Political tensions will begin rising during 2009 as all parties start to regroup and plan for the next general election, which is due in May 2010.
• Relations with Eritrea and insecurity 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 6.8% in 2009 and 7% in 2010, supported by steady inflows of donor aid and investment.
• Inflation is estimated to have averaged 44.4% in 2008 owing to strong increases in food and oil prices during the year. Monetary tightening and lower food and oil prices should bring the rate down to 15% in 2009 and 12% in 2010.
• The current-account deficit is forecast to widen to 6.8% of GDP in 2009 as the trade deficit continues to widen and GDP growth slows. In 2010 the start of electricity exports and gains in remittances will narrow the deficit to 6.4% of GDP.

Monthly review

• Ethiopia's army has now completed a full withdrawal from Somalia, after first entering the country in December 2006.
• In January the IMF executive board approved US$50m in emergency funding for Ethiopia to help the country to cope with balance-of-payments difficulties.
• The government has announced plans to reduce net domestic borrowing to zero in 2008/09 and to keep parastatal borrowing at no more than 2.2% of GDP to reduce the budget deficit.
• Ethiopia's economy is expected to slow sharply in fiscal year 2008/09 (ending July 7th), but will nevertheless still expand by a relatively healthy 6.8% in real terms, in spite of the global economic slowdown.
• Output of key staple foods (cereals and pulses) rose by 10% year on year during the main meher harvest (October-January), helping to keep inflation on a downward trend.
• In January Epsilon Energy (a small Canadian independent) announced promising oil prospects in the north-west (near Lake Tana) following the conclusion of aerial surveys in the area.
• Ethiopia's trade deficit soared to US$1.6bn in the second quarter of 2008—a record sum and 66% higher year on year—mainly because of the surge in imports owing to high world oil prices.

Source: Country Report

This report covers the following industry codes:
SIC Code: 1
NAICS Code: 11