Country Report Ethiopia September 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 to rise 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 fiscal year 2008/09 (ending July 7th) and 7% in 2009/10, supported by steady inflows of donor aid and investment.
• Inflation 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 14% in 2009 and 12% in 2010.
• The current-account deficit will remain stable at 7.2% of GDP in 2009 as falling imports are offset by lower private transfers. In 2010, as global demand edges up, the current-account deficit is expected to narrow to 6.5% of GDP.

Monthly review

• In August the Eritrea Ethiopia Claims Commission (affiliated with the Permanent Court of Arbitration in The Hague) issued a final decision on compensation payable by the two sides for damages during the war.
• The IMF executive board approved a large, US$241m funding package for Ethiopia in August, under the rapid access component of the exogenous shocks facility (ESF), to help to correct macroeconomic imbalances.
• The serious shortage of electricity that has hit Ethiopia in the past few months is now easing, helped by the main kiremt rains, which, although erratic, have helped to refill the country's dams.
• The state-owned Ethiopian Airlines registered record-breaking profits in the 2008/09 financial year. The carrier's gross profit jumped by 165% to Birr1.3bn (US$110m) as operating revenue climbed by 33% to Birr12.2bn.
• Another key parastatal, the Commercial Bank of Ethiopia (CBE), similarly reported record results in 2008/09, with gross profits jumping by 45% to Birr2.7bn.
• Momentum in Ethiopia's gold and platinum mining sector looks set to gather pace as new investments are announced.
• Economic ties between India and Ethiopia have been deepening, with new investments in agriculture and manufacturing being announced.

This report covers the following industry codes:
SIC Code: 49;60;10
NAICS Code: 22;52;212