Ethiopia’s economy projected to grow 8.7% in 2021/22

Ethiopia’s economy is on track to expand by an impressive 8.7% in the upcoming fiscal year 2021/2022, exceeding the initial forecast of 8.5%. The announcement was made as the country unveiled plans to allocate a substantial $13 billion budget for the same fiscal year. Zemedeneh Negatu, the Global Chairman of Fairfax Africa Fund, shared insights on the economic outlook with CNBC Africa’s Julius Bizimungu. The proposed budget of $561 billion Ethiopian Birr, equivalent to around $13 billion, is hinged on the anticipated 8.7% economic growth rate, aligning closely with the International Monetary Fund's projections for Ethiopia in the fiscal year 2021/2022. The fiscal year commences on July 7th, spanning from July to June. Both the IMF and the government have maintained similar growth forecasts for the period. The budget’s foundation lies in the country's economic expansion targets, coupled with a series of economic reforms aimed at sustaining growth. Ethiopia has experienced rapid economic growth in recent years, positioning itself as one of Africa's fastest-growing economies. However, recognizing the need for sustainable growth, the government has initiated the 'homegrown economic reform program'. This strategy, first implemented last year, outlines a comprehensive ten-year vision until 2030, focusing on restructuring the economy to ensure long-term viability. A key aspect of the reform program involves a significant pivot towards bolstering the private sector. Notable shifts are already evident, with government data indicating a move from 70% of bank lending directed towards government-related entities to a reverse scenario where 70% now funds private sector enterprises. Such systemic reforms underscore the government’s commitment to fostering sustainable economic growth. Despite the ambitious 8.7% growth target, challenges loom in achieving this feat. Factors such as heightened political uncertainty, ongoing COVID-19 impacts, and regional disruptio...performance of Ethiopia's economy. Concerns surrounding the Tigray region's instability, pandemic repercussions, and the approaching national elections raise valid questions about the feasibility of sustaining high growth rates. In response, Negatu emphasized the intrinsic appeal of Ethiopia's long-term economic fundamentals. With a burgeoning population expected to reach 181 million by 2042, abundant labor resources, and a robust GDP ranking as the third-largest in sub-Saharan Africa, Ethiopia presents a promising investment landscape. Investors are drawn to the country's favorable demographics, vibrant labor force, and evolving business environment. Ethiopia's strategic focus on encouraging foreign direct investment, particularly in labor-intensive industries and innovative sectors, signals its commitment to economic diversification and expansion. The nation's agricultural productivity, underscored by favorable weather forecasts, further bolsters economic prospects. Noteworthy developments such as the recent issuance of Ethiopia's first mobile operator license to a Safaricom-led consortium illustrate the country's strides towards liberalization and market competitiveness. Negatu reiterates the significance of viewing Ethiopia's economic trajectory through a long-term lens. While immediate challenges exist, such as election-related uncertainties, prudent investors acknowledge the transformative potential of the country's evolving economic landscape. Despite short-term fluctuations, Ethiopia's enduring appeal lies in its strategic reforms, demographic advantages, and burgeoning investment opportunities. As the nation charts its path towards sustainable growth, stakeholders remain optimistic about Ethiopia's economic resilience and long-term prosperity.