Publication: Fourth Ethiopia Economic Update: Overcoming Constraints in the Manufacturing Sector
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2015-07-08
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2015-11-02
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The Ethiopian economy continued its strong expansion in FY14 with real GDP growing by 10.3 percent. Growth was driven mainly by the services sector from the supply side and public investment from the demand side. At the same time, inflation has remained in single digits for the last two years on account of tighter monetary policy and lower international commodity prices. However, in recent months in 2015, domestic food prices are increasing partially as a result of shortage rainfall during the short rainy season. On the fiscal side, the budgetary stance at the general government level has been cautious. In an effort to adjust for the rising cost living, the FY15 budget incorporates an increase in public sector salaries after years of no increases which could also be the first step to adjust the balance between capital and recurrent expenditure. The salary increase accompanied by a supplementary budget in the middle of the fiscal year could potentially increase the budget deficit. The current account balance weakened. The deterioration is on account of a worsening trade deficit which was driven by weak export performance and large imports of capital goods for public investment programs. Goods exports showed positive growth in 2013-14 but rates remained far below their historical growth; furthermore, export growth fell into negative territory again in the last quarter of 2014 and first quarter of 2015. The strong economic growth in the past decade helped to reduce poverty significantly. The poverty headcount, measured by the national poverty line, fell from 38.7 percent in 2005 to 29.67 percent in 2011. Measured with the international poverty line (US$1.25 per day) Ethiopia saw the second fastest rate of reduction in Africa. Economic growth, particularly in agriculture, has been an important driver of poverty reduction in the last decade. Favorable weather conditions and improving terms of trade for rural producers have been reasons of this past trend supported by strong improvements in access to basic services and rural safety nets. Low levels of inequality have been maintained with the Gini coefficient remaining stable at 0.30.
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“World Bank Group. 2015. Fourth Ethiopia Economic Update: Overcoming Constraints in the Manufacturing Sector. © World Bank. http://hdl.handle.net/10986/22802 License: CC BY 3.0 IGO.”
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Publication Fourth Ethiopia Economic Update(Washington, DC, 2015-07-08)The Ethiopian economy continued its strong expansion in FY14 with real GDP growing by 10.3 percent. Growth was driven mainly by the services sector from the supply side and public investment from the demand side. At the same time, inflation has remained in single digits for the last two years on account of tighter monetary policy and lower international commodity prices. However, in recent months in 2015, domestic food prices are increasing partially as a result of shortage rainfall during the short rainy season. On the fiscal side, the budgetary stance at the general government level has been cautious. In an effort to adjust for the rising cost living, the FY15 budget incorporates an increase in public sector salaries after years of no increases which could also be the first step to adjust the balance between capital and recurrent expenditure. The salary increase accompanied by a supplementary budget in the middle of the fiscal year could potentially increase the budget deficit. The current account balance weakened. The deterioration is on account of a worsening trade deficit which was driven by weak export performance and large imports of capital goods for public investment programs. Goods exports showed positive growth in 2013-14 but rates remained far below their historical growth; furthermore, export growth fell into negative territory again in the last quarter of 2014 and first quarter of 2015. The strong economic growth in the past decade helped to reduce poverty significantly. The poverty headcount, measured by the national poverty line, fell from 38.7 percent in 2005 to 29.67 percent in 2011. Measured with the international poverty line (US$1.25 per day) Ethiopia saw the second fastest rate of reduction in Africa. Economic growth, particularly in agriculture, has been an important driver of poverty reduction in the last decade. Favorable weather conditions and improving terms of trade for rural producers have been reasons of this past trend supported by strong improvements in access to basic services and rural safety nets. Low levels of inequality have been maintained with the Gini coefficient remaining stable at 0.30.Publication Ethiopia’s Great Run(World Bank, Washington, DC, 2015-11-12)This report addresses two questions: what explains Ethiopia’s growth acceleration?; and how can it be sustained? In brief, the authors find that Ethiopia’s rapid economic growth, concentrated in agriculture and services, was driven by substantial public infrastructure investment and supported by a conducive external environment. To sustain high growth, three policy adjustments are presented: identifying sustainable ways of financing infrastructure, supporting private investment through credit markets, and tapping into the growth potential of structural reforms.Publication Second Ethiopia Economic Update : Laying the Foundation for Achieving Middle Income Status(Washington, DC, 2013-06)Over the past decade, Ethiopia has achieved high economic growth, averaging 10.7 percent per year. In 2012, Ethiopia was the 12th fastest growing economy in the World. If the country can continue its historically impressive growth performance, it could potentially reach middle income status by 2025. This, in turn, may require an adjustment in economic policy to phase in the private sector as an additional engine of growth. Moreover, Ethiopia needs to make progress on two related important fronts: enhancing domestic savings, and, resolving the bottlenecks of the trade logistics system. This Second Ethiopia economic update, prepared in collaboration with the Government of Ethiopia, offers policy guidance on how to move forward. Chapter one discusses Ethiopia's growth strategy, which emphasizes a strong expansion of public investment. This model has delivered impressive results, although the underlying macro policy mix highlights important challenges going forward suggesting that an adjustment to strategy may be warranted. One policy challenge relates to raising sufficient domestic savings to finance one of the highest public investment rates in the world, as discussed in chapter two. Another challenge relates to strengthening the competitiveness of the economy, to boost the lagging export performance, and attract foreign direct investment. Ethiopia's trade logistics system is a key constraint in this regard, as highlighted in chapter three.Publication Ethiopia - Accelerating Equitable Growth : Country Economic Memorandum, Part 2. Thematic Chapters(Washington, DC, 2007-06)This report presents an update on the economic challenges facing Ethiopia with a focus on the shared goal of accelerating equitable growth. The starting point is the Government's own Plan for Accelerated and Sustained Development to End Poverty (PASDEP), which is in the process of finalization, and is designed to cover the period 2005-2010. This report proposes that the growth strategy should more explicitly adopt a "two-legged" approach that would both (a) consolidate and deepen an essentially balanced, broad-based and inclusive growth strategy and (b) adopt a more selective approach to speed up growth, allowing for identification and support for dynamic new activities, based on private and public sector discoveries, innovations, and partnerships. This report suggests ways forward to complement and strengthen the PASDEP. It brings together recent analysis and thinking from a range of sources, to put forth a storyline and key elements of the strategy in Part I. The second part provides a series of chapters on key themes - viz. recent and longer term economic developments, rural development, the private sector, the infrastructure challenge, and the institutions and governance. The report seeks to provide adequate coverage of the major challenges facing Ethiopia in its efforts to accelerate equitable growth, drawing on work across a range of themes including the Institutional and Governance Review.Publication Trade Crisis and Recovery : Restructuring of Global Value Chains(2010-05-01)The recent large and rapid slowdown in economic activity has resulted in even larger and more rapid declines in international trade. As world trade is set to rebound, this paper addresses three questions: (i) Will trade volumes rebound in a symmetric fashion as world economic growth rebounds? (ii) Will the crisis result in a change in the structure of trade, and in particular will it lead to a reversal of the pattern of more diversified sourcing and thus to a consolidation of global value chains? (iii) What policies can improve the prospects for developing country growth in the event that trade volumes do not rebound symmetrically and there is a consolidation of some global value chains?
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