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Report Published: "Ethiopia Business Forecast Report 2013"

New Country Reports market report from Business Monitor International: "Ethiopia Business Forecast Report 2013"

Published on 08 April 2013

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by Bill Thompson


Boston, MA

Core Views

View Full Report Details and Table of Contents (http://www.fastmr.com/prod/584461_ethiopia_business_forecast_report_2013.aspx?afid=201)

We are forecasting Ethiopian real GDP growth of 7.8% in 2012 and 7.2% in 2013, a moderation from the estimated 8.8% expansion in 2011. The overall outlook remains stellar, with the economy driven by resilient private consumption despite rampant inflation as well as strong investment into the country's power and transport sectors. We are forecasting a continued deficit in Ethiopia's current account, 7.2% of GDP in 2012 and 5.7% in 2013, compared with an estimated 8.7% shortfall in 2011. However, we expect this deficit to narrow over our forecast period to 2021. We have an upbeat outlook for coffee and gold exports, but the overall deficit will remain in place owing to continued reliance on capital goods and oil imports. We forecast Ethiopia's fiscal account to post a shortfall of 2.8% of GDP in 2012 and 2.6% in 2013, from an estimated deficit of 2.0% in 2011.

Increased revenues accrued from the mining sector, a restructured domestic tax system and privatisations will largely be matched by spending in health and education. Defence expenditure will also be significant owing to Ethiopia's military re-involvement in Somalia. Major Forecast Changes Buoyant investment and stronger private consumption than we previously expected have led us to upgrade our real GDP growth projections, from previous forecasts of 7.6% and 7.0% for 2012 and 2013 respectively. We have significantly ramped up our inflation expectations for 2012 following price growth in 2011.

Continued tightness in domestic food supply, an outlook for high global oil prices and the National Bank of Ethiopia's unwillingness to rein in private sector lending is likely to keep price pressure elevated. We now forecast end-of-period inflation of 18.5% for 2012, compared with our previous forecast of 9.8%. Key Risks To Outlook A s is the case for many African nations, Ethiopia is highly susceptible to the volatility of commodity markets, particularly coffee, which can either adversely or favourably affect export revenues and headline growth. I ntervention in Somalia, tension with Eritrea, oppression of domestic opposition and high inflation all pose risks to Ethiopia's political environment. While we believe that the government's iron-fisted control of state resources means that there is no real threat to the regime of Prime Minister Meles Zenawi in the short term, each of these issues could contribute to a deterioration of stability over the longer term if left unresolved.

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  • Bill Thompson
  • Fast Market Research, Inc.
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  • Tel: +14134857001
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Posted 2013-04-08 15:54:00