Economists Explain Host of Factors that Impeded Growth in 2017/18

Addis Ababa A host of factors, including unrest in different parts of Ethiopia, impeded the growth of real GDP in 2017/18.

National Planning Commission Deputy Commissioner, Getachew Adem said civil unrest, climatic change, foreign currency and input shortages as well as lack of capacity and modernization slowed down the growth of agriculture and manufacturing sectors.

He said the socio-economic and political situation in the country until April 2018 has negatively affected economic activities.

Shortfalls in agriculture and manufacturing in 2017/18 contributed to the decline of Ethiopia’s real GDP growth from the planned 11.1% to 7.7%, according to the deputy commissioner.

Agriculture was expected to contribute 34% of GDP growth and industry 20%.

Large and medium scale manufacturing, hit by capacity utilization and lack of foreign currency and capacity, grew by 5.5%, though it was expected to grow at 22%, Getachew said.

He particularly noted that agricultural transformation has not been at the desired level at the macro or cross-sector level. A shift from rainfall agriculture to irrigation has not taken place as desired.

The rainfall dependent agriculture must be transformed into irrigation based agriculture, the deputy commissioner stressed, adding that modernizing the agriculture sector is crucial, be it in livestock and crops modernization.

Sustainable and inclusive economic growth requires supporting involvement of the private sector to boost productivity beyond shifting in output and labor in agriculture, medium and large manufacturing, he noted.

Following the reform, the private sector can be involved in infrastructures like power generation or distribution and linking toll roads, Getachew stated.

The country needs to shift from agriculture to manufacturing in order to generate employment and earn foreign currency from exports, he said, adding that manufacturing and construction facilitate industrial development.

According to him, capacity utilization in industry is vital, especially in manufacturing; but has been limited due to lack of foreign currency and inputs and limited implementations during the stated year.

Nonetheless, the shortfall in services that grew by 8.8 percent is lower than agriculture and manufacturing.

Private sector investments are vital for effective production of goods and services, he noted.

Addis Ababa University Economics Lecturer, Berhanu Denu said economic growth relates to stability and work. There is no productivity and growth where there’s no work. The participation of the private sector is useful in improving performance and efficiency.

Institutional reform, privatization schemes and engagement of the private sector or public-private partnerships could bring sustainable GDP growth, he added.

Ethiopia’s economy experienced strong, broad-based growth averaging 10.3% a year from 2006/07 to 2016/17, according to World Bank.

On the supply side, GDP growth was driven by services (8.8% growth) and industry (12.2%), facilitated by the development of energy, industrial parks, and transport infrastructure.

Source: Ethiopian News Agency