Friday, July 19, 2013

Ethiopia's Investment Prospects

The June 2013 issue of African Review of Economics and Finance contains a study titled "Ethiopia's Investment Prospects: A Sectoral Overview" by Henok Assefa, Derk Bienen and Dan Ciuriak.  The three authors are affiliated with consulting companies in Ethiopia, Germany and Canada respectively.

Dire Dawa, Ethiopia. Flickr/UK Dept. for Int'l Dev.
The authors note that Ethiopia is in the midst of a sustained surge that is becoming increasingly broad-based, building on major improvements in educational attainment, improved health outcomes, and infrastructure capacity in terms of access to power, transportation and telecommunications. The study reviews overall economic management and performance indicators and provides a hortizontal overview of the investment framework. It summarizes the investment prospects in several major sectors of the economy in light of Ethiopia's emerging capacities and global developments: agriculture, mining, oil and gas, economic infrastructure, manufacturing, health and tourism.

The study identifies a number of positive features in Ethiopia's macroeconomic performance. These include strong growth based on an increasingly diversified economy, stable non-food price inflation, increasing exports to a diversified range of markets, an improved trade balance, and generally stable economic policies and a solid investor protection framework. The study argues that the two key challenges to sustained economic performance are high and volatile inflation rates and negative real interest rates, which generate diverse macroeconomic management challenges and constrain savings growth needed to fuel investment. The study also expresses concern over Ethiopia's rising exchange rate.

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