The African Development Bank (AfDB), the continent’s biggest lender, forecasts Ethiopia’s economy will grow slowly by 4.8 percent in 2022 and 5.7 percent in 2023.
East Africa Regional Economic Outlook 2022, published by the African Development Bank on Friday, provides a review of the economic performance of 13 East African countries over the previous year, as well as short- to medium-term projections. Burundi, Comoros, Djibouti, Eritrea, Ethiopia, Kenya, Rwanda, Seychelles, Somalia, South Sudan, Sudan, Tanzania, and Uganda are among the countries involved in the report.
The report predicts that East Africa’s GDP growth will be moderate this year, at around 4%, before picking up to 4.7% in 2023, aided by the reopening of the economies. However, the majority of countries have yet to return to pre-Covid levels of growth.
The findings show that the expected strong growth is not homogenous across the region, with top performers being Ethiopia, Kenya, and Rwanda.
The report points out that the continued political unrest, particularly in Ethiopia, Sudan, South Sudan, and Somalia, could harm the region’s prospects while different countries are equally vulnerable to climate change.
Because of supply-chain disruptions and rising energy and food prices, inflation is expected to rise further in the medium term in the continent. Africa’s average consumer price inflation is expected to rise by 2.2 percentage points to 13.0 percent in 2021, up from 10.8 percent in 2020.
East African inflation is expected to rise from 5.3 percent in 2021 to 9.2 percent in 2022, owing primarily to high energy and food inflation caused by negative spillover from the Russia-Ukraine conflict in addition to internal political unrest.
COVID-19, according to the report, costs Ethiopia 2.3 million working hours in 2021, down from 3.3 million in 2020. Furthermore, it is estimated that the Russia-Ukraine conflict will cause more than 500,000 Ethiopians to become extremely poor in 2022.
“Of the three African countries—Chad, Ethiopia, and Zambia—that have so far requested debt treatment under the Common Framework, none has completed the process to benefit from the facility.” The report highlighted that this implies that more structural reforms are required to assist the continent in growing out of debt. Currency depreciation would also increase debt servicing costs for African countries, posing additional fiscal risks.
In summary, the report stated that the region’s economic recovery from the pandemic, including Ethiopia, faces new threats from political insecurity, rising crude prices, and the Russia-Ukraine war, which has disrupted global supply chains, resulting in higher food and energy prices, depreciating currencies, and falling forex reserves.
Source: AfDB
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