Ethiopia manages impact of worst drought: World Bank

Addis Ababa, December 7, 2016 (FBC) – Despite recently facing the worst drought in 50 years, Ethiopia has remarkably been able to maintain positive growth, said the World Bank.

According to the World Bank Groups' 5th Ethiopia economic update, strong economic growth continued in 2014-15.

However, the drought slowed down Ethiopia’s growth to 8 percent in 2015/16, which is impressive especially compared to previous drought situations which often resulted in economic contraction, it noted.

The recent drought will not likely affect Ethiopia’s medium-term economic growth, it indicated.

 The report said meher production declined by 1.3% in 2015/16; however, it increased by 113 % in belg season.

This, according to the report, prevented the economic impact of the drought from going as deep as it was feared.

Michael Tobegas, World Bank Economic Expert and Study Team Leader said the country has managed the impact of one of the significant drought, therefore, showing Ethiopia’s resilience against shocks.

Inflation is remarkable stable given the recent drought and even declining; it stood at 5.6 percent in October 2016, the report said.

However, the difference between the country's imports and its exports has created pressure on foreign currency earnings.

Dr Abrham Tekeste, Minister of Finance and Economic Cooperation of Ethiopia, said despite an increase in foreign direct investment (FDI) last year, export performance has declined for the past four years in a row.

This could be addressed by improving the participation of the private sector and increasing productivity, he said.

According to the report, the newly completed Addis Ababa-Djibouti railway line, government’s increased focus on new industrial parks and the increasing capacity in power generation along with the completion of transmission lines to neighboring countries are expected to stimulate Ethiopia’s growth.

According to the report, unemployment rate declined to 17 percent from 27 percent during the past ten years.

However, the unemployment rate is still high compared to Rwanda and Uganda, which have a 9 percent rate, according to the report.

Dr Abrham said works are underway to address unemployment rate, including the five policy recommendations offered by the economic update.

According to the five policy recommendations offered by the economic update, Ethiopia is expected to:-

  • encourage firm creation and growth that create jobs for non-graduates with a special focus on service and manufacturing sector growth,
  • increase labor productivity in the low-skill segment by addressing constraints faced by firms in accessing capital (financial and physical) to ensure that the labor productivity increases and wages can rise,
  • invest further in job and technical training programs to build the skills of those in the job market, both for low skilled workers and at higher levels of education in order to increase their productivity,
  • introduce targeted urban safety nets and labor market programs to invest in skills of low-skilled employees and the unemployed and provide financial support to enable their job search, and
  • enhance the use of ICT to provide information on job vacancies throughout Addis Ababa and reduce the cost of job search

Translated and posted by Amare Asrat