Friday, April 26, 2013

Just Released: "Ethiopia Business Forecast Report 2013"

Fast Market Research recommends "Ethiopia Business Forecast Report 2013" from Business Monitor International, now available

[USPRwire, Wed Apr 24 2013] Core Views

Despite the sudden death of long-standing Prime Minister Meles Zenawi in August 2012, the smooth handover of power and his successor's endorsement of the status quo should see stability and broad policy continuity preserved through to elections in 2015.

We expect the Ethiopian economy to remain on a robust growth trajectory over the next few years - BMI forecasts real GDP growth of 6.7% in 2013 and 6.1% in 2014 - underpinned by strong investment in the energy and transport sectors and an improvement in conditions for the Ethiopian consumer.


Having reached a peak of 40.6% year-on-year (y-o-y) in August 2011, headline inflation in Ethiopia has - as we predicted - fallen steadily over the last 18 months and we expect price pressures to continue to ease in 2013 on the back of a relatively favourable outlook for food production and a moderation in global oil prices.
We expect Ethiopia to sustain a persistent, but stable fiscal shortfall over the medium term, with the deficit hovering between 2.5% and 3.5% of GDP. The deficit will be sustained primarily by high levels of government spending on infrastructure and poverty reduction under the Growth and Transformation Plan.

Major Forecast Changes

Recently published data by the National Bank of Ethiopia in FY2011/2012 (October-September) suggest that the country's fiscal shortfall widened slightly more than we had anticipated, reaching an estimated 3.2% of GDP. In 2012/13, BMI forecasts the deficit to remain in similar shaping at 3.2% of GDP (compared with our previous projections of 2.6%).

Key Risks To Outlook

Despite the relatively smooth handover of power following Meles Zenawi's death, political risks will remain heightened. Increasing social tensions raise the prospect of an uptick in domestic unrest, while a behind-close-doors power struggle among the political elite could threaten policy-making.

As 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.

While inflation has come down significantly from the high levels witnessed in recent years inflation will continue to represent a key risk to macroeconomic stability. Food price inflation in particular will remain a concern, with unpredictable weather a constant threat.

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