This Is What the World Bank Says about the Ethiopian Economy

This Is What the World Bank Says about the Ethiopian Economy

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the world bank logoEthiopia is in the midst of one of the worst droughts in its history. In addition to the drought, Ethiopia is facing civil unrest that has resulted in protesters attacking factories and flower farms owned by foreign companies.

Still, Ethiopia has kept its inflation rate under control, maintained a focus on growing its labor market, and pursued opportunities to diversify and expand its economy. In fact, a recent report from the World Bank shows that the country continues to post some of the strongest economic growth in the world.

About the World Bank Report

The report, released in early December, is the World Bank Group’s fifth economic update on Ethiopia. Carolyn Turk, Ethiopia country director for the World Bank, noted that Ethiopia’s economy has maintained a “respectable” 8 percent growth rate. She described the statistics as “impressive, especially compared to previous drought situations which often resulted in economic contraction.”

The World Bank expects the economy’s momentum to continue in the medium term, especially considering that rainfall is on target for 2016. Many economic efforts are focusing on moving Ethiopia away from its disproportionate dependency on agriculture.

Factors the report cited for its optimistic outlook on Ethiopia’s economy include:

  1. The completion of the Addis Ababa-Djibouti railway line, which will smooth out logistics related to trade.

The electric rail line, which was built next to a 100-year-old, unused railway, will reduce the time it takes to transport goods from the coast from several weeks to one day. Business owners applaud the new transportation line, saying it will hugely benefit industrial parks and large agricultural operations dependent on movement of goods.

The line initially will only be open to freight, but passenger trains should begin running in early 2017.

  1. The construction of new industrial parks.

The Ethiopian government has turned its focus to commercial endeavors throughout the country, building new industrial complexes in Hawassa and Bole-Lemi. The Hawassa Industrial Park, located approximately 275 kilometers southeast of Addis Ababa, is the first of several the government is building. It is dedicated to the exportation of textile and apparel and builds on a growing manufacturing sector in Ethiopia.

Hawassa Industrial Park already has attracted the interest of large manufacturing firms from the United States, China, and Indonesia. Ethiopian officials hope the project will foster an important link with China. The Chinese economy is turning to higher-tech industries and the country may be looking to outsource lower-tech work to other nations.

Ethiopia’s new industrial parks also will address a growing need for stable jobs among the country’s massive labor force, of which 45 million are young people.

  1. Increased power generation capacity as transmission lines to Sudan and Kenya are completed.

Ethiopia continues to pursue power integration deals with surrounding countries that buy hydro-electric power from the nation. In August, Ethiopia announced it was signing a deal with Tanzania. It already exports power to Sudan, Djibouti, and Kenya.

Ethiopia is investing in hydro-electric plants throughout the country, with plans to eventually export power to seven nearby nations. Its Grand Ethiopia Renaissance Dam, which will be the biggest dam in Africa, is set for construction along the Nile River near the border of Sudan.

The dams are part of the Ethiopian government’s work to become a major power exporter in East Africa. According to experts, with its potential to produce power from hydro, geothermal, solar, and wind sources, Ethiopia could produce power equal to half of the currently-installed capacity in Africa.

Suggestions for Ethiopia’s Labor Market

The World Bank report also analyzed Ethiopia’s labor market, noting that the country kept wages stable and ensured that workers in urban labor markets would find value for their educations. Although the economy is growing significantly, the report offered five policy recommendations to continue fighting poverty and make urban labor markets more inclusive:

  1. Ethiopia should encourage growth in the service and manufacturing sectors to create jobs for people who have not graduated.
  1. Ethiopia should encourage higher labor productivity in low-skilled jobs by examining current constraints regarding how firms access financial and physical capital. This could result in higher wages, the report states.
  1. Ethiopia should continue investing in educational programs that provide job and technical training to help workers of all education and skill levels become more marketable.
  1. Ethiopia should implement safety nets and other programs to help employees with low skills and those who are unemployed search for jobs and to provide financial support while they are looking for work.
  1. Ethiopia should continue using ICT to list job openings in Addis Ababa and cut down on the cost of job searches.

Outside and nonprofit groups already are supporting the Ethiopian government’s mission to diversify the economy and invest in the younger members of its work force. The Gebeya Institute, for example, is a new IT training program that offers a six-month, high-quality technical education that will prepare students in Ethiopia for well-paying jobs in technical fields. Gebeya also offers a job search platform that connects its graduates and students with employers in Ethiopia and elsewhere who are looking for skilled IT workers.

Ethiopia is in the midst of one of the worst droughts in its history. In addition to the drought, Ethiopia is facing civil unrest that has resulted in protesters attacking factories and flower farms owned by foreign companies.

Still, Ethiopia has kept its inflation rate under control, maintained a focus on growing its labor market, and pursued opportunities to diversify and expand its economy. In fact, a recent report from the World Bank shows that the country continues to post some of the strongest economic growth in the world.

About the World Bank Report

The report, released in early December, is the World Bank Group’s fifth economic update on Ethiopia. Carolyn Turk, Ethiopia country director for the World Bank, noted that Ethiopia’s economy has maintained a “respectable” 8 percent growth rate. She described the statistics as “impressive, especially compared to previous drought situations which often resulted in economic contraction.”

The World Bank expects the economy’s momentum to continue in the medium term, especially considering that rainfall is on target for 2016. Many economic efforts are focusing on moving Ethiopia away from its disproportionate dependency on agriculture.

Factors the report cited for its optimistic outlook on Ethiopia’s economy include:

  1. The completion of the Addis Ababa-Djibouti railway line, which will smooth out logistics related to trade.

The electric rail line, which was built next to a 100-year-old, unused railway, will reduce the time it takes to transport goods from the coast from several weeks to one day. Business owners applaud the new transportation line, saying it will hugely benefit industrial parks and large agricultural operations dependent on movement of goods.

The line initially will only be open to freight, but passenger trains should begin running in early 2017.

  1. The construction of new industrial parks.

The Ethiopian government has turned its focus to commercial endeavors throughout the country, building new industrial complexes in Hawassa and Bole-Lemi. The Hawassa Industrial Park, located approximately 275 kilometers southeast of Addis Ababa, is the first of several the government is building. It is dedicated to the exportation of textile and apparel and builds on a growing manufacturing sector in Ethiopia.

Hawassa Industrial Park already has attracted the interest of large manufacturing firms from the United States, China, and Indonesia. Ethiopian officials hope the project will foster an important link with China. The Chinese economy is turning to higher-tech industries and the country may be looking to outsource lower-tech work to other nations.

Ethiopia’s new industrial parks also will address a growing need for stable jobs among the country’s massive labor force, of which 45 million are young people.

  1. Increased power generation capacity as transmission lines to Sudan and Kenya are completed.

Ethiopia continues to pursue power integration deals with surrounding countries that buy hydro-electric power from the nation. In August, Ethiopia announced it was signing a deal with Tanzania. It already exports power to Sudan, Djibouti, and Kenya.

Ethiopia is investing in hydro-electric plants throughout the country, with plans to eventually export power to seven nearby nations. Its Grand Ethiopia Renaissance Dam, which will be the biggest dam in Africa, is set for construction along the Nile River near the border of Sudan.

The dams are part of the Ethiopian government’s work to become a major power exporter in East Africa. According to experts, with its potential to produce power from hydro, geothermal, solar, and wind sources, Ethiopia could produce power equal to half of the currently-installed capacity in Africa.

Suggestions for Ethiopia’s Labor Market

The World Bank report also analyzed Ethiopia’s labor market, noting that the country kept wages stable and ensured that workers in urban labor markets would find value for their educations. Although the economy is growing significantly, the report offered five policy recommendations to continue fighting poverty and make urban labor markets more inclusive:

  1. Ethiopia should encourage growth in the service and manufacturing sectors to create jobs for people who have not graduated.
  1. Ethiopia should encourage higher labor productivity in low-skilled jobs by examining current constraints regarding how firms access financial and physical capital. This could result in higher wages, the report states.
  1. Ethiopia should continue investing in educational programs that provide job and technical training to help workers of all education and skill levels become more marketable.
  1. Ethiopia should implement safety nets and other programs to help employees with low skills and those who are unemployed search for jobs and to provide financial support while they are looking for work.
  1. Ethiopia should continue using ICT to list job openings in Addis Ababa and cut down on the cost of job searches.

Outside and nonprofit groups already are supporting the Ethiopian government’s mission to diversify the economy and invest in the younger members of its work force. The Gebeya Institute, for example, is a new IT training program that offers a six-month, high-quality technical education that will prepare students in Ethiopia for well-paying jobs in technical fields. Gebeya also offers a job search platform that connects its graduates and students with employers in Ethiopia and elsewhere who are looking for skilled IT workers.

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