GDP projected to reach USD half trillion by 2023

GDP projected to reach USD half trillion by 2023

Saturday, 03 October 2009

By Hayal Alemayehu Ethiopia’s economy is projected to reach almost USD half trillion in fifteen years, indicated a report presented on Monday by the global advisor Ernst & Young at the seventh Corporate Council on Africa (CCA) summit held in Washington, D.C. Entitled “Investing in Ethiopia,” the report forecasts that Ethiopia’s gross domestic product (GDP) could reach USD 472 billion in 2023 with a GDP per capita of just over USD 4000. “While Ethiopia continues to face many of the same challenges that are typical of fast growing transitional and emerging market economies, the economy has, nevertheless, already demonstrated its ability to sustain double digit GDP growth over the last few years,” Zemedeneh Negatu, Managing Partner of Ernst & Young, Ethiopia, said while presenting the report at the summit attended by senior U.S. and Ethiopian government officials, investors and representatives of various business groups. “And if recent trends continue, including attracting large volumes of FDI from Asia, the Middle East and elsewhere coupled with evolving and adoptive reforms in the business operating and regulatory environment and large investment in infrastructure, Ethiopia’s goal of joining the ranks of the middle income emerging market economies is achievable in less than two decades.” The Economist magazine (UK) has forecasted that Ethiopia will be the fourth fastest growing economy in the world in 2009. The Ernst & Young study shows that Ethiopia is the fifth largest economy in sub-Sahara Africa with a total GDP of 70 billion dollars in 2008. The study highlighted that three of the five largest economies in sub-Sahara Africa are oil- based, the exception being South Africa and Ethiopia. The study forecasted that Ethiopia could move up to the number three rank behind South Africa and Nigeria in fifteen year. It indicates that Ethiopia outranked three of the four BRIC (Brazil, Russia, India and China) countries in the World Bank’s global “Doing Business 2010” report, with only China placed at a higher position. The study reveals that there are potentially significant infrastructure investment opportunities worth 160 to 250 billion dollars in Ethiopia in the next fifteen years. U.S. multi-nationals such as Caterpillar and John Deer, already well regarded in Ethiopia, could benefit from this opportunity, according to the report. The report advised U.S. investors especially in infrastructure, agro-industry, oil and gas and ICT sectors to consider Ethiopia as one of the more attractive emerging markets investment destinations, especially since China, the second biggest economy in the world, is now the newest and biggest source of investment in Africa, anchored by large economies like Ethiopia. The report states that U.S. investors can benefit from the business and investment opportunities in Ethiopia if they come up with a long term strategic positioning. The report cites a UN study which indicated that the average return on investment in Africa is twenty nine percent compared to ten percent in the European Union. “I believe the Chinese have realized this and that is why they are investing billions in Africa including Ethiopia” Zemedeneh said. “Last year Africa-China trade reached USD108 billion from only USD ten billion eight years earlier. Chinese banks now lend more money to Africa than the World Bank and it has committed eighteen billion dollars in infrastructure investments in Africa over the past six years. These are the kinds of numbers U.S. policy makers and investors should keep in mind.” The report indicates that Ethiopia, with 81 million people, accounts for 10 percent of the total African population and is the fifteenth most populous country in the world.