IMF doubts Meles' growth predictions
By Addis Mulugeta
Capital Ethiopia - Though the government of Ethiopia projects the country's real Gross Domestic Product (GDP) to grow by 11.2 per cent this year, the International Monetary Fund's (IMF) estimation is for it to grow by 6.5 per cent, as a result of an overheating economy and a very difficult global environment.
"We will still grow by 11.2 per cent. We are just cleaning out our house," Prime Minister Meles Zenawi claimed three weeks ago.
However, Sukhwinder Singh, the IMF's resident representative differs.
According to the representative, the global financial crisis has contributed to the slower growth rate of Ethiopia. A few months ago, when the government of Ethiopia was working on the projection, the IMF was also busy on Africa's real GDP projection.
The IMF thought Africa would grow by 6.5 per cent, whereas it actually grew by three per cent. So, it would be wise for the government of Ethiopia to revise its projection.
"The projections are bounded on strong assumptions. I think, in this kind of global environment, it will be very difficult for any country to achieve a double digit growth. If it did, it would be an exceptional performance and we would be surprised to see that," said Mr Singh.
Leuelseged Lemma, lecturer in economics at Addis Ababa University told Capital: "This difference in projection, at the end of the day, will entail negative consequences for the real economy of the country.
"GDP is the major denominator for the government to plan and act accordingly. For instance, if the government promises an 11.2 per cent growth rate and fails to achieve it, every development activity will be negatively affected," explained Leuelseged.
Last Wednesday, March 4, at a roundtable discussion organised by the IMF between the Government and various businesses and non governmental organisations on the how the crisis is going to affect Sub-Saharan Africa, it was said the country is going to be affected directly and indirectly.
The main ones are reduced external demand, lower remittances and risks to lower aid flows. The IMF does not at this point think the impact of these effects will be very large but it says the risks are there and mostly on the downside.
The financial system has been largely immune to the first rounds effects due to its limited integration with the global system.
Other countries such as South Africa, Nigeria and Kenya have been more affected through their financial systems while commodity exporters have suffered a huge price shock.
"Clearly in Ethiopia, the real economy will have to be monitored carefully as domestic demand declines and some sectors are exposed to difficult world conditions.
Rising credit risks in the banking system will also need to be monitored carefully by bank supervisors," concluded Mr Singh.
However, Sukhwinder Singh, the IMF's resident representative differs.
According to the representative, the global financial crisis has contributed to the slower growth rate of Ethiopia. A few months ago, when the government of Ethiopia was working on the projection, the IMF was also busy on Africa's real GDP projection.
The IMF thought Africa would grow by 6.5 per cent, whereas it actually grew by three per cent. So, it would be wise for the government of Ethiopia to revise its projection.
"The projections are bounded on strong assumptions. I think, in this kind of global environment, it will be very difficult for any country to achieve a double digit growth. If it did, it would be an exceptional performance and we would be surprised to see that," said Mr Singh.
Leuelseged Lemma, lecturer in economics at Addis Ababa University told Capital: "This difference in projection, at the end of the day, will entail negative consequences for the real economy of the country.
"GDP is the major denominator for the government to plan and act accordingly. For instance, if the government promises an 11.2 per cent growth rate and fails to achieve it, every development activity will be negatively affected," explained Leuelseged.
Last Wednesday, March 4, at a roundtable discussion organised by the IMF between the Government and various businesses and non governmental organisations on the how the crisis is going to affect Sub-Saharan Africa, it was said the country is going to be affected directly and indirectly.
The main ones are reduced external demand, lower remittances and risks to lower aid flows. The IMF does not at this point think the impact of these effects will be very large but it says the risks are there and mostly on the downside.
The financial system has been largely immune to the first rounds effects due to its limited integration with the global system.
Other countries such as South Africa, Nigeria and Kenya have been more affected through their financial systems while commodity exporters have suffered a huge price shock.
"Clearly in Ethiopia, the real economy will have to be monitored carefully as domestic demand declines and some sectors are exposed to difficult world conditions.
Rising credit risks in the banking system will also need to be monitored carefully by bank supervisors," concluded Mr Singh.
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