Ethiopia’s GDP to reach half a trillion dollars by 2023, Ernst & Young forecast
And if recent trends continue, including attracting large volumes of FDI – from Asia, the Middle East and elsewhere – evolving and adoptive reforms in the business operating and regulatory environment and large investments in infrastructure, Ethiopia’s goal of joining the ranks of the middle income emerging market economies, in less than two decades, is achievable. The Economist magazine (UK) has forecasted that Ethiopia will be the fourth fastest growing economy in the world in 2009.
The Ernst & Young study also shows that in 2008, Ethiopia was the fifth largest economy in sub-Sahara Africa with a total GDP of 70 billion dollars. The study further highlights that three of the five largest economies are oil based, the exception being South Africa and Ethiopia. In fifteen years, the study forecasts that Ethiopia could move up to the number three rank behind South Africa and Nigeria.
Several interesting and surprising findings came out of the E&Y study including the fact that, in the World Bank’s global “Doing Business – 2010” report ranking of one hundred eighty three countries, Ethiopia ranked higher than three out of the four BRIC (Brazil, Russia, India and China) countries and only China, at number eighty nine, ranked higher than Ethiopia. When asked, Zemedeneh said, “this actually was a surprise to our analysts since they had all assumed that the BRIC countries would rank higher than Ethiopia because they have been attracting a lot of attention from global investors, but the fact of the matter is the World Bank ranking shows that doing business is actually better in Ethiopia. I would assume many global investors will now take note of this”.
The E&Y study also showed that there are potentially significant Infrastructure investment opportunities worth 160 to 250 billion dollars in Ethiopia in the next fifteen years. The study indicates that U.S. multi-nationals such as Caterpillar and John Deer, already well regarded in Ethiopia, could benefit from this opportunity.
In the aviation sector, where the U.S. is a global leader, the study indicated that the aircraft maker Boeing has been the sole supplier of jet aircrafts to Ethiopian Airlines for decades. E&Y says Ethiopian Airlines had a record profit of one hundred seventeen million dollars in 2009, more than South African Airways and all other African airlines combined. The airline has 35 Boeing jets and recently announced an order for five Boeing 777-200 LR. It’s also the launch customer for the Boeing 787 Dreamliner, and has ten of them on order, the first in the Middle East and Africa.
The E&Y report advises American investors especially in infrastructure, agro-industry, oil & gas and ICT to consider Ethiopia as one of the more attractive emerging market 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 continues by stating that American investors can benefit from the opportunities in Ethiopia if they come 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. Zemedeneh further elaborated on the report by saying “I believe the Chinese have realized this and that is why they are investing billions in Africa including Ethiopia”. He concluded his comments by saying “last year Africa-China trade reached one hundred eight billion dollars from only ten billion eight years earlier. Furthermore, Chinese banks now lend more money to Africa than the World Bank and that China had 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.”
Ethiopia with 81 million people accounts for 10% of the total African population and is the fifteenth most populous country in the world. It has a land mass greater than France and Spain combined and is five times bigger than the U.K.
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