IMF cuts government’s GDP forecast by half
(Saturday, 07 March 2009, Hayal Alemayehu,Reporter ) The International Monetary Fund’s (IMF) reviewed projection following the global financial turmoil slashed the Ethiopian government’s 11.2 percent GDP growth forecast for the year 2009 by nearly a half.
Sukhwinder Singh, IMF resident representative for Ethiopia, said on Wednesday that the Fund’s 2009 GDP growth forecast for Ethiopia stood at 6.5 percent, contrary to the government’s 11.2 percent projection.
“It would be very difficult for the economy to register an 11.2 percent GDP growth with the current global economic crises having a major negative impact on low-income countries”, Singh said while briefing journalists on the effects of the global financial crises on sub-Saharan Africa in general and on Ethiopia in particular.
“The government had its own way of projecting its GDP growth. Our [reviewed] GDP forecast [after the global financial crises took hold on world economies] for Ethiopia is [anyway] 6.5 percent.
Signgh said the country could even be proud if it attains a 6.5 percent GDP growth with the global economic crises slowing down investment in poor countries and bringing down their exports.
He indicated that the country’s exports could decline, with 85 percent of its exports going to developed countries suffering from the global financial crises coupled with a slow down in foreign investment.
“Ethiopia does seem to be less integrated to the world both trade and finance wise. This may be good in the short-term but it could be costly in the long-term,” the representative said while indicating the ways in which the country could be affected by the global economic crises.
With regard to the country’s fiscal position, the representative said that the economy is much weaker with the country’s current account deficit accounting for three percent of its GDP last year and its foreign currency position being one of the lowest with a one-month reserve currently. There are, however, indications that the country’s foreign currency reserve will improve at the end of the current fiscal year with some of the policy measures the government took and increasing aid in the protection for basic services.
