Ethiopia emerging as East Africa’s new top economy
Published on 10/10/2016
Buoyed by massive government spending on construction and infrastructure, Ethiopia is set to become Eastern Africa’s top economy. The Horn of Africa nation has been one of the world’s fastest growing economies for the past decade.
Ethiopia’s GDP is predicted by the International Monetary Fund (IMF) to reach $69.21 billion by the end of 2016. 2015 saw Ethiopia enjoy a gross domestic product of $61.62 billion, showing the breakneck pace at which the country is developing economically.
If the IMF’s latest round of statistical analysis is accurate, then Ethiopia would edge out its regional rival Kenya’s output to become the Horn of Africa’s best performing economy. The IMF predicts Kenya’s GDP will hit $61.17 billion in 2016.
Ethiopia’s stellar economic growth can be seen with some easy comparisons. Kenya’s GDP in 2000, at $14.1 billion, was 71.6% higher than Ethiopia’s $8.23 billion. By mirroring the Chinese growth model by investing heavily in building work, Ethiopia’s government has closed this gap with five years of intense growth.
“Ethiopia has experienced double-digit economic growth, averaging 10.8% since 2005, which has mainly been underpinned by public-sector-led development,” the African Development Bank, the OECD Development Centre and the United Nations Development Programme said in the latest African Economic Outlook report.
In the Medium term, Ethiopia is expected to maintain its position as the region’s economic leade, which will only improve its already enticing standing as a destination for international investment.
Ethiopia’s investment as a percentage of GDP has heftily increased since 2000, rising sharply from 20.2% in 2000 to reach new heights of 39.2% in 2015. Investment-as-GDP is expected by the IMF to continue growing throughout the next year.
Construction: powering Ethiopia’s economic engine
Over the past decade, the Ethiopian government has been undertaking massive investment programmes under the guise of its Growth and Transformation Plans. Essentially, these entail huge levels of government spending on infrastructure and construction projects.
The shining jewel in Ethiopia’s construction crown is the Grand Renaissance Dam (GERD). This $4.8 billion prestige project is close to completion and will provide the country with 6,000 megawatts of hydroelectric power – enough to earn the nation $1 billion through energy exports annually.
Elsewhere, the landlocked state has improved its access to the sea with the opening of the electrified Ethiopia-Djibouti railway. The 752.7 kilometre track, connecting the Ethiopian capital Addis Ababa to the Port of Djibouti, cost $4 billion and enjoyed its first run in October 2016.
The two above projects offer a glimpse into how international investment, technology and expertise is in hot demand in Ethiopia. Italian contractor Salini Impreglio is responsible for the GERD’s construction, while the Ethiopia-Djibouti railway was a joint project with the China Railway Group and China Civil Engineering Construction Corporation.
On top of this, the government has been investing heavily in affordable housing across the country with a particular focus on Addis Ababa. 38,790 new apartment units have been built throughout the city since 2015 and a further 80,000 are planned for construction across Ethiopia before 2020.
The African Economic Outlook report stated: “Public investments are expected to continue driving growth in the short and medium term with huge investments in infrastructure and the development of industrial parks, prioritised to ease bottlenecks to structural transformation, which will still have to take shape with industry playing a significant role in the economy.”
To learn more about how construction is building a stronger foundation for Ethiopia’s economic prospects, download the Market Insights report “Ethiopia’s Construction Industry: Transforming a Nation”.
This free report takes an in-depth look at Ethiopia’s building and interiors sector, the opportunities for foreign companies in the country and how building work will prove to be a vital part of Ethiopia’s ongoing development.