The Water Tower of Africa

A fast-moving economy
Since 2005, the Ethiopian GDP has grown annually at the rate of 10%. According to the World Bank, 2016 will close with a further increase of 10.5%. 56% of the total growth of the wealth produced in the Country depends on public investments.
 

The economic rebirth of Ethiopia began at least ten years ago, when the Country began developing at the rate of 10% per year, and it is still continuing to grow today. In 2015, the GDP recorded a rise of 9.5%, whereas the World Bank has indicated that 2016 will close with a 10.5% increase in wealth produced. As a result, the International Monetary Fund has entered the Country in the ranking of the five fastest-growing economies in the world. Additionally, the Country was also one of the most efficient nations in terms of meeting the objectives established by the UN in the Millennium Development Goals, indicators that gauge the social development of Countries.

To achieve these results, the Ethiopian government has implemented innovative development policies, focusing above all on the flow of both public and private investments.

According to the World Bank, public investments account for 56% of the total increase in the national GDP, whereas private investments account for 24%. Indeed, 80% of the new wealth produced in Ethiopia is substantially derived from investments.

Developing infrastructure, opening new factories and developing the real estate market are the priority activities of the expansion policy designed to impact the entire Ethiopian economy, which has made asignificant contribution to the social development of the Country. Indeed, according to the United Nations, in the period from 1995 to 2011, Ethiopia halved the number of people living below the poverty line, more than tripled the percentage of children enrolled in primary school, reduced infant mortality by two thirds and halved the incidence of malaria in the Country, only to mention the main indicators.

This is a successful formula which has been replicated inside the market, focusing on the industrial sectors where the economy is stronger (textiles, leather, food farming, chemical products and pharmaceuticals) and the results have been quick in arriving. The World Bank certifies that in 2014 the Country attracted over 1.2 billion dollars in foreign direct investments and this has led Unctad to add it to the list of the top five landlocked nations in the world with the highest foreign investment flows.

Most of the foreign capital has been directed to the manufacturing sector, which today accounts for 70% of the total FDIs, confirming the success of the policies designed to develop the industrial parks.

But the transition process is still a long one because – as certified in 2014 by the World Bank – industry is worth 14.3% of the gross domestic product and within that, the manufacturing segment stops at 4.1%, despite the fact that in the last decade it has continued to grow at an average rate of 10.9%.

 

11 consecutive
years

of GDP growth

1/3
of GDP

invested in infrastructure

Geography
of the country

ideal to invest in hydroelectric systems
 
 
Energy for development
Ethiopia is investing 12 billion euro in energy production with the objective of becoming a regional benchmark, for both the production of energy and the sale of the same to the neighbouring countries.
 

This economic growth, together with the future prospects for development, is closely linked to an ambitious energy policy which has now been sustained for many years.

Indeed, to date, approximately 85% of the energy generated comes from hydroelectric systems and their weight, in the internal market and in relations with foreign partners, is destined to increase in the coming years. Indeed, Ethiopia is investing resources equal to a third of the national GDP in the production of hydroelectric energy, for a total of 12 billion euro. The objective of this hefty economic commitment is to succeed in generating 40,000 MW of energy by 2035, by exploiting the large water resources that span the Country.

The first and second steps of the Growth and Transformation Plan, which together cover the decade from 2010-2020, both focus equally as hard on the use of natural resources and aim to transform Ethiopia into a hub of renewable energy for the entire eastern region of the African continent.