ADDIS ABABA -The International Monetary Fund (IMF) projects Ethiopia’s economy to grow by 6.6% in the 2024/25 fiscal year, driven by a stronger policy framework, improving agricultural conditions, and easing import shortages.
The IMF anticipates growth accelerating to 7.5–8% over the medium term due to increased competitiveness and efficiency from exchange rate unification.
Inflation is forecast to decrease from 26.6% in 2023/24 to 20.7% in 2024/25. Headline inflation has already fallen to 17% in November, down from 18-19% in September and October, with both food and non-food inflation declining. The impact of exchange rate reform on inflation has been contained so far, aided by gradual adjustments to administered prices and price stabilization measure, according to the financial agency.
It has predicted that the shift to a market-clearing exchange rate and international financial support are expected to alleviate foreign exchange shortages and rebuild international reserves. Goods exports are projected to rise from 1.8% to 3.5% of GDP between 2023/24 and 2024/25. Early data suggests a positive response to exchange rate reform, with Q1 2024/25 goods exports up 81% year-on-year, fueled by significant increases in gold and coffee exports.
Goods and services exports are expected to nearly double to 9.6% of GDP in 2024/25 and remain around 10% over the medium term, bolstered by Ethiopian Airlines’ strong prospects and the positive effects of exchange rate unification, including export diversification, it said.
The IMF also mentioned that private transfers (remittances and NGO transfers) are predicted to recover to around 5% of GDP, driven by exchange rate reform and the removal of current account restrictions. Remittances in Q1 2024/25 increased by 26% year-on-year. Foreign direct investment (FDI) is also expected to recover as exchange rate reforms take hold.
The IMF projects average real GDP growth of 7.3% between 2025/26 and 2033/34, reflecting demographic factors and expected productivity gains from reforms and economic transformation. This long-term projection assumes continued investment, given that previous projections already included a substantial increase in exports, the agency indicated.
BY STAFF REPORTER
THE ETHIOPIAN HERALD TUESDAY 4 FEBRUARY
