BY STAFF REPORTER
Ethiopia runs consistent trade deficits due to small production of exportable goods and logistic difficulties. Main exports are gold, coffee, cut flowers, live animals and oilseeds. The country is also a net importer of fuel, foodstuffs and textile apparel, according to Trading Economics.
The business climate is undergoing significant changes with broad policy reforms implemented under the leadership of Prime Minister Abiy Ahmed. Government plans to privatize leading state-owned enterprises signal a significant shift toward market based reforms and a new flexibility with respect to economic policymaking.
The acute foreign exchange shortage remains the leading challenge for U.S. suppliers, for which there is no quick fix. In addition, the COVID-19 pandemic is also having its own impact on the country’s economic activities including import-export trade.
The agriculture sector has historically been the engine of the Ethiopian economy, but it has recently given way to the expansion of the service sector. The National Bank of Ethiopia (NBE) notes agriculture, industry and services have contributed 33.3 percent, 28.1percent and 39.8 percent to GDP respectively during the 2018/19 Ethiopian fiscal year, as opposed to 36.3percent, 27 percent and 39.2 percent to GDP in 2017/2018.
The agriculture sector’s share of GDP shrank by more than 25 percent between 2005 and 2019, while the service sector’s share grew by 28 percent during the same period. Industry and the manufacturing sectors’ share gradually rose, expanding their share of GDP over the past ten years.
Ethiopia faces a growing trade deficit with total imports increasing on average by 12.5 percent per year during the last decade. As to International Trade Administration, the rise in the trade deficit has been driven by rising imports, which ballooned from 3.6 billion USD in 2010 to 15 billion USD in 2018/2019, the peak of Ethiopia’s trade deficit.
Concerned by the widening trade balance, the government works to suppress imports and has undertaken other macroeconomic measures in recent years, which has resulted in a narrowing of the trade deficit to 12.44 billion USD in 2018/19. Ethiopia’s total merchandise exports were 2.67 billion USD in 2018/2019 (a 6 percent decline from 2017/2018), while imports for the same period were 15.11 billion USD, a one percent decrease from the previous year.
According to the latest National Bank of Ethiopia Quarterly Bulletin, during the second quarter of 2019/20 merchandise trade deficit narrowed to USD 3.2 billion from USD 3.9 billion a year ago as merchandize export receipts improved and merchandize import bills declined.
During the first quarter, export earnings from coffee grew by 2.5 percent over previous year same quarter due to 19.4 percent increase in export volume despite 14.2 percent decline in international price. However, the share of coffee in total export earnings slightly decreased to 21.8 percent from 22.3 percent a year ago.
Albeit the impact of COVID-19 on the sector latter on, export revenue from fruit and vegetables stood at USD 37.1 million, showing 152.4 percent annual growth owing to 2.4 percent increase in export volume and 146.5 percent surge in international price. Thus, the share of fruits and vegetables in total merchandise export rose to 6.1 percent from 2.5 percent a year earlier.
Receipts from textile and textile products increased 38.6 percent on account of 20.6 percent growth in export volume and 14.9 percent rise in international price. As a result, the share of textile and textile product in total merchandise export earnings went up to 7.9 percent from 5.9 percent same period a year earlier.
Likewise, export revenue from flower surged 108.3 percent over the same quarter of last year due to 100.6 percent growth in export volume and 3.8 percent increase in international price. Thus, the share of flower in total export earnings doubled to 18.0 percent from 9.0 percent a year earlier.
Likewise, export receipts from meat and meat products decreased to USD 16.9 million showing 20.4 percent annual decline as export volume fell 29.1 percent while international price increased 12.4 percent.
As a result, the share of meat and meat products in total export earnings stood at 2.8 percent. But the COVID-19 pandemic impact is believed to have strong impact on latter on performances.
Total merchandise import stood at USD 3.8 billion during 2019/20 depicting 13.9 percent decrease over the previous year same quarter due to lower import values of fuel, capital goods,
On the other hand, import bill of capital goods fell 28.2 percent due to 88.4 percent decline in payments for transport capital goods despite 33 percent increase for industrial capital goods and 123.3 percent surge for agricultural capital goods. Hence, the share of capital goods in total goods import bill stood at 34.3 percent compared with 41.1 percent a year earlier.
Likewise, fuel import value decreased by 5.1 percent while its share in total import payments rose 16.7 percent from 15.2 percent previous year same period.
Payments for consumer goods went down by 11.6 percent over previous year same quarter due to tower import payments for durable and non-durable goods. Nevertheless, the share of consumer goods in total imports slightly increased to 27.5 percent from 26.8 percent a year ago.
Meanwhile, total franco-valuta import decreased by 41.1 percent and stood at USD 1.1 billion accounting for 28.2 percent of the total imports.
The major destinations for Ethiopian exports were Asia, Europe and Africa. Asia accounted for 34.8 percent of the total exports, with Saudi Arabia being the main destination having 23 percent share followed by United Arab Emirates (12.9 percent), Israel (11.2 percent), China (9.8 percent), Japan (9.5 percent), India (7.7 percent), South Korea (4.0 percent), Singapore (3.1 percent), Yemen (3.0 percent), Indonesia (2.6 percent) and Taiwan (1.1 percent). All these countries accounted for 87.9 percent of Ethiopia’s total export to Asia.
Europe constituted 29.7 percent of Ethiopia’s total export revenue with the Netherlands taking 40.3 percent share followed by Germany (18.6 percent), Belgium (6.9 percent), Italy (5.3 percent), France (5.3 percent), Turkey (4.5 percent), Switzerland (4.3 percent), United Kingdom (4.0 percent), Spain (2.1 percent), Norway (1.8 percent) and Russia (1.2 percent). These European countries together had 94.4 percent share in Ethiopia’s total exports to Europe.
About 25.2 percent of Ethiopia’s export earnings originated from Africa mainly from Somalia (27.9 percent), Djibouti (19.0 percent), Sudan (11.7 percent), Kenya (3.1 percent) and South Africa (0.8 percent) which altogether accounted for 62.5 percent of the total exports to Africa.
America had 9.8 percent share in Ethiopia’s total export earnings of which 70.8 percent was from exports to the United States and 6.8 percent to Canada. Both countries accounted for 77.6 percent of Ethiopia’s total exports to America.
During the second quarter of 2019/20, Asia accounted for 63.4 percent of total Ethiopia’s import bills. The major import payments include China (44.3 percent), Kuwait (17.2 percent), India (14.1 percent), Saudi Arabia (7.5 percent), UAE (4.1 percent), Indonesia (2.5 percent), Japan (1.9 percent), Malaysia (1.9 percent), South Korea (1.8 percent), Taiwan (1.1 percent) and Thailand (1.1percent) whose combined share was 97.4 percent.
Ethiopia’s imports from Europe constituted 22.8 percent of total imports. The major countries constituted of Turkey (20.2 percent), United Kingdom (15.3 percent), Ukraine (12.2 percent), Germany (11.0 percent), Belgium (9.2 percent), Italy (7.3 percent), France (6.5 percent), Spain (3.3percent), the Netherlands (2.6 percent), Denmark (1.5 percent), Ireland (1.5 percent), Poland (1.5 percent) and Rumania (1.4 percent) which jointly accounted for 93.4 percent of Ethiopia’s total imports from Europe.
Imports from America comprised 9.5 percent of the total import bill of which the United States took 87.2 percent share followed by Canada (10.4) and Brazil (1.1 percent).
Africa accounted for about 4.3 percent of Ethiopia’s total merchandise import bill. With the major countries of origin being South Africa (33.7 percent), Egypt (31.7 percent), Kenya (25.4 percent), Sudan (3.6 percent) and Djibouti (3.3 percent) which altogether accounted 97.6 percent of the total import bill from the continent.
The Ethiopian Herald January 26/2021
