Ethiopia Expects Economy to Expand by 10.1% This Year

By Jason McLure

Feb. 4 (Bloomberg) -- Ethiopia’s economy is expected to grow 10.1 percent in the year to July 7, from 9.9 percent the previous year, a finance ministry official said.

“Our economy has been the fastest non-oil and non-mineral economy in sub-Saharan Africa in the last six years,” Getachew Adem, head of development planning and research at the Ministry of Finance and Economic Development, told reporters today. “The financial crisis has not affected us much, but there was impact indirectly on our manufacturing sector.”

The financial crisis and power outages did keep growth last year below the government’s 11.2 percent forecast. The economy should expand by at least 10 percent through 2015, Getachew said in Addis Ababa, the capital.

The International Monetary Fund projected economic growth of 7 percent this year, according to a September report from the Washington-based lender.

A 14 percent expansion of the service industry led growth last year, Getachew said. Agriculture increased 6.4 percent while industrial output grew 9.9 percent.

The government may lift lending caps on banks that have slowed credit to the private industry by December if the annual inflation rate can be held at about 6 percent, he said. The inflation rate climbed to 7.1 percent in December from 0.6 percent the month before, according to the Central Statistical Agency.

“Banks cannot extend credit as they wish, and that is biting, but there is always a compromise,” Getachew said. Controlling inflation “is the government’s overriding objective in the medium and short term.”

Foreign currency shortages continue to hurt manufacturers and importers, he said. The government has rebuilt reserves from about $800 million November 2008 to $1.9 billion today, he said.

To contact the reporter on this story: Jason McLure in Addis Ababa via Johannesburg on pmrichardson@bloomberg.net.