Capital Ethiopia Newspaper

UN predicts Ethiopia will become the third fastest growing economy in 2012

The United Nations Development, Economic and Social Affairs (UN/DESA) predicted in a report released on Tuesday January 17 that Ethiopia will record the third fastest Economic growth in the African continent with 8.1 percent in 2012 only to be surpassed by the oil producing north African country of Libya and the southern African country of Mozambique. Those two countries are expected to have 11.5 and 8.5 percent growth respectively.
The report which surveyed the economies of 53 African countries didn’t include the newly independent republic of South Sudan that split from Northern Sudan last year and became a United Nations member state on July 14, 2011, due to lack of statistics.            
The report released under the theme: the “World Economic Situation and Prospects (WESP), 2012,” sees a continental economic growth forecast of five percent in 2012, up from 2011 overall growth of 2.7 percent.  It predicts this will occur because of a pronounced recovery and a return to the solid growth trend that emerged after the peak of the 2008 global economic crisis.
It also says the important driving forces for this trend will be relatively strong commodity prices, solid external capital inflows and continued expansion of demand and investment from Asia. However it concluded that countries across the continent will continue to have widely divergent growth outcomes because of military conflicts, lack of infrastructure, corruption and severe drought.
Although the report acknowledges the disastrous drought in East Africa will lead to a strong jump in food prices, the baseline sees more normal harvest patterns in 2012, resulting in reduced inflationary pressure.
It said growth in Ethiopia will reflect continued infrastructure development, especially in the energy sector, which will outshine the negative impact of drought conditions on agricultural output in some areas.
Libya which is expected to have the continent’s strongest growth in 2012 had its economy contract by 25 percent in 2011 in the wake of the regime change and violent revolution that accompanied it with a rebound to come primarily from reconstruction projects.
The continent’s largest economy and powerhouse South Africa is expected to have a measly growth rate of 3.5 percent in the year, although the inflation rate of the country which is expected to stand at 7.5 percent will be offset by spare capacity in some sectors in opposition to inflationary pressures to come from rising wages and electricity rates.
The report despite its relatively rosy picture for the economic growth of the continent predicts that unemployment and poverty will remain major problems caused by the underlying factors of lack of diversification, particularly into activities generating higher value added, a shortage of skilled workers and low productivity.
It also includes other external and internal  risks that may pose a challenge to Africa’s prospective growth like the current debt crisis in Europe and the United States which could push to a global economic stagnation as well as fall in flows of official development assistance, foreign direct investment and remittances negatively affecting Africa’s development financing.
Other external factors such as a fall in demands for commodities and their prices, fall in tourism receipts as well as the possibility of adverse weather conditions may also pose another significant downside risk, given the large role of agriculture across the continent.
On  the global scale it expects the emerging BRIC countries to have robust growth with Brazil expected to grow by real growth rate of 2.7 percent, Russia to grow by 3.9 percent powered by heavy demands for its oil and gas, India between 7.7 percent and 7.9 percent and China topping the league at almost nine percent.
Developed economies which are still grappling with the global economic crisis are expected to have anemic growth; in the case of the European Union at a baseline scenario of 0.7 percent and in case of the United States a growth of 1.3 percent.