Ethiopia needs structural economic changes and research based policy, expert says

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Abraham Tekeste, Newai Gebreab
(L) Abraham Tekeste, (PhD), Deputy Commissioner, of the National Planning Commission and Newai Gebreab, Chief Economic Advisor to the Prime Minister and Executive Director of the Ethiopian Development Research Institute (EDRI)

Unless there is  a structural change and diversification of the economy  accelerates, thereby producing adequate job opportunities, particularly for the growing population of youth, challenges in urban and rural areas will grow, stated Abraham Tekeste (PhD), Deputy Commissioner, of the National Planning Commission, during a workshop organized by the International Growth Center.

“This in turn dampens the high expectation of young people and becomes a source of frustration and unrest. Structural fragility of the economy puts a break on the sustainability of inclusive development and transition of the country to a middle and eventually high income economy,” Abraham said.

While Ethiopia has shown a remarkable economic recovery since the 70s and 80s and for the last decade has recorded double digit growth, becoming a hot spot for foreign direct investment, the country’s economic structure remains weak and vulnerable to natural and market related shocks.

“Last Ethiopian fiscal year was a resounding reminder about the significance of addressing the vulnerability of the economy to climate change and global economic shocks. These factors are expected to slow down economic growth and worsen the current account deficit,” Abraham pointed out.

While the country is currently implementing the second phase of the Growth and Transformation Plan (GTP) which will go on until 2020, the National Planning Commission is also drafting a longer term development plan that will go on through until 2030.

“These strategies emphasize the significance of private sector led structural transformation and industrialization. According to the Growth and Transformation Plan, transformation of agriculture in terms of productivity growth, commercialization and diversification remain critical,” Abraham said.

The strategy also recognizes the importance of harnessing the urbanization process to support industrialization and structural transformation of the economy. Another dimension of transformation concerns export development which will enable Ethiopia to improve competitiveness and generate foreign exchange to finance and drive rapid growth that is not constrained by the domestic market,  he argued.

While the country implements the vastly complex strategy, the availability of high quality studies and research plays an important role in making evidence based decisions. As it goes through a structural transformation, the country is further required to be adequately informed about its policy actions and interventions.

“Evidence based policy making is a significant step forward. It is only in very recent years the interaction between developing countries and donors has begun to move away from one size fits all suggestions, from proposals based on philosophical predilection to a more reasoned out conversation where by evidence becomes the basis of partnership,” said Newai Gebreab, Chief Economic Advisor to the Prime Minister and Executive Director of the Ethiopian Development Research Institute (EDRI), when speaking on the importance of high quality research.

Several research papers were presented at the IGC organized workshop. Some of the major issues studied included  employment and its challenges and the effectiveness of low cost housing in Ethiopia.