Economists fear looming recession, calls for NBE restructure

During a recent panel discussion organized by the Addis Ababa Chamber of Commerce and Sectoral Association (AACCSA) at Hilton Hotel economic experts said unless significant reform takes place, including restructuring the National Bank of Ethiopia (NBE), Ethiopia’s economic growth and progress will be hindered and a recession may occur.
Alemayehu Geda (Prof), Kebour Ghenna, Eyob Tesfaye (PhD), and Seid Nuru (PhD) expressed concerns about the country’s economic situation and the process being implemented to privatize state owned enterprises. Meanwhile, economists, Alemayehu and Seid questioned the validity of economic statistics the government has used to claim Ethiopia’s economy has been consistently growing by double digits.
During their presentation the two economists argued that there is little empirical evidence to suggest the country did in fact register double digit economic growth. For example the government claims that poverty has declined, but they pointed to data indicating that 60% to 70% of the Ethiopian population is currently living below the poverty line. This differs from the government’s data which says only 22 percent of the population lived below the poverty line in 2016.
The panelists expressed fears that growth would stagnate followed by a recession if reforms did not take place soon.
“First a common consensus [about economic policy] between the government and public has to be reached,” Seid Nuru (PhD), from the Ethiopian Economists Association, said.
Eyob Tesfaye (PhD), a former senior economic official and expert in international organization, said the (NBE) should be reformed.
“Policies have to be changed and the finance sector needs comprehensive restructuring,” he added.
He added that a person with experience in commercial banking must be hired at the central bank (NBE). “The duty of the central bank is different from business,” he argued.
Others who spoke at the event said the developmental economy has not done enough to boost exports, which have declined to 4.4 percent of the GDP from 5.5 percent in the past.
The developmental economy has been exclusive, unequal and featured unemployment.
Another concern, in addition to declining exports is a widening balance of payment gap; (the overall record of all economic transactions of a country compared with the rest of the world).
Unemployment also remains high in the country. The government estimates a rate of 25 percent but Alehayemu says that figure is much higher especially when underemployment is taken into account.
“No country has grown without the private sector playing an active role,” Eyob said. He went on to say that we need to work together to create a private sector that can change the country.
Kebour countered, however that the government needs to play a significant role in transforming the economy. He said youth need to come together and sacrifice to build the state as occurred in China.  Privatization of public enterprises is not advantageous for the country, he argued.
Eyob recommended that the government float shares internationally, while at the same time having the public be the complete owners of the enterprise. This has been done successfully in other countries with large companies.
The panel also wants a stronger focus on professionalism in all sectors. This would greatly improve economic performance, they said.
Finally they were unhappy about the recent 15 percent devaluation of the birr. The government did this partially to improve export earnings but they argued that without a surplus and competitive output there is no positive effect of the devaluation other than increasing the price of import items, which contributes to inflation.