ADDIS ABABA (Reuters) - Ethiopia expects double-digit economic growth for a decade, although power shortages have cost the nation more than 1 percent of GDP this year, Prime Minister Meles Zenawi told Reuters on Wednesday.
Meles said in an interview that agriculture, which accounts for roughly half of gross domestic product, would continue to drive the economy of sub-Saharan Africa’s second most populous nation.
“Our hope and expectation is that we can maintain double digit growth for a decade,” he said, endorsing forecast of 10 percent growth this year which would make Ethiopia one of Africa’s best-performing economies.
This prediction is more optimistic than the International Monetary Fund’s, which puts growth at a more modest 6.5 percent.
Ethiopia is attracting interest from foreign investors in agriculture, hydro power, and oil and gas exploration. It has recorded growth of more than 10 percent for the last five years.
But the country, which remains one of the world’s poorest, has suffered high inflation, power cuts, and a shortage of foreign currency this year.
Meles said farming was essential for keeping up the economic momentum. “Agriculture is not susceptible to the current global crisis, so if we can get agriculture moving, as has been the case for the past six or seven years, then we can sustain the growth,” he said.
“Unlike the global picture, the problem here in Ethiopia is not excess supply. Our problems emanate from high demand and inadequate supply, so our situation is different.”
Construction, services and manufacturing were also key drivers of the economy, Meles said. “There’s a lot of space for additional growth in manufacturing,” he said.
The former rebel said foreign reserves, which had fallen to $850 million earlier this year, had recovered to around $1.55 billion after the government “squeezed the system dry”.
“We were replenishing our reserves and were not making as much foreign exchange available to the market,” he said.
The power shortage, which means the lights go out for Ethiopians every second day on a rotating system, should be resolved by August, he said, when two new dams will be ready.
“The cuts have been very destructive for manufacturing but, more importantly, for people’s lives,” he said. “And we estimate at least 1.1 percent of GDP has been slashed as a result.”
Meles said he hoped negotiations for Ethiopia to enter the World Trade Organisation (WTO), which hinge on calls for Addis Ababa to open up its banking and telecommunications sectors, would be finished within three years.
“The negotiations are edging forward,” Meles said. “They move at glacial speed even at the best of times.”
Meles said Ethiopia — one of Africa’s biggest potential markets with a population of about 80 million — would resist pressure from the rich world to fast-track liberalisation of its financial and telecommunications sectors.
“In the end, of course, there has to be liberalisation,” he said. “But our hope is that this could be postponed for a significant time.”
Inflation, which has been dogging Ethiopia’s economy and stood at 14.2 percent annually in May, should be down to single figures in one to two months, Meles said.