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Ethiopia has overtaken Kenya as the economic hub in East Africa, with its growth buoyed by payoffs from a heavy spending in infrastructure and its open door policy on investors, making it among the world’s fastest-growing economies in the past 10 years according to the latest data from the International Monetary Fund.
The IMF figures put Ethiopia’s GDP at $78 billion this year, up from $72 billion last year maintaining a $29 million lead over Kenya.
This now portends that Ethiopia occupies the envious position of the East African economic powerhouse, boasting of double digital growth with Kenya trailing at 6 percent. The public sector led development that eases bottlenecks to structural transformation has worked in favour of Ethiopia in the last five year to build a robust economy that even Kenya couldn’t match. Yet in 2000 Kenya’s GDP stood at $14.1 billion against Ethiopia’s $8.23 billion representing a 71.6 billion difference.
Although Kenya has also spent a fortune in infrastructure projects, the investment cannot match that of Ethiopia, whose completion and actualization has finally paid off.
Flagship projects that have catapulted Ethiopia to its current status include the ongoing $5 billion Grand Renaissance Dam, which can generate 6,0000 megawatts of electricity. Once completed it will earn the country $1 billion yearly in electricity sales and exports.
Ethiopia is also building a railway that links Addis Ababa to the port city of Djibouti which will ease movement of people and goods across the country. This railway is crucial because Ethiopia is landlocked and relies on the port to trade with the rest of Africa, Asia and Europe. The horn of Africa country also launched a light rail project, the first of its kind metro service in Sub-Saharan Africa.
Ethiopia also prides itself in its vast population, about 100 million, which creates a large internal market for consumer goods producers and manufacturers.
“Despite the buildup of vulnerabilities highlighted in earlier sections, the growth momentum in non-resource-intensive countries like Ethiopia is expected to remain robust,” read the report.
This growth is expected to hold for the medium term especially with Kenya still reeling from the impacts of the cap on banks’ interest rates which has discouraged borrowing and distorted markets, and with the upcoming elections which will take a toll on key sectors that accelerate growth.
“In Kenya, the decision to cap lending rates at 400 basis points above the policy rate has also distorted lending markets, leading commercial banks to cut back on private sector lending and instead invest in government debt,” the report further said.
Source: Africabusinesscommunities.com/ africadata
www.imf.org
