The Economost Intelligence Unit released its latest report. The following are highlights of its Ethiopia Outlook for 2009 – 2010:

The Economist’s Economic Intelligence Unit
Ethiopia 2009-10

Read the full report here.

• The Economist Intelligence Unit expects the ruling Ethiopian People’s Revolutionary Democratic Front (EPRDF) to remain firmly in power over the forecast period.

• Political tensions will begin rising during 2009 as all parties begin to regroup and plan for the next general election, due in May 2010.

• Relations with Eritrea and Ethiopia’s involvement in Somalia will continue to dominate the foreign policy agenda throughout the forecast period, and tensions in the region will remain high.

• Sustained growth in agriculture, horticulture and services will keep real GDP growth robust, at 7.5% in 2009 and 7% in 2010, supported by healthy inflows of donor aid and foreign direct investment.

• Inflation is estimated to average 41% in 2008, reflecting continued strong increases in food and oil prices. Monetary tightening and lower food and oil prices should bring the rate down to 15% in 2009 and 12% in 2010.

• The current-account deficit is forecast to widen to 6.9% of GDP in 2009 as the trade gap offsets gains in exports. In 2010 gains on the services and current transfers accounts should narrow the deficit slightly, to 6.7% of GDP.

Monthly review

• The EPRDF re-elected Meles Zenawi—the prime minister—as party leader in mid-September.

• Ethiopia’s invasion of Somalia in December 2007 in support of the Transitional Federal Government is proving ever more costly in terms of both money and lives.

• Ethiopia has moved up 12 places to 126th position (out of 180 countries) in the latest Corruption Perceptions Index from Transparency International, a Berlin-based non-governmental organisation.

• Ethiopia marked the completion of the first year of the US$3.6bn Road Sector Development Programme—phase III—in September.

• Construction of a new sugar refinery at Tendaho, along with expansion at existing refineries at Fincha and Wonji, by Indian-owned Overseas Infrastructure Alliance has been delayed after a legal challenge in India.

• The current-account deficit rose to US$342m in the first quarter of 2008, despite strong growth in exports and capital investments, as high oil prices drove stronger growth in imports.