Insights Hub

Ethiopia overview

Standard Bank forecasts:

We retain our GDP growth forecast of 8.0% for FY2018/19, thereafter seeing growth slowing to 7.8% y/y in FY2019/20.

We expect the C/A deficit to narrow to 6.8% of GDP in 2019.

We see the USD/ETB trading at around 30.0 levels by the end of 2019.

GDP growth– economic rebalancing implies still slower growth 

We retain our GDP growth forecast of 8.0% for FY2018/19, thereafter seeing growth slowing to 7.8% y/y in FY2019/20. The rebalancing within this economy will likely see GDP growth moderating over the coming years, relative to the average of the past 5-y, as reforms will take time to stimulate economic activity and increase output. However, GDP growth in FY2018/19 could still be slightly higher than the previous year thanks to base effects.

Balance of payments – exports still weak

We still expect the C/A deficit to widen to 6.8% of GDP in 2019 and thereafter narrow to 6.5% by Dec 20. A faster than expected drop in imports of goods in 2018 resulted in a lower C/A deficit of 6.3% in FY2017/18, lower than our 7.1% estimate. Exports of goods remained broadly unchanged in 2018. However, despite both fuel and cereal imports growing by 31.5% y/y and 38.5% y/y/ respectively during this period.

Monetary policy- hawkish bias to persist

We continue to expect the MPC to maintain a tighter policy stance in 2019, although they could look to ease liquidity conditions in H2:20. we still see headline inflation remaining sticky around double digits for the most part of 2019. Thereafter, in 2020 we see headline inflation averaging 4.7% y/y, which is why we suspect the MPC could be tempted to ease its policy stance to boost the economy.

FX outlook – gradual weakness

We expect the USD/ETB to trade in a range between 29.5-30.0 by the end of 2019. Notably, the NBE never devalued the ETB by the customary 5.0% in 2018, perhaps due to the sharp devaluation that was already done towards the back end of 2017. The IMF continues to note with concern that the ETB remains overvalued on a real effective basis. Moreover, the fund surprisingly continues to promote the idea that a further devaluation could improve the competitiveness of exports. Pressure to devalue the ETB could arise again in 2020, if exports remain sluggish.



94.1 million

Nominal GDP

USD78.6 billion

Real GDP growth




  • Share
  • Email

Subscribe to our quarterly newsletter
giving you our latest insights