By Birhanu Fikade ADDIS ABABA Ethiopia
(Xinhua) -- Kenyan media outlets have
it well covered recently that Ethiopia is about to overtake
Kenya and become the leading economy in East Africa.
decade-long double-digit growth catalyzed by enormous government
spending on infrastructure, the size of the Ethiopian economy,
in terms of Gross Domestic Product (GDP) measurements, will
reach 69.2 billion U.S. dollars, according to projections the
International Monetary Fund (IMF) made for 2016. In 2015, its
GDP stood at 61.6 billion dollars.
Kenya’s GDP, on the
other hand, is expected to rise to 69.1 billion U.S. dollars in
2016, up from 63.4 billion dollars in 2015.
If the projections
turn out to be true, Ethiopia, hailed by pundits as an “African
lion”, will surpass Kenya. Though the possible win would be by a
small margin, Kenyans have echoed that Ethiopia is surely
becoming a new superpower in the region.
It is not hard to
understand why the possibility of Ethiopia coming at the
forefront has caused a stir among Kenyans.
Back in 2000, Kenya
had a 70 percent lead over Ethiopia. Kenya’s GDP then stood at
14 billion U.S. dollars while Ethiopia’s output was somewhere
around 8 billion dollars.
vigorous economic progress the government of Ethiopia has been
able to spin over the years, however, the country has managed to
catch up with Kenya and close the gap.
contributing factor behind Ethiopia’s quick ascension both the
IMF and the African Development Bank (AfDB) suggest is the
robust foreign direct investment (FDI), complementary to the
government’s huge investment.
According to the
Ethiopian Investment Commission, China leads the foreign
investment pack followed by Turkey and others.
David Shinn, former
U.S. Ambassador to Ethiopia, who actively follows events about
the relationship of China and Ethiopia, wrote on his blog that
in 2014 China’s investment in Ethiopia reached a cumulative one
billion U.S. dollars.
The diplomat went on
to point out that the trade and investment relations the two
countries have established over the course of the years
registered a booming growth.
For instance, Shinn
said “in 2000, China-Ethiopia trade was only 88 million U.S.
dollars. Since 2006, China has been Ethiopia’s largest trading
partner. Trade exceeded 2 billion U.S. dollars in 2013, although
the trade balance heavily favours China. One of China’s six
special economic zones in Africa has been established in
The diplomat also
noted that Chinese companies are building most of the roads in
Ethiopia. For example, the first phase of the Ethio-Djibouti
railway project, the telecommunications infrastructure, and the
light rail system in Addis Ababa. By 2014, the cumulative value
of Chinese contracted projects exceeded 22 billion U.S. dollars,
Though steady FDI
inflows have enabled Ethiopian economy to develop in a
progressive manner, there are doubts over whether the country
can sustain growth for long, what with the country’s political,
social and climate challenges.
The buildup of the
political discontent has led to clashes and deaths. Despite a
six-month state of emergency announced last October, worries
over whether the government can properly address anger over land
and other rights still linger.
The incidents have
affected foreign businesses as many companies were looted and
set alight. The country’s FDI is expected to suffer a blow if
the situation drags on.
In addition to the
political frictions, the ongoing droughts and harsh climate
conditions have significantly burdened the economy, forcing the
government to shift considerable resources from economic
activities to emergency aids.
Back in 2015 to
2016, some 10 million people in Ethiopia, 10 percent of the
population, was in need of emergency food aid. The country was
forced to import 1.6 million tonnes of wheat and lifesaving
This year again,
some five million people have fallen short of food and require
950 million U.S. dollars emergency food aid.
The government of
Ethiopia has been looking for donors and calling the
international community for assistance, which, in many instances
of the drought season, ended up short of expectations.
Also, the country
has to do more in reducing the prevalence of poverty in absolute
According to the
World Bank, some 22 million people in Ethiopia are believed to
be currently living under absolute poverty level.
challenges, the Ethiopian economy remains buoyant and growth
projections of the World Bank and the IMF indicate more positive
outcomes for the years to come.
agree that Ethiopia will maintain fast economic growth, with a
projected annual rate at seven to nine percent.
Though Ethiopia may
grow faster, it is not the richer of the two, as its per capita
GDP remains way below that of Kenya.
The current GDP per
capita stands at 686 U.S. dollars, with a possibility of
reaching 759 dollars this year, whereas Kenya’s GDP per capita
hangs around 1,434 dollars and is expected to increase to 1,500
dollars by the end of 2017.
One of the reasons
is the growing demographic pressure Ethiopia has to live with.
Ethiopia, the second
most populous nation on the African continent, has an estimated
population of 100 million, doubling that of Kenya.
population, however, is considered a blessing in disguise. Many
investors see huge consumer base and market potential, which can
shore up Ethiopia’s future growth.