Ethiopia Economic Forecast

In recent months, a prospective IMF deal has been in the economic spotlight in Ethiopia. After visiting the country in March and holding additional talks in April, in mid-May the Fund said that any program would require financial assurances from creditors. The government is reportedly seeking USD 2 billion in funding. Meanwhile, in May, the Central Bank announced that it would offer up to five banking licenses to foreign investors over the next five years. This bodes well for competitiveness in the financial sector and, thus, for the economy at large. In other news, in recent weeks, the government held peace talks with Oromo rebels amid a conflict in which hundreds have died, and thousands have been displaced. The meeting did not lead to a deal, but both parties agreed to continue the dialogue.

Inflation came in at 33.5% in April, down from March’s 34.2%. Price pressures are forecast to soften in the coming months due to lower commodity prices relative to 2022. That said, our panelists see inflation remaining elevated this year amid the government’s gradual elimination of subsidies.