Ethiopia, a growing economy with a population of over 100 million located in the conflict-affected Horn of Africa region, is experiencing an unprecedented political and economic change.
... See More + Sustaining growth requires a shift in economic management towards greater flexibility and openness. Over the past decade the Government has sustained high levels of public investment which has driven strong growth in agriculture and services. This has been financed by tapping external financing, keeping government consumption low and deploying heterodox mechanisms including financial repression. Despite substantial investments in infrastructure to support future growth, Ethiopia’s recent economic success has occurred in a context of modest structural economic transformation and private-sector development. Growing macroeconomic vulnerability and reducing fiscal space threaten the long-term sustainability of Ethiopia’s growth model. Recognizing the limitations of thisapproach, the new leadership has announced decisions to expand the role of the private sector, reform State Owned Enterprises (SOE) and enhance fiscal sustainability. Recognizing the limitations of the economic model, the new Government has initiated reforms to expand the role of the private sector, reform SOEs, enhance fiscal sustainability and improve transparency and accountability supported by the Growth and Competitiveness DPF. The Growth and Competitiveness DPF has contributed to Ethiopia’s reform efforts both financially and technically. First, it supported key reforms standing to transform Ethiopian economy. Second, it provided resources to support the orderly shift in the economic model. Third, it allows the World Bank to remain actively engaged in the design and formulation of the next steps in the reform implementation process. This Second Tranche Release Full Compliance document lists all conditions that the government met.
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The economic growth outlook remains positive. The country’s economic growth is projected to reach6.4 percent in 2019 and slightly edge up to 6.5 percent in 2020 and 2021, as inflation is expected to decline, and spending due to the upcoming midterm elections is likely to boost private consumption growth.
... See More + Public investment growth is expected to be tempered in the first half of 2019 due to delays in approving the public budget, and is projected to recover in the second half of 2019. Export growth will likely remain weak, as global economic and trade growth are projected todecelerate in the near term, due to persisting trade tensions. The further strengthening of the U.S. dollar, possible increases in U.S. interest rates, and geopolitical uncertainties continue to be the main external downside risks to the economic outlook. Key short-term priorities to sustain the Philippines’ rapid economic growth include prudently managing fiscal and current account balances and adopting policies to preserve consumer and business confidence. As the government continues to expand public investment to address the country’s infrastructure gap, it is crucial toraise additional revenue to preserve fiscal sustainability, particularly as financing conditions may tighten globally. In addition, the trade deficit is estimated to remain wide, as export growth will likely stay weak while import growth is expected to accelerate. Given that global financing conditions may tighten, the government needs to closely monitor the performance of remittances, service exports, and foreign direct investment to prevent an external funding gap. In the long term, in addition to sustained efforts to build human capital, initiatives to address structural constraints are needed to accelerate inclusive growth. Improved market competition, accelerated investment, and improved labor market conditions to boost both productivity and economic growth will be essential. This calls for urgent actions on a couple of policy initiatives including revisiting foreign participation in the domestic market, implementing reforms to improve doing business, and reducing non-tariff barriers to boost trade. For instance, passing the Public SectorAct Amendment bill will entice foreign investments and bring competition to the transportation andtelecommunications sectors that are key backbone services whose efficiency directly affects overall productivity.
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