Ethiopia’s Growth Acceleration and How to Sustain It
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World Bank, Washington, DC
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Ethiopia has experienced a growth
acceleration over the past decade on the back of an economic
strategy emphasizing public infrastructure investment and
supported by heterodox macro-financial policies. To analyze
the country’s growth performance during 2000–13, the paper
employs a neoclassical cross-country System Generalized
Method of Moments regression model. The analysis finds that
accelerated growth was driven by public infrastructure
investment and restrained government consumption, and
supported by a conducive external environment. Macroeconomic
challenges arising from declining private credit, real
currency overvaluation, and relatively high inflation held
back some growth. The model accurately predicts Ethiopia’s
growth over the period of analysis and is robust to
country-specific parameter heterogeneity and alternative
infrastructure variables. Looking ahead, model simulations
under alternative policy scenarios are indicative that
growth may decelerate in the coming decade, making it
challenging for Ethiopia to attain its middle-income country
target by 2025. Although simulated growth rates do not vary
much by policy scenario, the paper discusses some of the
emerging risks associated with a continued reliance on the
current infrastructure financing model and potential future adjustments.
Palabras clave
ECONOMIC BOOM, FORECASTS, GROWTH RATES, MONETARY POLICY, GOVERNMENT EXPENDITURES, POLICY REFORMS, ECONOMIC GROWTH, NATIONAL ACCOUNTS, CAPITAL ACCUMULATION, LAGS, REAL INTEREST RATES, VALUATION, STRUCTURAL CHANGE, STABILIZATION POLICIES, INCOME, INTEREST, MACROECONOMIC MANAGEMENT, INVESTMENT RATE, MARGINAL COST, INTEREST RATE, REAL GDP, EXCHANGE, MACROECONOMIC POLICY, GDP PER CAPITA, TELEPHONE COVERAGE, RESOURCE ALLOCATION, LIQUIDITY, EXPORTS, DEVELOPING COUNTRIES, MARGINAL PRODUCT, POLITICAL ECONOMY, GROWTH MODEL, PUBLIC INFRASTRUCTURE, ECONOMIC POLICY, DEVALUATION, HIGH INFLATION, VARIABLES, TRADE OPENNESS, BENCHMARKS, INPUTS, DEVELOPMENT GOALS, INFLATION, TRENDS, ECONOMIC OUTLOOK, CENTRAL BANK LENDING, BANK LENDING, CENTRAL BANK, DEVELOPMENT, INDIVIDUAL POLICIES, STANDARD DEVIATION, INFLUENCE, EMPIRICAL RESULTS, TOTAL FACTOR PRODUCTIVITY, PER CAPITA INCOME, EXPORT GROWTH, TELECOMMUNICATIONS, LOW-INCOME COUNTRIES, INCOME INEQUALITY, ECONOMIC DOWNTURNS, RELATIVE IMPORTANCE, BASE YEAR, PRODUCTIVITY, ECONOMETRICS, INDUSTRIALIZATION, MONOPOLY, DEMOCRATIC INSTITUTIONS, DEBT, PER CAPITA GROWTH, INFLATION RATE, INCOME LEVELS, ECONOMIC REFORMS, TRADE POLICY, BASKET OF GOODS, NATURAL RESOURCES, AVERAGING, INTEREST RATE EFFECT, PUBLIC INVESTMENT, MACROECONOMIC STABILIZATION, EXTERNAL FACTORS, TAXES, INFRASTRUCTURE INVESTMENT, LEADING INDICATORS, PRODUCTIVITY GROWTH, CONSUMPTION, EMPIRICAL GROWTH MODEL, HUMAN CAPITAL, VALUE ADDED, OPPORTUNITY COST, CAPITAL, WAGES, POPULATION SHARE, INTERNATIONAL TRADE, OPEN MARKET OPERATIONS, ECONOMETRIC ANALYSIS, MACROECONOMIC OUTCOMES, FINANCIAL POLICIES, EXTERNAL CONDITIONS, VALUE, BENCHMARKING, COMPETITIVENESS, CREDIT, MACROECONOMICS, STATE-OWNED ENTERPRISES, NATIONAL INCOME, FACTOR PRICES, AGRICULTURE, GROWTH MODELS, MEASUREMENT, ERROR TERM, REAL EXCHANGE RATE, BENCHMARK, ECONOMIC THEORY, GLOBAL CONDITIONS, POLICY PERSPECTIVE, ECONOMICS, FIXED EFFECTS, TRADE, GDP, GOODS, THEORY, FINANCIAL DEVELOPMENT, GROWTH RATE, INVESTMENT, GROWTH POLICY, GROWTH REGRESSIONS, TOTAL FACTOR PRODUCTIVITY GROWTH, CREDIT RATIONING, GROWTH PERFORMANCE, POVERTY, GROWTH REGRESSION, COUNTRY CHARACTERISTICS, ECONOMIC TRENDS, GINI COEFFICIENT, OVERVALUATION, CAPITAL ACCOUNTS, POLICY RESEARCH, GROWTH POLICIES, HIGH GROWTH, MACROECONOMIC POLICIES, EXCHANGE RATE, PUBLIC SPENDING, OUTCOMES, CONSUMPTION INCREASES, DEVELOPMENT INDICATORS, POSITIVE EFFECTS, MIDDLE INCOME COUNTRIES, PRICES, LONG RUN, GROWTH PROJECTIONS, DEVELOPMENT POLICY, HUMAN DEVELOPMENT, FUTURE RESEARCH, GROWTH