Ethiopia: The contested economic issues of Meles’s report

Ethiopian Opposition
Ethiopian Opposition Confront PM in Parliament

By Asrat Seyoum & Dawit Taye

Following Prime Minister Meles Zenawi’s nine-month performance report to the House of Peoples’ Representatives on Tuesday, the issue of economic growth and associated macroeconomic challenges like the inflation rate remained on the center of the national agenda for rest of the week. Though the report dealt with range of national issues, specifically issued connected to the election, the highlight of the document was the performance of the Ethiopian economy during the nine months the report covers.

If one were to summarize the content of Mele’s report, three most critical issues would come to the fore. These are export trade, the Gross Domestic Product (GDP) growth, and the staggering inflation rate. According to the report at the beginning of the current Ethiopian fiscal year the government planned to achieve a double digit GDP growth to maintain the trend of the past seven years. In this regard, Meles said that inspite of variability in rainfall distribution across the country, agricultural output had grown mainly on the back of the ‘belg’ rains which revived production towards the end of the year under review. Hence agricultural production and general output level in the economy are expected to top the 10 percent rate while the average GDP for the whole seven years would stay well above the 10 percent mark.

The report also addressed the inflation rate for the period under consideration. Meles said that the inflation rate recorded at the start of the fiscal year had went down at a pace that as beyond expectation. He recalled that although doubts were expressed whether this would be achieved the outcome has surpassed most projections handsomely. The report noted that for the nine-month period the inflation rate was measured at 3.9 percent level which, according to the PM, is way below the targeted single digit level.

With respect to export trade, the report also painted a positive picture in spite of the dip last year. It said that the 10 percent decline of export trade last year had been reversed to achieve a 21 percent growth so far.

Apart to these issues, the PM’s report also addressed the hydro-electric power shortage currently gripping the country. He assured the public that barring unforeseen circumstances, the mishap at Gilgel Gibe II would be fixed as soon as possible and that the power plant would commence operations by July.

Dr. Kostentinos Berhe, an economist says that official figures regarding economic growth for the past consecutive years are not debatable. However, he believes that the more important question here should be how the growth had contributed to the well-being of the society. “Most of the time GDP fails as an indicator of society’s welfare,” Kostentinos says. In this regard, he points out that the most relevant yardstick that would portray the true living conditions of individuals in the economy is the Human Development Index (HDI). Partly, the reason behind the development of HDI is the inherent weakness of the GDP measure, he says. Kostentinos argues that in light of the HDI measure, the Ethiopian economy is currently at the bottom of the rung though in a bizarre contrast, it is one of the top five economies with respect to GDP growth. He says the incidence of poverty, the number of people who are under the safety net program and people in dire need of food aid could help one to understand the objective reality on the ground.

Kostentinos also dwelt on the problem of reliability and confidence in the statistical data outputs on the economy. “How is the data is collected? And which markets were the sources for these data? These are some of the most issues in the Ethiopian economy”, he said. However, according to Kostentinos, perception about data problem, particularly in a report of such kind, should not be of a significant concern since prior to the release of the figures both the government and the International Monetary Fund (IMF) hold a round-table discussion to reach a mutual agreement on the numbers to be released. He also mentioned the experience of the American Congress with respect to vital economic data. “Congress takes the data issue seriously, to the extent that it has set-up its own institution to deal with any-data-related matters.”

Finally, Kostentinos cautioned that apart from the statistical and data related problems in the economy, some time measurement problems with regard to the GDP could result in ‘understatement’ or ‘overstatement’ of the output value of the nation.