Ethiopian Economy essay

Ethiopia is one of the fastest growing economies in Africa and the world. At the same time, the current level of the economic development of Ethiopia is still far from the level of well-developed countries, such as the EU, the US and others. On the other hand, Ethiopia has a considerable potential and the current economic growth of the country reveals the fact that Ethiopia can become one of the regional leaders, while human resources, with a large share of young people in the total population, make the potential of Ethiopia even greater. However, Ethiopia should use its actual potential and overcome existing problems which often refer not only to the economic but also to the political domain (Marcus, 2002). The democratization of the country has had a positive impact on its economic development and revival of business activities. At the moment, the country is still in the difficult economic position because of its economic and technological backwardness mainly as well as remoteness from financial and economic centers of the world, but the fast economic growth allows Ethiopia to close the gap between its economy and economy of well-developed countries or, at least, of emerging economies in a long-run perspective.

Background of Ethiopian economy

     Colonial past of Ethiopia and its impact on its economic development is still very significant. In economic terms, the impact of the colonial past of Ethiopia can be traced through the strong impact of European capital and companies on Ethiopian businesses and economy at large. For instance, Ethiopia is still dependent on European technology and capital. This is why Ethiopians view Europe as the place, where they prefer to obtain their higher education. At the same time, the persisting, strong impact of foreign companies puts local businesses in the disadvantaged position and slows down the economic development (Teferra & Altbach, 2003). This is why, at the moment, the government attempts to stimulate business activities in Ethiopia and attract foreign direct investments to enhance the economic growth of Ethiopia and ensure the economic growth in a long-run perspective.

Ethiopia experienced the same colonial past as other African countries. The liberation of Ethiopia brought not only new opportunities for the economic growth but also and mainly new conflicts and struggle for power. The political struggle has had a negative impact on the economic development of the country. One of the major events in the post-colonial history of Ethiopia was the establishment of the pro-Soviet, communist government. As a result, the pro-communist government conducted specific economic policies which resulted in the nationalization of the major sectors and industries of Ethiopian economy. Consequences of such policies and nationalization are still relevant today.

However, the recent democratization contributed to the fast and steady economic growth. At the moment, the government of Ethiopia attempts to enhance open market economy principles and stimulates fair competition to make the economic growth of Ethiopia long run. Reforms conducted by Ethiopian government have had a positive macroeconomic effect, but some problems, such as corruption, technological backwardness, and other problems persist.

GDP growth

At the moment, Ethiopia is one of the fastest growing economies in the world. At the same time, the fast economic growth now is, to a significant extent, the result of a considerable downturn in the economic development of Ethiopia in the past. However, the economic growth reveals the positive trend in the development of Ethiopian economy. The government has managed to cope with major macroeconomic issues, such as slow GDP growth and high inflation rates.

The growth of the economy allows Ethiopia to increase the quality of life but Ethiopia still faces the problem of the fair redistribution of the national wealth. For example, about 85% of the total population of Ethiopia works in agriculture which comprises about a half of the total export of the country but still the overwhelming majority of Ethiopian farmers are living in poverty or next to poverty conditions (Mauri, 2010). In fact, the economic disparity of the ruling elite, which comprises just a minor part of the society, and the rest of the society, which comprises the overwhelming majority of the population, is enormous. One of the reasons for such disparity is the high level of corruption and the limited access of the larger part of the population to economic benefits and redistribution of the national wealth.

     Labor force as the ground for the economic growth of Ethiopia in the future

About a half of the total population of Ethiopia are people under the age of 18. Therefore, the large part of the population is young that means that Ethiopian labor market has a considerable potential for the growth since all young people, who are under 18 now, will become economically active soon and start working or launch their businesses.

At the moment, the economic potential of Ethiopia is enormous because the large part of the younger population in the total population of the country means that the larger part of the population is economically active that creates conditions for the stable economic growth. The creation of new jobs will involve the growth of business activities, while the large number of tax payers will stimulate the government to conduct efficient economic policies in public sectors of the economy, which still comprise a large share in the total economy of the country.

     Private vs public sector

In the past, the government control Ethiopian economy, while now the process of privatization contributes to the fast growth of the private sector. The government control over the economy of Ethiopia resulted to its decline and profound crisis, while privatization stimulated the optimization of businesses and improvement of the performance of organizations and companies which used to be in the public sector (Henze, 2005). At the same time, the transition from the public to private sector dominated economic structure was accompanied by profound changes. The change of ownership required consistent changes in the development of the fiscal policy and system of the country. Taking into consideration that the financial sector of Ethiopian economy still remains under the government control, the economic development of Ethiopia cannot be viewed as driven by private sector alone because banks and banking industry can influence consistently the economic development, while decisions taken by banks depend on the government policies because the financial sector remains in the public ownership.

 Ethiopian Economy essay part 2

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