Running head: ETHIOPIA’S POTENTIAL FOR DEVELOPMENT 1

Ethiopia’s Potential for Development

Nyagetuba Mayaka Hesbone

(Own Library)
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Ethiopia’s Potential for Development in the Context of its Emerging Economy

Ethiopia, a country with a population exceeding 100 million is undergoing unprecedented

political stability and economic upsurge. The ascension to power of a new Prime Minister in

2018 has fostered political tranquility and quelled the long-lasting socio-political crises. The

International Monetary Fund projects the country’s economy to grow by 8.5 percent in 2019. In

the past decade, Ethiopia recorded an approximate 10% economic growth. Although the country

has an underdeveloped private sector and experiences constraints in the manufacturing sector,

the Growth and Transformation Plan aims a typical 11% GDP growth annually. The

geographical proximity to the Gulf, internal political stability and viable economic stability

makes Ethiopia a hub for development in the Sub Saharan Africa.

Geographical factors like the spread of flora and fauna, existence of renewable resources

and latitude have a significant impact on the development of Agriculture. Although the

developed countries do not depend on Agriculture to flourish economically, their historical

agribusiness accomplishments spearheaded their growth (Cuaresma, Doppelhofer & Feldkircher,

2014). Ethiopia is becoming one of the fast growing non-oil economies in Africa. The World

Bank posits that the state-led models of economic development based on agronomy have made

Ethiopia to stand out from her high performing neighbors. Although the country guarantees food

security, the government has sought to open the country to foreign investors on lease agreements.

The investors’ expertise in Agriculture have steered economic growth. Evidently, the

geographical location and Ethiopia’s ecological instances have improved the country’s economy.

Institutions play a critical role in a nation’s economy as they invoke economic outcomes

through the elimination of market failures. The market and the state are autonomous institutions
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that can hinder or promote social cooperation. From a Marxist school of thought, Ethiopia’s

political institutions respond to the common good needs of the nation. Between 2000 and 2011,

the country’s poverty reduced by 26% while the income disparities remained low. Ethiopia has

embraced a statist perspective to institutions that has overseen increased public investments

according to its plans of economic production (Shiferaw, 2017). The decline in military

squabbles and openness to international commerce have contributed to improved public

infrastructure. The government’s efforts to strengthen the country’s institutional framework has

provided an impetus for growth.

Demographic factors including population density, age composition and fertility rate

have profound ramifications on a country’s potential to develop. Contrary to the common belief

that a high population can influence the dependency ratio and saving behavior, a higher working

age population can boost economic growth (Mberu & Ezeh, 2017). A proper management of

high population can elevate a country’s economic position through knowledge spill over,

specialization and labor market economies. Evidently, Ethiopia is among the most populated

countries in the Sub-Saharan Africa. The youth aged below 25 years constitute 60% of the

Ethiopian population. Although less than half of this population has attained college level

education, the less learned can provide semi-skilled labor.

Over the past decades, Ethiopia has recorded the fastest economic growth in Africa. The

installation of development oriented government has steered the country to greater economic

heights. The availability of natural resources and favorable ecological conditions continue to

influence the country’s economic development. The institutional framework in Ethiopia has

influenced economic growth through policy oriented development initiatives. The government’s

initiative to promote peaceful co-existence by eliminating military rows has furthered the
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country’s aspiration to attain economic prosperity. Despite the few challenges the country faces,

a culmination of these factors will, in the future, make Ethiopia the second developed nation in

Africa.
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References

Cuaresma, J. C., Doppelhofer, G., & Feldkircher, M. (2014). The determinants of economic

growth in European regions. Regional Studies, 48(1), 44-67.

Mberu, B. U., & Ezeh, A. C. (2017). The population factor and economic growth and

development in sub-saharan African countries. African Population Studies, 31(2).

Shiferaw, A. (2017). Productive capacity and economic growth in Ethiopia. United Nations,

Department of Economics and Social Affairs.