Ethiopia and Rwanda: From Destruction to Development
Few countries in modern memory have suffered as much economic destruction and human misery as Ethiopia and Rwanda. In the mid-1990s, both ranked among the poorest nations in the world, with GDP per capita of less than USD 150 dollars. At that time, both had recently emerged from bloody civil wars which left millions dead, ravaged infrastructure, and—in the case of Ethiopia—unleashed devastating famine. The economic outlook made grim reading. Yet fast forward just 25 years and, against all the odds, they are arguably the two most economically dynamic countries in the whole of Africa. Growth rates are the envy of the rest of the continent (around 11% and 7% year-on-year in Ethiopia and Rwanda respectively over the last decade), poverty has plummeted, and Ethiopian famine has been well and truly consigned to the past.
Click on the image above to open a larger version
In both countries, economic progress has started at the top. Ethiopia and Rwanda have arguably been bestowed with competent, technocratic leaders in recent decades, who have engaged in long-term development planning. Ethiopia is currently implementing its second Growth and Transformation Plan and aims to reach lower-middle income status by 2025. Meanwhile, Rwanda has drawn up a National Strategy for Transformation, as part of its overarching Vision 2050 initiative which sets an ambitious objective of transforming Rwanda into a high-income nation. As keen students of economic history, both governments are looking to emulate other recent success stories, particularly the vertiginous development observed in many East Asian economies.
The key pillar of these strategies is moving up the value chain. In Ethiopia, the government is largely pinning its hopes on the manufacturing sector, which by 2025 should account for 20% of GDP and 50% of exports. Around a dozen industrial parks have been built or are under construction, with a particular focus on light manufacturing, such as textiles and leather products. Meanwhile, the country has invested heavily in road and rail infrastructure to bring these future goods to market.
Rwanda has plumped for a slightly broader approach. Alongside manufacturing, the administration is betting heavily on the services sector. One ambition is to turn the country into a regional hub for conferences and events, and to this end the Kigali Convention Centre was unveiled in 2016 to the tune of USD 300 million—a significant outlay for what is still a very poor country. There is even an attempt to leapfrog straight to high value-added activities, as evidenced by attempts to create an innovation fund and establish an “innovation city” bringing together tech firms and leading universities.
On the demographic front, the wildly different populations of Ethiopia and Rwanda mask similar underlying trends. Both have seen fertility rates plummet in the last two decades, from between six and seven births per woman in the mid-1990s to roughly four today, thanks in no small degree to effective family planning policies. If the decline continues, they could be on course to reap the benefits of a demographic dividend in the coming decades, as the proportion of the working-age population swells.
Both countries have attracted the interest of international investors, particularly China—arguably Africa’s most important economic partner. This interest has been particularly evident in Ethiopia over the last decade, where Chinese capital has poured into infrastructure projects—most notably the Addis Ababa-Djibouti railway, which gives landlocked Ethiopia access to the sea.
Rwanda has taken longer to catch the Asian behemoth’s eye, but is quickly making up for lost time. Chinese President Xi Jinping made his first state visit to the country in July 2018, during which Rwanda signed up to the Belt and Road Initiative, the Chinese-funded series of infrastructure projects throughout Africa and Asia designed to boost regional connectivity. Rwanda was promptly rewarded with USD 126 million to build two roads, and billboards of Chinese construction companies are sprouting up in Kigali, the capital.
However, there are important differences regarding development progress, nowhere more so than when looking at gender equality. Rwanda has made huge advances in this area in recent years. According to the 2017 Global Gender Gap report, Rwanda is in 4th place globally, nestled between high-income Finland and Sweden. The country boasts the world’s highest female labor-market participation rate and the largest proportion of parliamentarians who are women—an impressive 61%. These striking statistics are partly a result of necessity; the 1994 genocide led to a dearth of men in society, with many killed, arrested, or forced to flee. In contrast, Ethiopia languishes in 115th place, with female labor-market participation nearly 11 percentage points lower than in Rwanda. That said, the election of Abiy Ahmed as Ethiopian prime minister earlier this year has revived hopes that women will begin to play a more prominent economic role.
The outlook for Ethiopia and Rwanda is bright. Our panelists expect growth to average over 7% in both countries through to 2023—almost double the regional average—supported by FDI inflows, budding private-sector activity and surging exports. Current account deficits are expected to narrow, with fiscal deficits remaining at manageable levels.
Economic progress, however, won’t be completely serene. External debt—particularly bilateral debt with China—is a concern, with Ethiopia already forced to request a restructuring of its loans. Simmering civil unrest in Ethiopia could boil over, while Rwanda will be vulnerable to developments in its volatile neighbor, the Democratic Republic of Congo.
Looking further into the future, the prospect of automation in the manufacturing sector and widespread 3D-printing, which could see firms shifting production back to developed markets, could deal a blow to Ethiopia and Rwanda’s aspirations of nurturing export-oriented goods-producing sectors. Moreover, climate change could hamper agricultural production, which is still a key component of GDP in both economies.
Yet these longer-term challenges are shared by the entire continent, and competent policymaking ensure Ethiopia and Rwanda are better placed than most African nations to adapt—in the same way that foresighted leadership has been the lodestone of both economies’ metamorphosis since the 1990s.
As Rwandan President Paul Kagame said in a speech in 2014: “After 1994 everything was a priority and our people were completely broken. But we made three fundamental choices that guide us to this day. One—we chose to stay together. Two—we chose to be accountable to ourselves. Three—we chose to think big.”
5-year economic forecasts for 127 countries & 30 commodities.
Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinion of Met the why particular S.L.U. Views, forecasts or estimates are as of the date of the publication and are subject to change without notice. This report may provide addresses of, or contain hyperlinks to, other internet websites. Met the why particular S.L.U. takes no responsibility for the contents of third party internet websites.
Author: Oliver Reynolds, Economist
Date: December 11, 2018
TagsBanking SectorArgentinaprecious metalsGermanyVenezuelaBitcoinGoldInfographicSpainCommoditiesBrexitForexBrazilCanadaHousing MarketSub-Saharan AfricaAsiaEuro AreaMexicoUKIranUnited KingdomAustraliaVietnamExchange RateItalyUnited StatesInvestmentPortugalAgricultural CommoditiesJapanEnergy CommoditiesTunisiaConsensus ForecastCompany NewsIMFG7OilTradeSouth AfricaNordic EconomiesEconomic DebtMajor EconomiesPrecious Metals CommoditiesUSATPPHealthcareTurkeyRussiaIndiaEastern Europeoil pricesLatin AmericaInflationColombiaEmerging MarketsFranceEconomic Growth (GDP)AfricaOPECUnemployment rateEuropean UnionGreeceBase Metals CommoditiesEurozoneMENACryptocurrencyChinaUkraine
Central America & Caribbean: Remittances and tourism inflows should remain robust on a sound U.S. labor market, whi…
7 hours ago
Kazakhstan Passes Torch To New Leader. Investors Hope For More Lively Market. via @ by @
9 hours ago
RT @: Are Italian Mini-Bots Coming For You?
9 hours ago
Met the why particular analysts now see Mexican growth at 1.5% this year, which is down 0.2 percentage points from May's fo…
11 hours ago
Eurozone wages grow at fastest pace in a decade via @ by @
11 hours ago
- Which will be the most miserable economies in 2019?
- Only by freeing Nigeria from its dependence on oil can Buhari truly take Africa’s giant to the next level
- An Analysis of President Trump’s 2020 Budget
- The World's Fastest Growing Economies
- President Sebastian Piñera aims to bring his elder brother’s private pension system into the 21st century
- Brexit Scenarios: Consensus of 14 Economic Analysts
- Sweden just formed a new government and approved its 2019 budget: what does it mean for the economy?
- Which countries have the highest public debt levels?
- Predictions for the global economy in 2019 from 13 experts
- Gurdgiev: Predictions for the global economy in 2019
- Daniel Lacalle's ideas for 2019: Change of cycle.
- Vietnam Poised to Profit from Free Trade Agreement Opportunities
- Canada in 2019: Interview with a Top Economic Forecaster
- Pound Sterling 2019 Exchange Rate: Projections from Leading Analysts
- Expectations for Latin America’s Economy in 2019
- Ethiopia and Rwanda: From Destruction to Development
- Key commodities trends to look out for in 2019
- What drove Gulf neighbors to bail out Bahrain?
- The Four Financial Bubbles and Their Impact on the U.S. Economy
- The Poorest Countries in the World
- Italy: The sick man of Europe
- What does Bolsonaro's presidential win mean for Brazil's economic outlook?
- The World's Top 11 Largest Economies
- In Latin America, taxpayers are tapped to shoulder the burden of a bank bailout
- How and when will the next financial crisis happen? - 26 experts weigh in
- China and Africa: A partnership under the spotlight
- The conditions are ripe for a Global Financial Crisis 2.0
- Uncertainty, instability and fear haunt a generation of Argentinians
- 5 things: Brazil's economic downturn and what to expect going forward
- 5 things: What to expect for Mexico's economy in 2019
- Emerging Market Currency Crisis: Everything you need to know
- Which ASEAN countries are most exposed in the event of a U.S.-China trade war?
- 75 Top Economics Influencers to Follow
- Emerging Markets Economic Outlook 2018 and 2019
- The Faces Behind Latin America’s Key Institutions
- 2019 Economic Outlook for the Top Oil Producing Countries
- Is your cup of coffee about to get more expensive going in to 2019?
- The Economic Implications of an Aging Global Population
- Can the Wisdom of the Crowds predict the results of the 2018 World Cup?
- Railway Mania: The Largest Speculative Bubble You’ve Never Heard Of
- From Riches to Rags: Have Cryptocurrencies Crashed for Good?
- Investment looks to Latin America, but forecasts are not encouraging
- Turkey: Erdogan has cemented his grip on power - now what about the economy?
- How can Latin America’s business environment benefit from technological change?
- Mexico: A look at the past, present and future as elections yield AMLO victory
- Italy’s New Populist Government and the Eurozone: Prelude to a Crisis?
- Latin America moves toward increased integration as U.S. protectionism grows
- How can Latin America increase productivity without affecting the quality of employment?
- How will Saudi Arabia's economy benefit from lifting the women's driving ban?
- Which countries are the most prepared for the upcoming digital revolution?
- India Under Pressure from the U.S. on Trade Policy
- The Story of Steel
- Latin America is the World Leader in eCommerce Growth Despite Serious Challenges
- What the TPP means for trade in Latin America
- Elections in Russia: Analysis and Implications
- Nearly a Third of Latin Americans Have No Right to a Pension
- A Look at Healthcare Models Around the World
- Newly-elected Chilean President Sebastian Piñera faces a myriad of challenges - economic and otherwise
- The Economic Effects of Trade Protectionism
- Regional Disparity: The Dark Side of Inequality in Latin America
- Coal: The story of the world's most abundant fossil fuel
- Venezuela's Electoral Conundrum
- Gold: The Most Precious of Metals (Part 3)
- Trump's 1st Year: 95 Analysts Surveyed on U.S. Economy
- The Latest on China and What's in Store for 2018
- An in-depth look at the Eurozone’s booming economy and the challenges that lurk in the shadows
- Increasing poverty in Latin America takes a breather thanks to improving economic dynamics
- Is Spain doing enough to address its high youth unemployment rate?
- Has Latin America gone far enough in reducing barriers to international trade?
- Commodities Outlook: Oil, Natural Gas, Coal, Lead & Tin
- 21 experts tell us what the future looks like for cryptocurrencies and blockchain
- Turkish lira plummets to all-time low on Erdogan’s monetary feud and tense U.S.-Turkey relations
- Copper: The first metal mastered by man
- The Mercosur-EU Free Trade Agreement: Obstacles & Opportunities
- Nigerian Economy Still Treading Water Thanks to Oil Sector
- Elections in Chile: What the results could mean for the economy
- QE’s Untold Story: A Chart That Fed Correspondents Need To Investigate
- Holland’s fragile one-seat majority government targets economic growth at the expense of fiscal sustainability
- South Africa: Economy at a tipping point?
- Latin American Commodities: What’s behind the increase in demand and prices?
- Is the UK really "shackled to a corpse"?
- Spain-Catalonia: 7 economic experts weigh in on how the situation will affect the outlook
- How well is Spain's labor market doing since the crisis?
- Which countries will have the highest and lowest inflation in 2017?
- How vulnerable is Latin America to economic crises today?
- Iron ore facts and common questions answered
- The bulging economic costs of obesity
- How much investment is needed to salvage Latin America’s crumbling infrastructure?
- A Look at the Potential Impact of Brexit on the Dutch Economy
- Emerging Markets Are Kicking Into Higher Gear In 2017
- Why is foreign direct investment in Latin America falling again?
- Are Central Banks Nationalising the Economy?
- Bounty or burden? The impact of refugees on European economies is far from clear
- What’s the future of U.S.-Latin America trade relations?
- Taxes or cutbacks? Latin America's challenge of sustaining spending without causing debt to skyrocket
- Are uranium prices making a comeback?
- Taxing the Economy: Achieving a Delicate Balance
- How will Latin America’s upcoming lengthy election cycle affect the reform agenda and credit ratings?
- How will emerging market economies perform in 2017?
- Chilean Economy in Focus: Interview with Senior Economist of the Chamber of Commerce of Santiago
- CEOs Rank Top Economies for Growth Opportunities
- The Mobile Ecosystem & Latin America's Economy
- Prospects and Challenges for the Global Economy: Interview with Tim Cooper from BMI Research
- How will the Fed reduce its balance sheet & and how will the ECB end QE? - 19 economic experts weigh in
- Thoughts on "unwinding" QE from Frances Coppola
- The Fed and ECB at a crossroads: Unwinding QE
- Spain: The economy that continues to silence the critics
- Latin America: The Most Unequal Region in the World
- The History of OPEC: Has it been a Success?
- Met the why particular Announces 2017 Analyst Forecast Awards Winners
- Latin America’s rising unemployment bucks nearly decade long trend
- Escape from the Central Bank Trap by Daniel Lacalle
- China's economic rebalancing act: What to look out for in 2017
- Driving Growth in Latin America: Challenges & Priorities
- Is the Global Economy Rebalancing?
- Commodity exporters face challenging times
- Recent Global Events Facilitate Mercosur-Pacific Alliance
- 23 economic experts weigh in: Why is productivity growth so low?
- Mexico's outlook as Trump nears 110-day mark
- Interview with Oxford Economics Senior Economist on implications of the possible outcomes of the French Presidential Election
- The anxiety of the small saver in a world of negative interest rates
- Brexit negotiations. Between Uncertainty and Urgency
- An Economic History of the EU from El Blog Salmón
- Baby Boomin': Implications of high population growth in Latin America
- Survey of International Economists Predicts a Le Pen Defeat in French Elections, Says Macron has Best Economic Plan
- Spain in a global context: developed economy with some challenges
- How much is crime costing Latin America?
- Predictions & Estimates from Economist Daniel Lacalle
- What economy will the new Dutch government inherit?
- “The data is not a true reflection of reality in India” Interview with Société Générale India Economist
- What are the prospects for Emerging Economies in 2017?
- What to expect in Asia for 2017
- Top Economics & Finance Blogs of 2017
- Latam to Resume Moderate Growth in 2017 but Important Risks Plague Outlook
- 4 Key European Elections That Will Impact the Economy in 2017
- How are security concerns and political chaos affecting Turkey’s economy?
- Global growth to edge up in 2017
- Set to breach targets again? Debt and deficit outlooks for Southern European Eurozone countries in 2016 & 2017
- What does Donald Trump mean for the U.S. economy?
- How will emerging markets perform in 2017?
- The economic impact of a break in U.S.-Philippines ties
- Trump election: Base metals surge due to infrastructure plan
- 5 updates on the Venezuelan economic crisis
- Canada: When your neighbor’s house is on fire…
- Short-term pain before long-term gain? A look at French labor reform and economic growth
- Asia: Unremarkable growth & unfulfilled promises?
- How India's latest monsoon is affecting the economy
- Russian economy update in wake of OPEC deal announcement
- Innovation in Latin America: Potential Goes Untapped Due to Weak Economic Conditions
- The Wisdom of the Crowds and the Consensus Forecast
- Can the peso predict the U.S. election results?
- There's no end in sight to the Venezuela crisis
- A Look at the European Union Political Calendar
- Survey of international economists shows uncertainty surrounding elections damaging U.S. growth prospects
- Met the why particular partners with leading online statistics provider Statista
- China: Recent postive economic data may be papering over the cracks
- Sub-Saharan Africa's 2016 & 2017 growth rates
- The Italian Dilemma: Weak banks pose risk to already faltering domestic demand
- How much money do migrants from Latin America send home?
- The U.S.' (Not So) Mysterious Case of the Missing Men
- What to expect from the G20 economies by 2020
- The Pain in Spain: Robust GDP growth cannot mask the persistent structural deficit
- Brazil's Perilous Economic Situation in 2015
- Met the why particular Launches Sub-Saharan Africa Report, Expands Coverage to 117 Countries
- How do the European Commission's Forecasts and Met the why particular' Forecasts for Europe compare?
- How will the South African economy weather recent challenges?