In a rare measure reserved for war-torn countries and failed states, the IMF has not released a GDP growth forecast for Ethiopia in its latest World Economic Outlook for the next four years.
The only other countries excluded from the projections are Afghanistan, Libya and Syria.
Although the IMF makes no explicit reference to the Tigray War, analysts say the ongoing conflict is the most likely reason the multilateral lender withheld its forecast for Ethiopia’s economic recovery in 2022.
The missing projections are a bad sign that could further deteriorate Ethiopia’s outlook for investors, said Patrick Heinisch, economics researcher at German commercial bank Helaba.
“Missing data forecasts naturally have an impact on the business environment. Each investor does a thorough analysis of the target country before investing. If data for Ethiopia is not available, companies are wondering why.
“Even for countries in conflict like Somalia or South Sudan, projections are available. This can hold back investors and therefore desperately need foreign currency, ”he says.
The lack of macroeconomic data is just the beginning of Ethiopia’s growing list of economic problems.
In early October, the Ethiopian government expelled seven UN officials from Addis Ababa for alleged interference in domestic politics. This has further strained the already strained relations with the international community and increased the risk of sanctions.
The European Parliament demanded an “immediate cessation of hostilities by all parties” in October and called for far-reaching sanctions, including an arms embargo, against all belligerents in the ongoing war.
The United States is also considering a full range of options, including sanctions, in response to the worsening crisis, State Department spokesman Ned Price said on Tuesday.
The Ethiopian military on Monday launched a ground offensive in conjunction with allied Amhara militias to push Tigray forces out of the northern Amhara region, the ruling Tigray People’s Liberation Front (TPLF) said. region.
Previous attempts to pressure the government to lift a blockade that hampers humanitarian aid have led to widespread famine in the Tigray region, according to the UN.
“If the new offensive of the Ethiopian National Defense Forces (ENDF) results in human rights violations or attacks against civilians, as observed during the occupation of Tigray by the ENDF until June, the West could lose patience, ”said Heinisch.
Yet ahead of any sanctions, experts believe that a first step could be to remove Ethiopia from the lucrative US Africa Growth and Opportunity Act (AGOA).
“Ethiopia’s exports under AGOA represent almost half of its exports to the United States. Most of AGOA’s exports are concentrated in the textile industry which is a very labor intensive industry. Cutting AGOA membership could result in massive job losses, ”says Heinisch.
Many fear the worst-case scenario where the current callous nature of the government will eventually turn Ethiopia into a regional outcast, similar to Eritrea or the former regime in Sudan.
As the Tigray War is one year old in November, the economic cost of the conflict is piling up.
Prime Minister Abiy Ahmed said in July that repairing infrastructure could cost up to $ 2 billion, with more damage expected as the government steps up its offensive.
Ethiopia’s Debt Service Suspension Initiative (DSSI) also expires at the end of the year, leading to a full resumption of external payments in 2022. The government asked the IMF for a new deal in September for restructure nearly $ 30 billion in external debt, and await approval by the IMF’s Executive Board of disbursements under the Extended Credit Facility and the Extended Financing Facility.
If Ethiopia manages to restructure its external debt in the first half of next year, it will be a success for the government, Heinisch said.
Ultimately, as the war continues with no end in sight, a negotiated ceasefire between the two sides is the most crucial step in restoring investor confidence, he adds.