If Ethiopia’s pre-conflict growth premium cannot be restored, it would be equivalent to a loss to the Ethiopian economy of about $125 billion.
Up to 2020, Ethiopia benefited from a ‘growth premium’ of between 3.9 to 6.9 percentage points relative to other sub-Saharan African countries that are not rich in natural resources. Forecasts from the International Monetary Fund (IMF) World Economic Outlook (WEO) for the period 2022–2027 suggest that this premium is now on average only 1.5 percentage points per year. We argue that this is linked to the direct – and especially indirect – costs of the conflict the country has experienced in recent years, such as the inability to access international public and private resources to support speedy macroeconomic stabilisation and economic reform, public investment for growth, and FDI. Without sustained peace, and a positive response from international partners, it is unlikely that any improvement is possible on the IMF forecasts; some might even argue that the situation could be worse than the forecasts. If the growth premium cannot be restored, it will be equivalent to a loss to the Ethiopian economy of about 125 billion current US dollars (range: US$ 79 to 171 billion), and will lead to an economy that will be 19 percent (range: 13 to 26 percent) smaller than what could have been obtained by 2027.