Focus on Ethiopia: Inflation rate surges to 10-year high amid civil war
In December 2021, Ethiopia’s inflation rate jumped to 35.1% up from 33% in November, marking the highest level in almost a decade. This is bad news for the war-ravaged Horn of Africa country which was recently delisted by the US from AGOA.
According to data made available by the Central Statistical Agency of Ethiopia, the jump was mainly due to a rise in food prices. Specifically, food prices increased to 41.6% in December, up significantly from 28.9% in November last year. Business Insider Africa understands that the prices for staples such as vegetables, meat, milk, eggs, spices, coffee and non-alcoholics all increased.
Unfortunately, this casts a dark shadow over an earlier forecast by Fitch Solutions which projected a positive outlook for the country’s consumer spending in 2022. Recall that Business Insider Africa reported that Ethiopia’s household spending was expected to grow by 4.0% in 2022, up from a 1.7% growth in 2021.
In its forecast, Fitch Solutions did factor in inflation as one of the factors that could hamper the expected growth.
Read: Gov’t delaying an obvious need for a return to the IMF – Economist
Meanwhile, the Ethiopian statistics agency explained that food prices usually go up in December due to the increased demand often associated with the yuletide celebrations.
It also noted that the months-long war in the country had contributed to the surge in inflation. This is because the war has disrupted both farming activities and supply chains in the country.
Also, the Ethiopian currency (birr) has weakened significantly against the dollar over the past one year, thus contributing to inflation.
Sadly, the Ethiopian economy has not only been pressured by the ongoing war which has ravaged some parts of the country, it has also grappled with the fallout from the pandemic.
Earlier this month, Ethiopia was officially delisted from the African Growth and Opportunity Act (AGOA). Analysts worried that the country’s removal from AGOA would portend catastrophic economic effects, including thousands of job losses. This could, in turn, plunge many families into poverty.
Do note AGOA is a duty-free trade arrangement that allows African countries earn more each time they export their products to the USA.
