Based on Ethiopia’s robust infrastructural projects pipeline, the country's construction industry is projected to grow further in the medium term, with the forecast to become the fastest growing construction market in Sub Saharan Africa
The power of infrastructure spend – lessons from Ethiopia
Ethiopia has become the fastest-growing economy in SSA, thanks to government investments in infrastructure projects which have enabled manufacturing and other industries. The country’s rapid growth has been guided by the introduction of the Growth and Transformation Policy (GTP), a framework mainly focused on creating a conducive macroeconomic environment.It has also been supported by close alliances with Chinese firms including financial support from Chinese banks.
Although Ethiopia’s robust GDP growth has averaged 9.9% over the past ten years to 2018, it moderated to 7.5% in 2018,somewhat owing to policy alterations, civil unrests and political instability. Underpinning the high growth figures has been the construction sub-sector which expanded by 16% in 2018 and is also the largest industrial sub-sector in the country accounting for 71.4% of the industries sector.
For the past few years, Ethiopia has sustained its GFCF as a share of GDP spending above 30%,26 making it one of the top economies globally in terms of capital formation spend as a shareof economic activity. Based on the country’s robust infrastructural projects pipeline, the construction industry is projected to grow further in the medium term, with Ethiopia’s forecast to becomethe fastest growing construction market in SSA.Countries with the highest GFCF as % of GDP
It has been noted that reliable infrastructure helps to boost economic activity as it enables production and thus attracts FDI. Ethiopia’s infrastructure investments have been coupled with growth in FDI inflows, up from US$344m in 2007 to US$3.3bn in 2018.29 This makes Ethiopia one of Africa’s top five FDI recipients, with China being the largest investor.
This article was extracted from the Deloitte Africa Trends Construction Report 2019 to read the full report click here
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