Table of Contents
1. Introduction..................................................................
1
2. Price
Level....................................................................4
3. Public
Finance..............................................................14
4. Financial Sector Developments....................................23
5. Foreign Trade………………........................................29
6. Statistical
Annexes........................................................40
Introduction
This report attempts to evaluate the performance of some macroeconomic aggregates of the Ethiopian economy during the fourth quarter of 2003/2004. Given the unavailability of data on the production side of the economy, the report focuses on macro-economic aggregates related to the demand side of the economy. These include: price movements, the performance of the public sector, the monetary or the financial sector and the external sector.
Section Two of the report examines the
movement of prices both at a national and at a regional level. In addition to
analyzing overall price changes, as measured by the consumer price index (CPI),
it also details price movements in the food and non-food category and changes
in specific commodity prices relative to previous quarters. As a prelude to the
details included in the sectors the following main points could be highlighted.
First, both at a national level and in almost all the regions, the aggregate
price index increased during the quarter relative to the preceding quarter and
a similar quarter last year mainly due to the increase in the food price index
category. Second, despite the fact that prices exhibited an upward movement in
the fourth quarter compared to the preceding quarter, annualized inflation
rates during the same period are lower than the same period last year. Third, unlike its national counterpart, the
annualized inflation rate in
The third section of the report evaluates the fiscal performance of the government during the quarter. It also outlines the budgetary allocation of public finance both in terms of its sources and uses. During the fourth quarter of 2003/04, among the major developments regarding public finance that are worth highlighting are: First, the federal government raised revenue from both tax and non-tax sources worth 10.8 billion Birr while spending about 16 billion Birr; the result was an overall deficit (excluding grants) of 5.2 billion Birr. Second, the difference between domestic revenue and current expenditure (i.e. the primary balance) was positive at about 5.5 billion Birr. Thus, in the year under review, the government has raised enough resources to cover current expenditure; the overall deficit (excluding grants) was, therefore, due to regional transfers (about 5 billion Birr) and special programs (about 272 million Birr). Third, the government was able to secure 2.3 billion Birr worth of grants from foreign sources, which reduced the overall deficit to about 2.9 billion Birr. And, fourth, to financing its resource shortfall, the government borrowed about 2.4 billion birr from foreign sources and about 2.2 billion Birr from domestic sources. The government also made payments of about 1.6 billion Birr to other unspecified creditors.
The fourth section highlights developments
in the monetary sector. These include changes in monetary aggregates, interest
rate, expansion of credit and the treasury-bill market. To just highlight some
of the issues, the fourth quarter is characterized by monetary expansion,
further accumulation of excess reserves, and increased fresh loan
disbursements. But there was no noticeable development regarding interest rates
and the Treasury bills market continues to be dominated by commercial banks.
The fifth section of the report
outlines the performance of the external sector during the fourth quarter of
2003/2004. In particular it discusses the performance of the economy in both
visible and invisible trade and examines the balance of payment position of the
economy during the quarter in review. Among the notable points in this regard
are the following. First, the current accounts balance (including public
transfer) showed an improvement relative to the second and the third
quarters of the same year, but it had deteriorated relative to the first
quarter of the same year and relative to a similar quarter of the previous
year. Second, net service during the quarter in review has improved vis-à-vis
the same quarter of a year earlier and the first quarter of 2003/04, but it has
fallen vis-à-vis the previous two consecutive quarters. And, third, the balance
of payments registered a deficit amounting to more than one billion Birr during
the fourth quarter of 2003/04.
And finally, the sixth section presents an annex that includes related data since 1998/1999. It is hoped this will help those interested in examining the behavior of the aggregates in historical (albeit short) terms.
Enjoy the rest of the report and please do not hesitate to forward your comments and suggestion.
The Macroeconomic Division,
EEA/EEPRI
Prices
During the fourth quarter of fiscal year 2003/04, quarterly inflation went up by 5.4 percent from the preceding quarter due to a respective increase of 8 % and 1.8% in food and non-food inflation rates. This increase reversed the downward movement that had started in the second quarter of the fiscal year. The observed inflation in the review quarter is also comparatively higher than the figure for a similar quarter last year.
Table 2.1 Quarterly Inflation
during 2000/01-2003/04
|
|
2003/04 |
2002/03 |
2001/02 |
2000/01 |
||||||||
|
|
General |
Food |
Non-Food |
General |
Food |
Non-Food |
General |
Food |
Non-Food |
General |
Food |
Non-Food |
|
Qtr I. |
4.5 |
6.5 |
0.4 |
8.0 |
12.5 |
0.9 |
-2.1 |
-4.4 |
1.3 |
-1.2 |
-2.6 |
0.4 |
|
Qtr II |
-3.3 |
-5.2 |
1.0 |
4.5 |
7.0 |
0.4 |
0.1 |
-0.1 |
0.6 |
-6.6 |
-10.5 |
-2.0 |
|
Qtr III |
-2.2 |
-5.2 |
4.8 |
4.5 |
6.5 |
1.0 |
-2.0 |
-3.1 |
-0.4 |
0.2 |
0.1 |
0.6 |
|
Qtr. IV |
5.4 |
8.0 |
1.8 |
4.5 |
6.9 |
0.0 |
0.8 |
2.5 |
-1.4 |
-3.8 |
-6.8 |
-0.1 |
Source: CSA and EEPRI/EEA
staff computations
An increase in food prices is the reason behind the rise
in inflation in this quarter. As shown in Fig. 2.1, all major food items registered
a relatively huge quarterly surge in their prices. For instance, the prices of
cereals, spices, and vegetables and fruits notably went up by 10.7%, 19.2%,
14.3 % and 6.8%, respectively.
The upward
movement in prices of food items in the fourth quarter is to be expected. In
general, during the third quarter (the period in which the agricultural
production from the Meher (
Consequently, as can be observed from the above figure, the level of food prices in particular and consumer prices in general tend to decline during the second and the third quarters and pick up in the fourth quarter. On the other hand, the non-food component of inflation does not show a significant seasonal variations. And after an exceptionally higher growth rate in the preceding quarter, the non-food index exhibited only a modest growth rate in the review quarter.
During the third
quarter, the prices of clothing & footwear, and house rent, construction
materials, water and fuel & power had shown the largest quarterly jump (3.7
%), but during the quarter in
review these same items
saw declining prices . Except a relatively higher price increase in personal
& care effects (4.6%), and a modest growth in the prices of transport and
communication (0.8%) and household equipments (1.1%), the prices of major
non-food items went down. It is to be recalled that, increasing prices in construction
materials, water and fuel & power, which account for the largest share in
the non-food index, were the main reasons that led to the rise in the price
index of the non-food items during the preceding three consecutive quarters.
Despite the fact that prices exhibited an upward movement in the fourth quarter compared to the preceding quarter, annualized inflation rates[1] during the same period are lower than the same period last year. Accordingly, by the end of the review quarter (i.e. June), annualized inflation was 9.0 % as compared to 15.1 % in the same period last year. Annualized food inflation rates for the reporting period were 11.8% in contrast to the corresponding figure of 24.8% last fiscal year.
Table 2.2 Annualized Inflation During the Fourth Quarter 2000/01-2003/04