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Ethiopia Eritrea Somalia Djibouti COUNTRY REPORT Ethiopia Eritrea Somalia Djibouti December 2001 The Economist Intelligence Unit 15 Regent St, London SW1Y 4LR United Kingdom The Economist Intelligence Unit The Economist Intelligence Unit is a specialist publisher serving companies establishing and managing operations across national borders. For over 50 years it has been a source of information on business developments, economic and political trends, government regulations and corporate practice worldwide. The EIU delivers its information in four ways: through our digital portfolio, where our latest analysis is updated daily; through printed subscription products ranging from newsletters to annual reference works; through research reports; and by organising seminars and presentations. The firm is a member of The Economist Group. London New York Hong Kong The Economist Intelligence Unit The Economist Intelligence Unit The Economist Intelligence Unit 15 Regent St The Economist Building 60/F, Central Plaza London 111 West 57th Street 18 Harbour Road SW1Y 4LR New York Wanchai United Kingdom NY 10019, US Hong Kong Tel: (44.20) 7830 1007 Tel: (1.212) 554 0600 Tel: (852) 2585 3888 Fax: (44.20) 7830 1023 Fax: (1.212) 586 0248 Fax: (852) 2802 7638 E-mail: [email protected] E-mail: [email protected] E-mail: [email protected] Website: www.eiu.com Electronic delivery This publication can be viewed by subscribing online at www.store.eiu.com Reports are also available in various other electronic formats, such as CD-ROM, Lotus Notes, online databases and as direct feeds to corporate intranets. For further information, please contact your nearest Economist Intelligence Unit office Copyright © 2001 The Economist Intelligence Unit Limited. All rights reserved. Neither this publication nor any part of it may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior permission of The Economist Intelligence Unit Limited. All information in this report is verified to the best of the author’s and the publisher’s ability. However, the EIU does not accept responsibility for any loss arising from reliance on it. ISSN 1352-2922 Symbols in tables “n/a” means not available; “–” means not applicable Printed and distributed by Patersons Dartford, Questor Trade Park, 151 Avery Way, Dartford, Kent DA1 1JS, UK. 1 Contents 3 Summary Ethiopia 5 Political structure 6 Economic structure 6 Annual indicators 7 Quarterly indicators 8 Outlook for 2002-03 8 Political outlook 9 Economic policy outlook 10 Economic forecast 11 The political scene 14 Economic policy and the economy Eritrea 17 Political structure 18 Economic structure 18 Annual indicators 19 Outlook 2002-03 20 The political scene 23 Economic policy and the economy Somalia 25 Political structure 26 Economic structure 26 Annual indicators 27 Outlook for 2002-03 28 The political scene 31 Economic policy and the economy 33 News from the Somaliland Republic 33 The political scene 34 Economic policy and the economy Djibouti 36 Political structure 37 Economic structure 37 Annual indicators 38 Quarterly indicators EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 2 39 Outlook for 2002-03 40 The political scene 41 Economic policy and the economy List of tables 10 Ethiopia: forecast summary 15 Ethiopia: effects of debt relief on external debt and debt service 21 Eritrea: signatories of a letter criticising Mr Isaias 34 Somaliland: licensed political parties, Oct 2001 List of figures 10 Ethiopia: gross domestic product 20 Eritrea: gross domestic product 40 Djibouti: gross domestic product 42 Djibouti: trade with Ethiopia 42 Djibouti: money supply EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 3 Summary December 2001 Ethiopia Outlook for 2002-03 The government appears to have weathered the political disruptions within the TPLF party earlier in 2001, and is expected to move ahead with economic liberalisation and poverty reduction. However, disagreements over a number of issues, such as what attitude to adopt towards Eritrea, economic reform and government corruption, will continue to cause political tension. Despite the current optimism among both Ethiopian leaders and foreign donors, the Economist Intelligence Unit believes that these will remain significant political factors in 2002-03. The restoration of external lending, and reductions in military spending, will improve economic prospects, and we expect real GDP growth of around 7-8% per year in 2002-03. The political scene The prime minister, Meles Zenawi, has restructured his cabinet, and expanded it from 15 to 18 posts. Most ministers were replaced. It is unclear whether the newly created federal agencies will be reproduced at the regional level. A new national security council has been established by the Council of People’s Representatives. It includes the prime minister, the ministers of foreign affairs and defence, and the chief of staff of the armed forces. Economic policy and the Delayed and patchy rain in central and southern grain-producing regions has economy lowered crop estimates, but grain production is likely to be around average. Minimum wages for civil servants have doubled. Ethiopia has abolished its wholesale foreign-exchange auctions. Ethiopia has qualified for HIPC debt relief. Eritrea Outlook 2002-03 If elections planned for December 2001 are not held, they are likely to be held before mid-2002. Either way, President Isaias Afewerki and the PFDJ party are expected to remain in power. Disputes with Ethiopia, resulting from the work of the UN Border Commission and Claims Commission, are likely to continue into 2003. The government clampdown on free speech could lead to a freezing of donor funds. In this case real GDP in 2002-03 is expected to growth by 3-4% per year. If funding is unaffected, real GDP growth of 7-8% is more likely. Both forecasts assume normal weather patterns. The political scene In mid-September 11 members of the PFDJ who had signed an open letter criticising the president were arrested. All private newspapers in Eritrea have been closed. The Italian ambassador has been expelled. Ambassadors from the EU countries returned in November after being (temporarily) called home. Economic policy and the The crackdown on dissidents has led to concern that donors will freeze economy development funding. Defence spending dropped from 38% of GDP in 2000 to EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 4 15% of GDP in 2001. International donors have pledged US$132m for demobilisation. UN reconstruction work near the Ethiopian border has begun. Somalia Outlook for 2002-03 High-level national reconciliation talks are possible, but are unlikely to be successful. The transitional government is not expected to gain control over the entire country. Lack of central authority will nullify Central Bank attempts to control inflation and the exchange rate. The closure of the country’s largest money transfer company and a poor harvest will worsen the humanitarian crisis. Elections in Somaliland are unlikely to proceed according to schedule. The political scene A no confidence motion has been passed in the Transitional National Assembly, forcing the dismissal of the government. Hassan Abshir Farah has been appointed the new prime minister. President Abdikassim Salat Hassan and representatives of the opposition Somali Reconciliation and Restoration Council have attended reconciliation talks in Kenya. An Islamist group, Al- Ittihad, has been targeted in America’s “war against terrorism”. Economic policy and A leading money transfer company, Al-Barakat, has had its assets seized by the the economy US. The Somalia shilling has fallen further against the US dollar. The refusal of some businesses to accept SoSh500 notes has caused violent protests. News from the Somaliland Seven political parties have been officially recognised. The government and republic opposition have started talks about election issues. The border with Djibouti has been reopened, and an agreement to end hostilities has been signed. Djibouti Outlook for 2002-03 President Ismael Omar Guelleh will seek to exploit American concerns over terrorism and Djibouti’s role in the Somali peace process to win financing and improve his international standing. Concessions by Mr Guelleh may allow opposition groups representation in parliament at the 2002 election, but real power will continue to reside in the presidency. Progress on economic reform will be slow and growth will be sluggish. The political scene Despite speculation to the contrary, Djiboutian military facilities have not been used in the military action against Afghanistan. An anti-terrorism committee has been established. Relations with Somaliland have improved. Economic policy and the Mr Guelleh has stressed the importance of development outside the capital. A economy mobile phone network has been agreed. An Ethiopian delegation has discussed trade tensions. New economic data indicate the weakness of the economy. Editors: Christopher Eads; Paul Gamble (editor); David Cowan (consulting editor) Editorial closing date: November 20th 2001 All queries: Tel: (44.20) 7830 1007 E-mail: [email protected] Next report: Full schedule on www.eiu.com/schedule EIU Country Report December 2001 © The Economist Intelligence Unit Limited 2001 Ethiopia 5 Ethiopia Political structure Official name Federal Democratic Republic of Ethiopia Form of state Federal republic Legal system The
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