Outlook for 2011-12

• The ruling Ethiopian People's Revolutionary Democratic Front is expected to remain firmly in power following its emphatic victory in federal and regional elections in May 2010.
• The opposition was, in effect, removed from parliamentary politics by its landslide election defeat in 2010. Its divided nature and inability to raise significant funds will make it easy for the government to keep it marginalised.
• Ethiopia will continue to support the government of Somalia, and it will retain its position as the key US ally in the volatile Horn of Africa.
• Barriers to business caused by the government's state-led development model will hinder private-sector growth, but the stable political outlook following the 2010 elections will make the investment climate more attractive.
• Real GDP growth is forecast to rise to 9% in 2010/11 (year ending July 7th), owing to a favourable agricultural performance, and 9.5% in 2011/12, helped by higher foreign investment and improvements in the power supply.
• Inflation is forecast to rise to 22.7% in 2011, as a result of global food and fuel price rises and a large currency devaluation in September 2010. It is expected to stay high in 2012, at around 11%, owing to structural constraints.
• The current-account deficit is forecast to average 4.9% of GDP in 2011-12, owing to the structural trade deficit.

Monthly review

• The foundation stone for the Renaissance Dam was laid on April 2nd, reviving tensions around "water politics". If built, it will be one of the largest dams in the world, producing 5,250 mw initially, and 10,000 mw by 2017.
• Six of the nine Nile riparian countries have signed an agreement to change the distribution of control over the Nile. This has angered Egypt and Sudan; colonial era agreements currently entitle them to over 90% of the Nile's water.
• The Ugandan president, Yoweri Museveni, has said that the accord will not be ratified until Egypt elects a government, giving it a chance to reverse the stance of the Mubarak regime.
• In early April the US State Department released its annual Human Rights Report, which again criticised the human rights situation in Ethiopia. The Ethiopian government has dismissed the report in its entirety.
• The government started to sell staple foods directly to consumers as shortages emerged following the introduction of state-imposed price ceilings in January.
• The year-on-year inflation rate reached almost 30% in April, up from 16.5% in February, owing to higher food and fuel prices.