It is well comprehended that inward-looking approaches are quite important for resilience and help the nation have higher per capita income and bounce back better from shocks. Policy-makers have played a paramount role in balancing growth, innovation, inclusion, sustainability and resilience. Hence, Ethiopia needs a higher level of urgency and ambition to rewire growth for this new era. Policymakers, line ministries, financial institutions, industries, trade runners, and other stakeholders have to focus on the means to bolster economic advancement.
Cognizant of the fact that, economic growth can be attributable to a number of factors, The Ethiopian Herald had a stay with Arega Adolla, an economist graduated from Arba-Minch University in agro-economics, to have ample information about the national comprehensive effort to get economic grow.
He said, "The rate of economic growth refers to the geometric annual rate of growth in Gross Domestic Product (GDP) between the first and the last year over a period of time. Economic growth-rates of countries are commonly compared using the ratio of the GDP to population (per-capita income). In simplest terms, economic growth refers to an increase in aggregate production in an economy, which generally manifests as a rise in national income. That leads to an increase in incomes, inspiring consumers to open up their wallets and buy more and driving a higher material quality of life and standard of living."
In economics, growth is commonly modeled as a function of physical capital, human capital, labor, and technology. Increasing the quantity or quality of the working-age population, the tools that they have to work with, and the recipes that they have available to combine labor, capital, and raw materials will lead to increased economic output.
This creates opportunities for trade in services from developing economies that are still largely untapped, partly because of low digitalization. Digitalization rates across advanced and developing economies are diverging rather than converging, leading to persistent economic divides and missed opportunities for innovation, he said.
As to him, the most common measure of economic growth is real GDP. This is the total value of all goods and services produced in an economy, with that value adjusted to remove the effects of inflation. Another problem is that not all individuals place the same value on the same goods and services. Adding capital to the economy tends to increase the productivity of labor. Newer, better, and more tools mean that workers can produce more output per time period.
There are three different methods for looking at real GDP. Someone in the economy must first engage in some form of saving in order to free up the resources to create the new capital. In addition, the new capital must be of the right type, in the right place, and activated at the right time for workers to actually use it productively, he suggested.
The second method of promoting economic growth is through technological improvements, Arega said adding that prior to the discovery of its energy-generating power, improved technology allows workers to produce more output with the same stock of capital goods by combining them in novel ways that are more productive. Another way to generate economic growth is to grow the labor force. All else being equal, more workers generate more economic goods and services. True, he said economic growth was due to a high influx of cheap, productive labor. However, as with capital-driven growth, there are some key conditions to this process.
In the simplest terms, economic growth means that more will be available to more people, and how economic growth is used to fuel social progress matters. Taxes affect economic growth, at least in the short term, through their impact on demand. Economic growth is generally measured in terms of GDP and is an indicator of the economic health of a country. However, how widely the fruits of the growth are shared is an important factor in its sustenance, not to mention societal health and progress, Arega said.
He added, "Good health, a place to live, access to education, nutrition, social connections, respect, peace, human rights, a healthy environment, and happiness are born to sustainable and stable economic growth. These are just some of the many aspects we care about in our lives. Poverty, prosperity, and growth are often measured in monetary terms, most commonly as citizens' income."
As to him, economic growth is an increase in the production of goods and services in an economy. Increases in capital goods, labor force, technology, and human capital can all contribute to economic growth and sustainable development. It describes how much an entity, such as a country, is increasing and improving the goods and services it produces.
"Understanding whether an economy is getting bigger or smaller is important not only to economists but also to public-and private-sector leaders, as well as to individuals. That's because economic growth usually indicates that people and businesses are earning and spending more and generally feeling better off."
Arega further elucidated that, economic growth is difficult to measure accurately. Traditionally, GDP has been considered the best indicator of a country's economic growth because it accounts for the country's entire economic output, including goods and services sold both domestically and internationally. A more holistic measure is needed to get a better sense of an economy's growth and prospects.
"Economic growth is an increase in the amount of goods and services that an economy produces. Economic growth results in rising wages and higher standards of living for citizens, measured as increases in real gross domestic product (GDP); it allows a society to increase its consumption of goods and services. In short, economic growth reduces the sting of scarcity--the condition that exists because there are not enough resources to quench every citizen' desires.
He said, "More capital, more labor, and better use of existing capital or labor are the three factors that can be potentially attributable to bring about economic growth. The growth that results from increases in capital and labor represents growth due to increases in inputs and other related necessary ingredients."
Arega said, "Increasing investment in physical capital allows for continued increases in productivity and economic growth. A well-educated workforce is also generally more productive, providing higher output per worker. Well-educated workers can make the most efficient use of existing technologies. The innovation resulting from new ideas is a key to continued technological progress."
He further stated that in addition to productivity-boosting factors such as physical and human capital, economies with high rates of economic growth often share characteristics related to economic institutions that support or reward productive activity.
Free trade extends the benefits of free markets beyond national borders and allows for more competition within industries, which provides additional productivity gains. Well-developed financial markets are thus essential ingredients for long-run economic growth, he added.
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Basically, Ethiopia is continually seeking ways to stimulate economic growth as a means of providing jobs and improving living standards. Examples include the development of tools and machinery, and aggregation of labor and businesses in urban settings, and the division of production processes into multiple stages handled by different workers. Such innovation increases productivity - enabling society to maximize the economic returns on finite inputs of labor and resources.
"Rapid economic growth is a comparatively recent phenomenon. Equally, economic performance shapes the revenues available to governments and, correspondingly, the resources available for public infrastructure and services such as education, healthcare and various forms of social security."
Economic growth in both developing and developed regions is also associated with social and economic harm that threatens to undermine improvements in living standards.
In sum, economic growth has to be achieved at it is not only a rate but also a direction. Besides, economic growth is not the only thing that matters, but it does matter. It is because a person has more choices as their prosperity grows that economists care so much about growth.
Rising prosperity gives people access to a wide range of things they value: food, healthcare, and access to education, entertainment, holidays, free time, and more. It is because of this, that it is so important to track how economic growth has changed nation's status quo.
Similarly, improvements in labor quality like human knowledge, skill, and training are both a carrier of and a spur to technological change. Hence, within each of the basic factors of production, technology often takes an embodied form thereby boosting the national economy.
