Current GDP estimates undervalue the contribution of Ethiopia’s forestry sector by about 38 percent.
In Ethiopia – the second most populous country in Africa after Nigeria – policymakers are trying to make the nation’s economic development more sustainable. One of the challenges faced is that traditional economic accounting does not adequately consider services that the natural environment contributes to Ethiopia’s economy. Natural resources are, all too often, viewed as a “free gift of nature”.
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The invisible value of forests
Ethiopia’s forests cover is approximately 15.5 percent of the country’s land area. However, the value of forest products and services to the national economy is not well understood. For example, Ethiopia’s System of National Accounts is used to calculate GDP, but the extent to which forests produce income that is captured by it, is uncertain. Official statistics from the Ministry of Finance and Economic Cooperation show the forestry sector’s contribution to be around 3.8 percent of GDP.
In 2014, the Government of Ethiopia requested the UN-REDD Programme to support the country in assessing the contribution of forest ecosystems to the national income.
UN Environment’s report titled 'The contribution of forests to national income in Ethiopia and linkages with REDD+' assessed income from forest-derived goods and services for the first time.
Some compelling facts
Forests generate economic benefits in the form of cash and in-kind income equivalent to 12.86 percent of GDP in 2012 and 2013. Of this, 6.09 percent of GDP is attributed to forest industries, meaning that forest income is undervalued by about 38 per cent, because official statistics show the sector’s contribution to be 3.8 percent in 2015.
The contribution of forest ecosystems – such as carbon sequestration, crop pollination, conservation of agricultural soils and control of water discharge to streams and rivers – to other sectors, particularly agriculture, is valued at 6.77 percent of Ethiopia’s GDP.
The fodder livestock farmers obtain freely by allowing animals to graze on forest land was worth around 3.5 percent of GDP.The value added on wood fuel is estimated at around 4.5 percent of GDP.
The findings of the study can help strengthen the national forest sector in Ethiopia by enabling the Ministry of Finance and Economic Cooperation, the Central Statistical Agency, the Ministry of Agriculture, and the Ministry of Environment, Forests and Climate Change, among others, to better understand the extent to which forests underpin the country’s economy. This knowledge would build support across different ministries for the ten-year National Forest Sector Development Program.
The findings could potentially provide the basis for updating Ethiopia’s System of National Accounts with better estimates of forest-derived benefits in GDP, particularly the subsistence or in-kind income derived, such as fodder for livestock, wood fuel and roundwood.
The results and recommendations could be incorporated in the forest sector development program, and also be reflected in Ethiopia’s subsequent Growth and Transformation Plan (GTP) or any subsequent products and reports.
Making economic sense
The UN-REDD Programme's economic valuation study has made the 'invisible visible' by highlighting how forests contribute, not only to the value added of the forestry sector, but also other non-forest industries both in cash and in-kind income. Implementing the Climate Resilient and Green Economy Strategy, therefore, makes economic sense as Ethiopia would safeguard its natural capital – including forests – on which the economy depends directly and indirectly to a considerable extent.
For further information regarding the contents of this article: contact UN-REDD Programme
Click to download a copy of the report: The contribution of forests to national income in Ethiopia and linkages with REDD+
About the writers
Tefera Mengistu Woldie is National Coordinator, Institutional Strengthening for the Forest Sector Development Program at the Ministry of Environment, Forests and Climate Change in Ethiopia
UN Environment’s Ivo Mulder is Finance and Private Sector Coordinator of the UN-REDD Programme