Current Account Surplus Possible in 2012 – Captialeritrea



Eritrean Business News: Eritrea’s mining activities and the resulting economic trade, investment and market movements are clearly showing signs of change in terms of the nation’s trade balance. The trade balance in simple terms is a measure comparing your earning against your expenses, in the same way you would review your household costs and revenues at the end of each month.

In a national economy it is the measure which compares earnings from exports of goods and services versus expenses from imports of goods and services. Although, economics argue what might be better a trade surplus, when your exports exceed your imports in monetary terms, or trade deficits, when your imports exceed your exports in monetary terms, it depends on many other factors and it might not harm if the balance does not tip to much either way.

2011 was definately a game-changer for the revival of the Eritrean economy, as the African Development Bank (AfDB) highlighted earlier this year the economic growth was strong in 2011 estimated to be 8.2%, compared to 2.2% in 2010. This kind of year-over-year jump is very unusual, and only seen in economies, which start their economic development from scratch.

Eritrea’s Global Trade Values, Comesa

Since 2007 imports have increased fueled by the need of machines, hardware and technology to build the mining industry until it would be ready to start producing exports for the national economy. This were necessary investment in previous years to be able to witness the return on capital employed we start to see emerging now.

With the first Eritrean gold mine, operated by Nevsun Resources, having started production in 2011 the country’s exports jumped enormously compared to 2010, while imports showed a moderate increase for the same period. Eritrea’s historic current account deficit is expected to turn to a trade surplus in 2012 largely due to higher exports revenues from gold an silver, according to the AfDB .

Eritrea’s biggest export trade partners within the Comesa region in 2011, were Kenya, Egypt and Sudan, whereas Eritrea imports most goods and services within the Comesa region from Egypt.

The biggest impact on the trade balance however comes from global trade partners. Top global export partners in 2011 was Canada followed by the Comesa region, European Union and China. Canada as the origin country of Stock Exchange-listed miner Nevsun Resources, shows that operational production of the Bisha mine has kickstarted exports and therefore increased national earnings, strongly needed to pay for domestic and international expenses. Top export goods in 2011 were gold and silver.

Top global import partner in 2011 is China followed by the Comesa region and the European Union. Top imported goods are sugar, wheat and motor vehicles, bulldozers, lorries to provide for the growing need of the expanding mining industry.

Development takes time and self-reliance is not easily earned but signs are looking good that the economic outlook for the coming years is bright.

This can bring along improvements in living standards and socio-economic aspects and further enhancement of good trade relations within the region and beyond, given that Africa collectively pursues peace and stability

The AfDB acknowledges Eritrea’s national development priorities are clearly spelled out in its human resources, infrastructure and food security programmes and policy statements. The country focuses on self-reliance to a degree not seen elsewhere in Africa. It also boasts a functioning education and health system.

To assure continues economic stability and growth for many many years to come the challenge of being able to stimulate other economic sectors next to mining plays a crucial role. Only the multiplier effect of mining on other industries such as construction, tourism, agriculture, transport, manufacturing, marine and fisheries etc., can guarantee, if successful, long term sustainable economic growth.

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