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Fitch cuts Ethiopia's outlook to negative as political unrest hangs over economy

Fitch Ratings on Oct. 1 revised its outlook on Ethiopia's long-term foreign-currency issuer default ratings to negative from stable, citing the possibility of continued political unrest in the country that could have "meaningful" spillovers to the economy.

As part of the ratings action, Fitch affirmed the issuer default rating at B.

The rating agency said the political instability stemming from regional and ethnic violence and tensions within the country's ruling political coalition could further keep tax collection and foreign direct investment under pressure.

Ethiopia's net foreign direct investment is projected to remain at approximately 3.5% of GDP, after declining for the second year in a row in the fiscal year ending June, Fitch said. Economic growth is forecast to be at around 7.5%, below the annual average growth of 10% since 2004.

Political instability in the country has also disrupted supply chains, pushing inflation to an annual rate of 17.9% in August from an average of 12.6% in the fiscal year ending in June, according to Fitch.