Impact of Foreign Direct Investment on Gross Domestic Product in Ethiopia

The world has increasingly accepted that private capital has a vital role to play in economic development. Foreign direct investment (FDI) throws into capital accumulation and technological progress and is an imperative catalyst for industrial development. The objective of this study is investigating the impact of foreign direct investment on gross domestic product in Ethiopia over the period of 2000–2013/14. The study is based on secondary data. The study used time series data and ordinary least square (OLS) method. The major findings of this study are the average contribution of foreign direct investment on gross domestic product (GDP) is 2.34 percent within the study periods; foreign direct investment has a positive and medium correlation with growth domestic product and foreign direct investment has a positive effect on gross domestic product in Ethiopia, but statistically insignificant. Based on the finding the researcher recommended that the government should attract more foreign direct investment by opening more to the external world, improving domestic infrastructure, undertake more economic reforms, providing financial incentives, promoting local skill development, devalued its currency and improve national saving and investment.