The Federal Republic of ETHIOPIA: Economic Perspectives

Ethiopia has some of the highest growth rates in the world :

  • 2.5% average growth over the 1990’s
  • 8.4% during the 2000s
  • 9.7% between 2010 and 2018

With more than 112 million inhabitants, second most populous country in Africa, Ethiopia is considered as one of the cradles of humanity thanks to the discovery in 1974 of the bones  of Australopithecus Lucy (more than 3 million years ago). This country is one of the very few in Africa which has not been colonised, except a brief Italian occupation period from 1935 to 1941.

Ethiopia has experienced a sustained growth, around 10% per year on average, over the past decade with main engines such as agricultural production, services and foreign development assistance.

However, in 2020, the Covid-19 pandemic and locust invasion led to a slowdown in the economy : 6% vs 10% in 2019. The IMF expects GDP growth to stand at 2% in 2021 before rebounding to 8.7% in 2022, subject to the post-pandemic global economic recovery.

  • The Primary sector contributes in 2020 to 33% of GDP and employs up to 66.6% of the working population. Despite the dominant place Agriculture, the country struggles to meet the growing food needs  of the population given the high vulnerability to drought, land degradation and reduced land availability. Nevertheless, Ethiopia is the 5th largest coffee producer in the world (in volume), the 7th coffee exporter (in value), the 3rd largest producer of Oilseeds and the 12th largest producer of beans (FAO).
  • The Secondary sector weights 24.8% of GDP and only employs 9% of the working population. A large number of companies have recently outsourced their textile production from Asia to Ethiopia.

– Construction remains the predominant sub-sector (18%)

– Manufacturing sector stands after (6%)

  • The Tertiary sector contributes at 37% of GDP and employs 24% of the working population. Public sector still plays a predominant role in the economy and the state owns all land and only provides long-term leases to tenants. The main activities are :

– Public enterprises in the transport sector (Ethiopian Airlines)

– Banks (Commercial Bank of Ethiopia)

– Tourism

With more than 112 million inhabitants, the 2nd most populous country in Africa, Ethiopia, is the continent’s 8th richest country with a GDP of USD 96.61 Billion in 2020. Although GDP per capita doubled in the country the past decade, it still remains one of the lowest in the world. A high demographic growth rate (2.5% in 2020) and a low level of development render difficult to reduce poverty. The unemployment rate in 2020 was measured at 2.8% of total labor force (World Bank).

Population (2020 UN)32.51 million inhabitants
GDP / Capita USD (2021, IMF)USD 10.0
HDI (2020, UNDP)79th over 190
Doing Business (2020 World Bank rank) 75th over 190
Corruption Perceptions Index 202136h over 180
Unemployment rate (FMI 2021)9.7%

On a Demographic point on view, Ethiopia has more than 80 ethnicities with 60% of the  population being Christian (mainly Orthodox) and 30% Muslim. Population density is 92  inhabitants per km², with life expectancy at birth of 64.6 years (SSA average is 60.9 years). The average length of schooling is only at 2.4 years.

On a Political point on view, Ethiopia has been ruled for decades by the same coalition, the  Revolutionary Democratic Front of the Ethiopian People (RDFEP). In 2018, Ethiopia is plunged into a great political uncertainty which led to the postponement of the municipal elections and the surprise resignation (on February 15, 2016) of Prime Minister Haile Mariam Dessalegn. The country was put in a state of emergency for six months. Since the end of 2015, the  country has experienced a strong instability born in the Oromo region, the most important ethnic group (60% of the population) : they denounce the over-representation of the minority  of Tigrayans (6% of the population) in the ruling coalition. Nominated in March 2018, Abiy  Ahmed, the new Prime Minister implemented various reforms : release of dissidents, democratic space, peace with the neighbor Eritrea. He obtains the Nobel Prize on October 11, 2019 because of his popularity.

On an Economical point of view, Agriculture remains the socio-economic pivot of the country, the government plans to develop large agro-industrial parks across the country.

Ethiopia’s macroeconomic stability faces increasing risks because of its high inflation rates (from 15.8% in 2019 to 20.4% in 2020), explained by different factors : delayed effect of loans expansion to the public sector in 2017, induced effect of currency devaluation of October 2017 and previous political unrest that affected distribution networks.

On the fiscal point of view, the deficit widened to more than 3% of GDP since 2017 but the level of government spending remains stable, around 17.7% of GDP since 2010. State revenues are very low, falling by 1.5% of GDP (-11% of GDP in tax revenues, -1.8% in  non-tax revenue). Growth is also expected to slow due to tighter fiscal and monetary policy stances aimed at containing inflation.

Economic Indicators201920202021e2022e 2023e
GDP ($ Billion current price)230.87205.46225.86231.69246.72
GDP growth (%)2.2-
Inflation rate (%)
Public debt (% GDP)
Current balance (% GDP)-

National Bank of Ethiopia (NBE)

Despite the reduction of external tensions, foreign exchange reserves remain at a particular low level because of the decline in FDI, public debt. In order to control the demand for foreign currency and the money supply in circulation, National Bank decided,

– the devaluation of the Birr (local currency) by 13.4% against the dollar in October 2017,

– the hardening of conditions to access foreign currency

– the use of foreign exchange to the payment of imports of petroleum products, the  purchase of pharmaceutical products and to industrial exporters.

Along with the support from the World Bank, those measures help improve the reserves from 1.6 months of imports in 2018 to 1.9 months of imports in 2019. The World Bank has 71 active projects in Ethiopia for a total commitment of USD 11.6 Billion on January 2020.

On December 20, 2019, the IMF Executive Board approved the granting of a support program  for the benefit of Ethiopia of USD 2.0 Billion over the period of 2019 to 2022. The stated goal is to bring the country back to “moderate” risk of debt distress.

Due to a very low level of levies and the lack of depth of the banking market, the Ethiopian government resorted to external debt to increase its exportations, but the level of debt exceeded the alert threshold of 150% in 2015 because of a growth more modest than expected. Until 2020, the debt-to-exports ratio is expected to be above the 20% prudential threshold, leading the IMF to increase the risk of debt distress to “High”.

Exports and Imports

In 2019, Ethiopia was the 62nd economy in the world in terms of GDP (current USD) (132nd in the total exports and 110th in total imports). The country exported USD 3.11 Billion and imported USD 8.95 Billion, resulting in a negative trade balance of USD -5.84 Billion.

The top exports of Ethiopia are Coffee ($837M), Other Oily Seeds ($347M), Gold ($256M), Cut Flowers ($238M), and Zinc Ore ($199M). Ethiopia exports mostly to China ($518M), United States ($484M), United Arab Emirates ($251M), Saudi Arabia ($197M), and South Korea ($159M).

The top imports of Ethiopia are Planes, Helicopters, and/or Spacecraft ($717M), Gas Turbines ($608M), Packaged Medicaments ($402M), Electric Filament ($266M), and Cars ($225M). It imports mostly from China ($2.37B), India ($828M), United Arab Emirates ($788M), France ($787M), and United Kingdom ($622M).


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