Eritrea: Economic Outline
Eritrea is one of the world’s most closed countries. It was already facing a very difficult economic situation due to chronic droughts, a steep decrease in remittances from the diaspora, autarkic policies and past tensions with Ethiopia when it was hit by the outbreak of the COVID-19 pandemic and a locust invasion. In 2022, Eritrea experienced a slowdown in real GDP growth, estimated at 2.3% compared to 2.5% in 2021. This deceleration was partially attributed to the repercussions of Russia's invasion of Ukraine, particularly affecting energy, fertilizer, and food prices. Notably, Russia and Ukraine collectively supply nearly 100% of Eritrea's wheat imports, while oil comprises 71% of the country's energy consumption. Despite this, growth in 2022 was primarily driven by the industry and services sectors on the supply side, coupled with private consumption and investment on the demand side (data African Development Bank). Real GDP growth in 2023 is estimated to have remained relatively stable at 2.6%, supported by the construction progress of the Colluli potash project. The World Bank forecasts growth at 2.8% in 2024.
Despite a 24% decrease in global zinc prices in 2023, Eritrea experienced higher export revenues due to relatively high prices for gold and copper. Additionally, reduced imports of fuel and food further supported this trend. As a result, the current account surplus remained above 14% of GDP. Meanwhile, robust mining export revenues have additionally bolstered government earnings. As of the end of 2023, public debt was estimated to be around 219% of GDP, with almost 80% attributed to domestic banks. Eritrea is currently in a state of debt distress, and by January 2023, it had reached a pre-decision point in the Highly Indebted Poor Countries (HIPC) list. A gradual fiscal consolidation, coupled with consistent robust mining sector earnings, is expected to contribute to a reduction in the fiscal deficit to 4% of GDP by 2024. This trend of fiscal consolidation is anticipated to persist over the medium term. The ongoing economic recovery is projected to facilitate a decrease in the public debt-to-GDP ratio, from 211% of GDP in 2024 to 189% of GDP by 2026 (World Bank). In 2023, inflation eased to slightly over 6%, primarily attributed to the decrease in global food and energy prices. This moderation provided some relief for households, with an expected decrease to 5% this year. There are notable downside risks to the outlook, including potential declines in global or Chinese demand for Eritrean commodity exports, along with fluctuations in metals and minerals prices. Production delays at the Colluli mine, spill-over effects from the conflict in Sudan, and increased tensions in the Middle East are additional concerns. Furthermore, severe climate vulnerabilities may exacerbate in the future, posing a significant threat to food security in Eritrea.
Eritrea, which has not held an election since 1993, is one of the 10 poorest countries in the world. It suffers from recurring famines that affect a large portion of the population and NGOs have been banned from the country. The labour market is almost non-existent, pushing many Eritreans into the informal sector. According to the World Bank (modeled ILO estimate), unemployment rate in Eritrea was at 5.9% of total labour force in 2023. Poverty is widely acknowledged to be prevalent in Eritrea, although official national accounts and poverty statistics have not been compiled for over a decade.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| GDP (Constant Prices, Annual % Change) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| GDP per Capita (USD) | 0 | 0 | 0 | 0 | 0 |
| General Government Gross Debt (in % of GDP) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Inflation Rate (%) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
| Current Account (billions USD) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 |
| Current Account (in % of GDP) | 0.0 | 0.0 | 0.0 | 0.0 | 0.0 |
Source: IMF – World Economic Outlook Database - October 2021.
Note: (e) Estimated Data
| Monetary Indicators | 2014 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Eritrea Nakfa (ERN) - Average Annual Exchange Rate For 1 MUR | 0.50 | 0.45 | 0.44 | 0.43 | 0.38 |
Source: World Bank - Latest available data.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 62.4 | 8.6 | 29.0 |
| Value Added (in % of GDP) | 14.1 | 21.8 | n/a |
| Value Added (Annual % Change) | 3.6 | -0.2 | n/a |
Source: World Bank - Latest available data.
| 2018 | 2019 | 2020 | |
|---|---|---|---|
| Labour Force | 1,589,292 | 1,612,622 | 1,545,718 |
Source: International Labour Organization, ILOSTAT database
| 2017 | 2018 | 2019 | |
|---|---|---|---|
| Total activity rate | 81.63% | 81.46% | 81.25% |
| Men activity rate | 88.21% | 87.95% | 87.60% |
| Women activity rate | 75.09% | 75.00% | 74.92% |
Source: International Labour Organization, ILOSTAT database
The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
See the country risk analysis provided by Coface.
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
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Latest Update: May 2024
