Economic and Political Overview

flag Ethiopia Ethiopia: Economic and Political Overview

In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline

 

Economic Indicators

From 2004 to 2018, Ethiopia - Africa's second most populous country - saw rapid growth under a state-led model that improved infrastructure and living standards. However, it relied on an overvalued currency, rising debt, and restrictive regulations, which limited private investment, drove inflation, and failed to boost productivity or create enough jobs for the two million new job seekers each year. Growth stood at 7.2% in FY23 following the end of the Tigray conflict and stayed strong in FY24 (6.1%), supported by good harvests and reforms. However, worsening forex shortages and revenues below 7% of GDP increased economic strain. Short-term growth may slow due to tighter monetary policy and investor uncertainty but is expected to recover as conditions stabilise and forex access improves. The World Bank forecasts growth at 6.5% in FY 2024/25 and 71% the following year.

Ethiopia’s fiscal deficit fell to 1.8% in FY24, easing reliance on inflationary central bank financing. Tax reforms and higher development aid are expected to boost public spending over the forecast horizon, reversing recent declines in real expenditure. Fitch forecasts the fiscal deficit to increase to 2.7% of GDP in FY25, as higher spending— including a 1.5% of GDP support package and public wage hikes—outweighs revenue gains from FX reforms. Interest payments are also set to rise to 1.2% of GDP, up from 0.6% in past years. The debt-to-GDP ratio decreased to 33.6% in 2023, down from 38.7% the previous year, and is expected to increase to 41.8% in 2025 before returning on a downward path, according to the IMF. Ethiopia is seeking to restructure about USD 15.1 billion in external debt (including arrears as of end-June 2024) under the Common Framework, which it joined in 2021. In November 2023, it secured an interim debt standstill with the official creditor committee and major Chinese lenders, suspending USD 1.3 billion in bilateral debt service for 2023–2024. Moreover, in March 2025, Ethiopia reached an Agreement in Principle (AIP) with its Official Creditor Committee (OCC) on the key financial terms of a debt treatment under the G20 Common Framework, covering about USD 8.4 billion of outstanding public debt, with a debt service relief totalling approximately USD 2.5 billion over the period 2023-2028. Preliminary figures from the IMF show that inflation slowed to 26.6% in FY 2023/24 (from 32.5%) and is expected to gradually decrease to 10.6% in FY 2026/27.

Despite doubling over the last decade, GDP per capita in Ethiopia remains one of the lowest globally, estimated at USD 4,045 in 2024 by the IMF (PPP). Poverty reduction remains challenging due to demographic dynamics and a low initial level of development. To mitigate the short-term poverty impacts of macroeconomic reforms, the government committed to expanding social assistance, including a nearly five-fold increase in spending, wage hikes for the lowest-paid civil servants, and a temporary social package worth 1.1% of GDP. The unemployment rate stood at 3.4% of the total labour force in 2023, according to the World Bank, but the vast majority of the workforce is still employed in the informal economy.

 
Main Indicators 2024 (E)2025 (E)2026 (E)2027 (E)2028 (E)
GDP (billions USD) 143.12117.46138.82159.26182.24
GDP (Constant Prices, Annual % Change) 8.16.67.17.78.0
GDP per Capita (USD) 1,3201,0661,2401,4011,578
General Government Gross Debt (in % of GDP) 32.341.837.034.632.7
Inflation Rate (%) 21.721.512.212.212.2
Current Account (billions USD) -6.01-5.59-4.48-4.06-3.83
Current Account (in % of GDP) -4.2-4.8-3.2-2.6-2.1

Source: IMF – World Economic Outlook Database , Latest available data

Note: (e) Estimated Data

Main Sectors of Industry

Ethiopia boasts one of the largest livestock herds in Africa and has significant potential for hydropower energy. It stands as the 5th-largest coffee producer and exporter globally and is among the leading producers of oilseeds and dry beans. The agricultural sector plays a pivotal role in the economy, contributing over a third of Ethiopia’s GDP (35.8%) and employing nearly two-thirds of the workforce (62.4%). Major agricultural products include cereals, coffee, oilseeds, cotton, sugarcane, vegetables, khat, cut flowers, hides, cattle, sheep, goats, and seafood. However, challenges such as periodic droughts, soil degradation, and deforestation persist. Key cereals consumed in Ethiopia are maize and wheat, with the country being self-sufficient in maize but importing around 30% of its wheat requirements. High taxation levels and poor infrastructure pose obstacles to the agricultural sector, prompting government efforts to establish large agro-industrial parks across the nation to add value to agricultural products. According to figures from the USDA, the 2024/25 corn production is forecast at 10.2 million tons, in line with the 2019/23 average; whereas that of wheat is expected to increase by 6%, to 6 million tons.

The industrial sector, though modest, contributes significantly to the GDP (24.5%), with a marginal share of total employment (6.5% of the workforce). Industries include food processing, beverages, textiles, leather, garments, chemicals, metals processing, and cement. While the manufacturing sector currently has a limited impact on exports and represents only 4% of GDP, its growth has reduced reliance on imports, with the share of locally-made goods rising from 30% to 40% in recent years. Notably, Ethiopia has attracted textile production outsourcing from Asia in recent years. Moreover, Ethiopia has developed dozens of industrial parks to position itself as Africa's manufacturing hub. Chinese investors, the largest foreign group in these parks, have played a key role in this growth, according to the Ethiopian Industrial Parks Development Corporation.

The tertiary sector, led by state-run Ethiopian Airlines, drives Ethiopia’s foreign exchange earnings, constituting 37% of GDP and employing an estimated 31.2% of the workforce. Growing sectors like tourism and telecommunications are anticipated to contribute significantly to the country’s economic growth. Despite ongoing privatization efforts and a transition toward a market economy, the public sector retains a dominant role, particularly in strategic sectors like telecommunications, financial services, transportation, and retail. Land in Ethiopia is state-owned, with long-term leases provided to tenants. The banking sector comprises the National Bank of Ethiopia as the central bank, one state-owned development bank, a government-owned commercial bank, and several private banks. In 2024, Ethiopia's Parliament passed a new Banking Business law, reopening the market to foreign banks and investors after 50 years.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 62.4 6.5 31.2
Value Added (in % of GDP) 34.8 25.4 37.5
Value Added (Annual % Change) 7.0 9.2 7.7

Source: World Bank - Latest available data.

 

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Monetary Indicators 20202021202220232024
Ethiopian Birr (ETB) - Average Annual Exchange Rate For 1 MUR 0.891.051.171.211.78

Source: World Bank - Latest available data.

 
 

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Foreign Trade in Figures

Ethiopia's trade openness is not fully realized, with a foreign trade-to-GDP ratio of 21% (World Bank, latest data available). It is a member of the IGAD and the COMESA but has not yet joined the free trade zone. Ethiopia has long been in the process of joining the WTO, and as part of this effort, the government is restructuring customs tariffs to rationalize investment opportunities, including introducing lower duties on raw materials and semi-finished products. Additionally, Ethiopia signed the African Continental Free Trade Agreement and established special economic zones offering tax incentives and customs duties exemptions to investors. The country's primary export is coffee, which accounted for 42.9% of the total in 2023, followed by other oil seeds and oleaginous fruits (9.0%), dried leguminous vegetables (9.0%), cut flowers and flower buds (8.1%), and other vegetables, fresh or chilled (6.5%). Major imports consist of petroleum oils (14.2%), mineral or chemical fertilisers (4.1%), motor cars and vehicles (3.4%), nitrogenous fertilisers (2.9%), palm oil and its fractions (2.9% - data Comtrade).

According to Comtrade data for 2023, Ethiopia's main export destinations were Saudi Arabia (10.4%), the United States (9.7%), the Netherlands (7.6%), the United Arab Emirates (5.7%), Somalia (5.0%), India (4.9%), and Germany (4.7%); while imports primarily originated from China (32.7%), India (9.6%), Kuwait (7.8%), Saudi Arabia (6.6%), the United States (6.3%), and Morocco (4%). In 2023, Ethiopia’s total trade with the EU reached EUR 2.2 billion, making it its second-largest trading partner after China with a 13.1% share.

Ethiopia's trade balance remains structurally in deficit, a trend driven by the country's investment-led economy, which incentivizes imports. Weather phenomena also influence the trade balance, sometimes necessitating grain imports during droughts despite Ethiopia's status as a significant agricultural producer. In 2023, goods imports totalled USD 17.8 billion, while exports reached USD 3.6 billion (with a decrease of 4.1% and 8.9% year-on-year, respectively - data WTO). Additionally, Ethiopia is also a net importer of services. In the same year, the country's trade balance was negative by 7.4% of GDP, up from 10.1% the previous year, according to the World Bank. Preliminary figures from the government show that in the first half of the fiscal year (July-December 2024), Ethiopia's export earnings totalled USD 3.2 billion, with coffee contributing significantly, generating USD 908 million from 204,000 tons of exports.

 
Foreign Trade Indicators 20202021202220232024
Imports of Goods (million USD) 13,11515,97318,66317,06321,489
Exports of Goods (million USD) 3,2583,9493,9703,4684,501
Imports of Services (million USD) 5,3756,5127,4477,633n/a
Exports of Services (million USD) 4,3185,3756,8217,218n/a
Imports of Goods and Services (Annual % Change) -2.013.310.4-4.126.0
Exports of Goods and Services (Annual % Change) -5.419.011.0-0.815.0
Imports of Goods and Services (in % of GDP) 16.916.718.414.011.9
Exports of Goods and Services (in % of GDP) 7.17.68.26.65.5
Trade Balance (million USD) -8,509-10,403-12,765-11,849-14,050
Trade Balance (Including Service) (million USD) -9,455-11,363-13,217-12,086-11,948
Foreign Trade (in % of GDP) 24.024.326.620.617.4

Source: WTO – World Trade Organisation ; World Bank , Latest Available Data

 

Main Partner Countries

Main Customers
(% of Exports)
2023
Saudi Arabia 10.4%
United States 9.7%
Netherlands 7.6%
United Arab Emirates 5.7%
Somalia 5.0%
See More Countries 61.6%
Main Suppliers
(% of Imports)
2023
China 32.7%
India 9.6%
Kuwait 7.8%
Saudi Arabia 6.6%
United States 6.3%
See More Countries 37.0%

Source: Comtrade, Latest Available Data

 
 

Main Products

2.9 bn USD of products exported in 2023
Coffee, whether or not roasted or decaffeinated;...Coffee, whether or not roasted or decaffeinated; coffee husks and skins; coffee substitutes containing coffee in any proportion 42.9%
Other oil seeds and oleaginous fruits, whether or...Other oil seeds and oleaginous fruits, whether or not broken (excl. edible nuts, olives, soya beans, groundnuts, copra, linseed, rape or colza seeds and sunflower seeds) 9.0%
Dried leguminous vegetables, shelled, whether or...Dried leguminous vegetables, shelled, whether or not skinned or split 9.0%
Cut flowers and flower buds of a kind suitable for...Cut flowers and flower buds of a kind suitable for bouquets or for ornamental purposes, fresh, dried, dyed, bleached, impregnated or otherwise prepared 8.1%
Other vegetables, fresh or chilled (excl. potatoes...Other vegetables, fresh or chilled (excl. potatoes, tomatoes, alliaceous vegetables, edible brassicas, lettuce "lactuca sativa" and chicory "cichorium spp.", carrots, turnips, salad beetroot, salsify, celeriac, radishes and similar edible roots, cucumbers and gherkins, and leguminous vegatables) 6.5%
See More Products 24.5%
17.1 bn USD of products imported in 2023
Petroleum oils and oils obtained from bituminous...Petroleum oils and oils obtained from bituminous minerals (excl. crude); preparations containing >= 70% by weight of petroleum oils or of oils obtained from bituminous minerals, these oils being the basic constituents of the preparations, n.e.s.; waste oils containing mainly petroleum or bituminous minerals 14.2%
Mineral or chemical fertilisers containing two or...Mineral or chemical fertilisers containing two or three of the fertilising elements nitrogen, phosphorus and potassium; other fertilisers (excl. pure animal or vegetable fertilisers or mineral or chemical nitrogenous, phosphatic or potassic fertilisers); animal, vegetable, mineral or chemical fertilisers in tablets or similar forms or in packages of a gross weight of <= 10 kg 4.1%
Motor cars and other motor vehicles principally...Motor cars and other motor vehicles principally designed for the transport of persons, incl. station wagons and racing cars (excl. motor vehicles of heading 8702) 3.4%
Mineral or chemical nitrogenous fertilisers (excl....Mineral or chemical nitrogenous fertilisers (excl. those in pellet or similar forms, or in packages with a gross weight of <= 10 kg) 2.9%
Palm oil and its fractions, whether or not refined...Palm oil and its fractions, whether or not refined (excl. chemically modified) 2.9%
See More Products 72.5%

Source: Comtrade, Latest Available Data

 
 

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Main Services

Source: United Nations Statistics Division, Latest Available Data

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Sources of General Economic Information

Ministries
Ministry of Finance
Ministry of Trade and Regional Integration
Ministry of Mines
Statistical Office
Ethiopian Statistical Service
Central Bank
National Bank of Ethiopia (NBE)
Stock Exchange
Ethiopian Commodity Exchange
Economic Portals
Addis Fortune

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Political Outline

Current Political Leaders
President: TAYE Atske Selassie (since 7 October 2024)
Prime Minister: ABIY Ahmed Ali (since April 2018)
Next Election Dates
House of Federation: October 2026
House of People's Representatives: June 2026
Main Political Parties
The ruling coalition in Ethiopia, formerly the Ethiopian People’s Revolutionary Democratic Front (EPRDF), is now the Prosperity Party, which was formed through the merger of three ethnically-based parties: the Amhara Democratic Party (ADP) (formerly the Amhara National Democratic Movement, ANDM), the Oromo Peoples' Democratic Organisation (OPDO), and the Southern Ethiopian People's Democratic Movement (SEPDM). The Tigrayan People's Liberation Front (TPLF) opted not to join the new party. While the TPLF was the dominant group within the former coalition, Tigrayans make up only 6% of the country's population. Despite this, Prime Minister Abiy Ahmed is the first leader of Ethiopia from the Oromo ethnic group.

Other notable political parties in Ethiopia include:

National Movement of Amhara (NaMa): a right-wing, Amhara ethnic nationalist party
Ethiopian Citizens for Social Justice (EZEMA): a centrist party formed from the merger of several smaller parties
Gedeo People's Democratic Party (GPDP): a party advocating for Gedeo nationalism
Kucha People Democratic Party (KPDP): representing the Kucha ethnic group
Type of State
Ethiopia is a federal parliamentary republic.
Executive Power
The highest executive authority in Ethiopia’s federal government is vested in the Prime Minister and the Council of Ministers. The Prime Minister is elected from among the members of the House of Peoples' Representatives and serves a term that aligns with the mandate of the House. As the Chief Executive, the Prime Minister also chairs the Council of Ministers and serves as the Commander-in-Chief of the national armed forces. The Prime Minister leads the Council, coordinates its activities, and represents it. The Council of Ministers consists of the Prime Minister, the Deputy Prime Minister, various Ministers, and other members as defined by law. Among its duties, the Council formulates and implements economic, social, and development policies and strategies.
Legislative Power
Federal legislative power in Ethiopia is shared between the government and the two chambers of the Federal Parliamentary Assembly: the House of People's Representatives and the House of the Federation. The House of People's Representatives consists of 547 members, each elected for a five-year term in single-seat constituencies. The House of the Federation, with a maximum of 153 members, is made up of representatives indirectly elected by state assemblies, also serving five-year terms.
 
 

Indicator of Political Freedom

Definition:

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:
6/7


 

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Latest Update: March 2026