Ethiopia: Economic and Political Overview
In this page: Economic Indicators | Foreign Trade in Figures | Sources of General Economic Information | Political Outline
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) | 143.12 | 117.46 | 138.82 | 159.26 | 182.24 |
| GDP (Constant Prices, Annual % Change) | 8.1 | 6.6 | 7.1 | 7.7 | 8.0 |
| GDP per Capita (USD) | 1,320 | 1,066 | 1,240 | 1,401 | 1,578 |
| General Government Gross Debt (in % of GDP) | 32.3 | 41.8 | 37.0 | 34.6 | 32.7 |
| Inflation Rate (%) | 21.7 | 21.5 | 12.2 | 12.2 | 12.2 |
| 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
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 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Ethiopian Birr (ETB) - Average Annual Exchange Rate For 1 MUR | 0.89 | 1.05 | 1.17 | 1.21 | 1.78 |
Source: World Bank - Latest available data.
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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 | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Imports of Goods (million USD) | 13,115 | 15,973 | 18,663 | 17,063 | 21,489 |
| Exports of Goods (million USD) | 3,258 | 3,949 | 3,970 | 3,468 | 4,501 |
| Imports of Services (million USD) | 5,375 | 6,512 | 7,447 | 7,633 | n/a |
| Exports of Services (million USD) | 4,318 | 5,375 | 6,821 | 7,218 | n/a |
| Imports of Goods and Services (Annual % Change) | -2.0 | 13.3 | 10.4 | -4.1 | 26.0 |
| Exports of Goods and Services (Annual % Change) | -5.4 | 19.0 | 11.0 | -0.8 | 15.0 |
| Imports of Goods and Services (in % of GDP) | 16.9 | 16.7 | 18.4 | 14.0 | 11.9 |
| Exports of Goods and Services (in % of GDP) | 7.1 | 7.6 | 8.2 | 6.6 | 5.5 |
| 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) | 24.0 | 24.3 | 26.6 | 20.6 | 17.4 |
Source: WTO – World Trade Organisation ; World Bank , Latest Available Data
| 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
Source: Comtrade, Latest Available Data
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| 7.0 bn USD of services exported in 2022 | |
|---|---|
| 75.79% | |
| 16.78% | |
| Business travelBusiness travel | 13.50% |
| Personal travelPersonal travel | 3.28% |
| OtherOther | 7.43% |
| 2.57% | |
| 2.52% | |
| 2.16% | |
| 0.17% | |
| n/a% | |
| n/a% | |
| 7.5 bn USD of services imported in 2022 | |
|---|---|
| 77.60% | |
| 7.10% | |
| Business travelBusiness travel | 5.54% |
| Personal travelPersonal travel | 1.56% |
| OtherOther | 15.30% |
| 6.60% | |
| 3.59% | |
| 3.41% | |
| 1.58% | |
| 0.07% | |
| 0.04% | |
| 0.01% | |
| n/a% | |
Source: United Nations Statistics Division, Latest Available Data
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.
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Latest Update: March 2026