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 | COVID-19 Country Response

 

Economic Indicators

Africa's second most populous country, Ethiopia, with a population of more than 120 million people, has experienced sustained growth averaging around 10% per year over the past decade. The main drivers of this growth have been agricultural products and services, supported by foreign development aid. However, the Ethiopian economy has faced multiple challenges over the past two and a half years, including the COVID-19 pandemic, drought, conflict in the north, and the war in Ukraine, leading to significant macroeconomic and humanitarian challenges. According to the latest IMF estimates, GDP growth was 6.1% in 2023, down from 6.4% the previous year, due to strong fixed investment following the resolution of the conflict in Tigray. For 2024, the IMF anticipates growth at 6.5%, driven by private consumption, followed by another 6.5% growth in 2023.

Ethiopia's FY 2023/24 budget is 801.7 billion birr, representing a 1.9% increase, but inflation reduces its buying power by 17.8%. Over 70% of the budget is allocated to federal spending, with 26% for regions and 1.7% for local SDG projects. Capital spending is at a 10-year low, accounting for 35.5% compared to 61% for recurring costs (UNICEF). The debt-to-GDP ratio decreased to 37.9% in 2023, down from 46.4% the previous year, and is expected to decline further to 31.2% and 28.9% in the subsequent years, according to the IMF. Despite this, Fitch downgraded Ethiopia's credit rating to junk in December 2023 due to rising default risk, following a missed coupon payment on its USD 1 billion Eurobond. Ethiopia has experienced high levels of inflation in recent years, with an average of 16% over the last decade. Inflation reached 28.7% by the end of 2023, according to the National Bank of Ethiopia, with food prices, comprising 53.5% of the consumer price index, growing to 30.6% compared to the same period in 2022. Inflation is expected to decelerate to 20.7% in 2024 and 16.5% the following year, as progress is made on implementing roadmaps for foreign exchange reforms and modernizing monetary policy. The government is pursuing the "Homegrown Economic Reform Plan" and launching numerous projects under the third "Growth and Transformation Plan 2021-2025" to address vulnerabilities and stimulate private sector activity. IMF forecasts suggest that medium-term macroeconomic and structural reforms will lead to a reduction in public debt, lower external vulnerabilities, and stronger growth, investment, and exports. However, this outlook faces challenges from domestic opposition to reforms, rising global protectionism, the war in Ukraine, and climate-related shocks.

Despite doubling over the last decade, GDP per capita in Ethiopia remains one of the lowest globally, estimated at USD 2,812 in 2022 by the World Bank (PPP). Poverty reduction remains challenging due to demographic dynamics and a low initial level of development. Life expectancy at birth is only 65 years, and the average duration of schooling is 7.8 years. The unemployment rate stood at 3.4% of the total labor force in 2022, according to the World Bank, but the vast majority of the workforce is still employed in the informal economy.

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 120.37155.80192.01223.52248.94
GDP (Constant Prices, Annual % Change) 6.46.16.26.56.7
GDP per Capita (USD) 1,1561,4731,7872,0482,245
General Government Gross Debt (in % of GDP) 46.437.931.228.929.0
Inflation Rate (%) n/a29.120.716.512.6
Current Account (billions USD) -5.17-3.73-3.88-2.77-4.26
Current Account (in % of GDP) -4.3-2.4-2.0-1.2-1.7

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, estimated at 954 TWh. 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 (37.6%) and employing nearly two-thirds of the workforce (63%). 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.

The industrial sector, though modest, contributes significantly to the GDP (22.7%) and employs 7% 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, it is anticipated to expand in the future, representing around 4% of GDP. Notably, Ethiopia has attracted textile production outsourcing from Asia in recent years. Government policies, such as the Home-grown Economic Reform and the 10-year Perspective Development Plan, emphasize support for local manufacturers.

The tertiary sector, led by state-run Ethiopian Airlines, drives Ethiopia’s foreign exchange earnings, constituting 36.6% of GDP and employing an estimated 31% 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.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 63.7 10.2 26.2
Value Added (in % of GDP) 37.6 22.7 36.6
Value Added (Annual % Change) 6.1 4.9 7.6

Source: World Bank - Latest available data.

 

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Monetary Indicators 20152016201820192020
Ethiopian Birr (ETB) - Average Annual Exchange Rate For 1 MUR 0.610.650.810.790.80

Source: World Bank - Latest available data.

 
 

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Indicator of Economic Freedom

Definition:

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.

Score:
51,7/100
World Rank:
151
Regional Rank:
35

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

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Foreign Trade in Figures

Ethiopia's trade openness is not fully realized, with a foreign trade-to-GDP ratio of 24% (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 exports include coffee (49.1%), other vegetables (7.5%), cut flowers and flower buds (7.4%), other oilseeds and oleaginous fruits (6.8%), and dried leguminous vegetables (5.6%). Major imports consist of palm oil (10.8%), wheat and meslin (5.2%), mineral or chemical fertilizers (4.7%), and motor cars and other vehicles (4.5%) (data from Comtrade 2022).

According to Comtrade data for 2022, Ethiopia's main export destinations were the United States (10.8%), Saudi Arabia (8.7%), Somalia (8.6%), Germany (8.4%), and the Netherlands (7.0%), while imports primarily originated from China (30.0%), India (14.3%), the United States (6.7%), Turkey (4.5%), and Morocco (4.2%). Peace agreements with Eritrea are expected to boost economic relations between the two countries, while the water-sharing agreement with Egypt and Sudan over the Nile River dam will alleviate tensions and foster economic cooperation among neighboring nations. However, the U.S. decision to remove Ethiopia from the African Growth and Opportunity Act trade program due to the conflict in the Tigray region and alleged human rights violations is likely to have negative repercussions on trade.

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 2022, goods imports totaled USD 18.6 billion, while exports reached USD 3.9 billion (a 16.8% increase in imports and a 0.5% increase in exports year-on-year). Additionally, Ethiopia spent USD 7.4 billion on imports of services, while exports generated USD 7 billion (data WTO). The country's trade balance, according to the World Bank, was negative by 10.1% of GDP, up from 9% the previous year.

 
Foreign Trade Indicators 20182019202020212022
Imports of Goods (million USD) 15,30514,55413,11515,97318,663
Exports of Goods (million USD) 2,7042,7413,2583,9493,970
Imports of Services (million USD) 6,2036,1715,4086,5267,452
Exports of Services (million USD) 4,9194,8424,4625,5667,001
Imports of Goods and Services (Annual % Change) -6.6-5.3-2.013.3n/a
Exports of Goods and Services (Annual % Change) 5.4-5.8-5.419.0n/a
Imports of Goods and Services (in % of GDP) 22.820.916.916.718.3
Exports of Goods and Services (in % of GDP) 8.47.97.17.68.2
Trade Balance (million USD) -11,021-10,310-8,509-10,403-12,765
Trade Balance (Including Service) (million USD) -12,305-11,639-9,455-11,363-13,217
Foreign Trade (in % of GDP) 31.228.824.024.326.6

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

 

Main Partner Countries

Main Customers
(% of Exports)
2022
United States 10.8%
Saudi Arabia 8.7%
Somalia 8.6%
Germany 8.4%
Netherlands 7.0%
See More Countries 56.5%
Main Suppliers
(% of Imports)
2022
China 30.0%
India 14.3%
United States 6.7%
Türkiye 4.5%
Morocco 4.2%
See More Countries 40.3%

Source: Comtrade, Latest Available Data

 
 

Main Products

3.1 bn USD of products exported in 2022
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 49.1%
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) 7.5%
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 7.4%
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) 6.8%
Dried leguminous vegetables, shelled, whether or...Dried leguminous vegetables, shelled, whether or not skinned or split 5.6%
See More Products 23.5%
16.5 bn USD of products imported in 2022
Palm oil and its fractions, whether or not refined...Palm oil and its fractions, whether or not refined (excl. chemically modified) 5.4%
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 5.4%
Wheat and meslinWheat and meslin 5.2%
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 4.7%
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) 4.5%
See More Products 74.8%

Source: Comtrade, Latest Available Data

 
 

To go further, check out our service Import-Export Flows.

 
 

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 Statistics Service
Central Bank
National Bank of Ethiopia (NBE)
Stock Exchange
Ethiopian Commodity Exchange
Search Engines
Google in Amharic
Google in Tigrinya
Google in Oromo
Economic Portals
Addis Fortune

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Political Outline

Current Political Leaders
President: SAHLE-WORK Zewde (since 25 October 2018)
Prime Minister: ABIY Ahmed (since 2 April 2018)
Next Election Dates
House of Federation: October 2026
House of People's Representatives: June 2026
Main Political Parties
The ruling coalition (former Ethiopian People’s Revolutionary Democratic Front - EPRDF) is the new Prosperity Party, which is formed by the merger of three ethnically-based parties: the Amhara Democratic Party (ADP) (formerly: 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) refused to become part of the new party. The TPLF is the dominant group within the coalition, though Tigrayans represent only 6% of the country's population. However, Prime Minister Abiy Ahmed is Ethiopia's first leader from the Oromo ethnic group.

Other parties include:

- National Movement of Amhara (NaMa): right-wing, Amhara ethnic nationalist
- Ethiopian Citizens for Social Justice (EZEMA): centre, formed from the merger of several parties
- Gedeo People's Democratic Party (GPDP): Gedeo nationalism
- Kucha People Democratic Party (KPDP).

Type of State
Federal parliamentary republic.
Executive Power
The highest executive powers of the Federal Government are vested in the Prime Minister and the Council of Ministers. The Prime Minister is elected from among members of the House of Peoples' Representatives, and his term of office is for the duration of the mandate of the House of Peoples' Representatives.
The Prime Minister is the Chief Executive, the Chairman of the Council of Ministers, and the Commander-in-Chief of the national armed forces, he/she leads the Council of Ministers, coordinates its activities and acts as its representative.
The Council of Ministers comprises the Prime Minister, the Deputy Prime Minister, Ministers and other members as may be determined by law. Among its powers and functions, it formulates and implements economic, social and development policies and strategies.
Legislative Power
Federal legislative power is vested in both the government and the two chambers of the he Federal Parliamentary Assembly: the House of People's Representatives (with 547 members elected for a five-year term in single-seat constituencies), and the House of the Federation (with maximum 153 members indirectly elected by state assemblies to serve 5-year terms).
 

Indicator of Freedom of the Press

Definition:

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.).

World Rank:
101/180
 

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.

Ranking:
Not Free
Political Freedom:
6/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For the general overview of the key economic policy responses to the COVID-19 pandemic (fiscal, monetary and macroeconomic) undertaken by the government of Ethiopia, please consult the country's dedicated section in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.

 

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Latest Update: April 2024