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

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Africa's second most populous country (more than 120 million people) Ethiopia has experienced sustained growth of around 10% per year on average over the past decade. The main drivers of growth have been agricultural products and services, sustained by foreign development aid. However, the Ethiopian economy has been subject to multiple shocks over the past two and a half years, including the COVID-19 pandemic, drought, conflict in the north, and the war in Ukraine, creating significant macroeconomic and humanitarian challenges. According to the latest IMF estimates, GDP growth decelerated to 3.8% in 2022 (from 6.3% one year earlier). For 2023, the economy is expected to pick up to 5.3%, driven by industry and by private consumption and investment, replacing Kenya as the fourth-largest economy in sub-Saharan Africa amid the easing of armed conflict in the nation and the continuation of ambitious economic reform programmes (IMF).

According to figures by Fitch Ratings, the general government fiscal deficit widened to 3.4% of GDP in FY22, owing to lower revenue collection and a supplemental budget that increased military and humanitarian spending. However, the debt-to-GDP ratio decreased to 46.4% in 2022, from 53% one year earlier, and is expected to decline further this year (40.4%) and the next (37.4% - IMF). While more than half of government debt is held by external creditors, the overwhelming majority is held by multilateral and bilateral lenders. A significant share of domestic debt has been in the form of direct advances from the National Bank of Ethiopia, reaching ETB 160 billion (2.7% of GDP) as of end-FY22 (Fitch Ratings). Ethiopia has been recording high levels of inflation in recent years, with a further uptick in 2022 (to 33.6%) due to the rise in food prices (which account for the largest share of the consumption basket) exacerbated by drought in some areas and the Tigray conflict that complicated domestic supply chains. For 2023 and 2024, inflationary pressures should ease, with a marginal decrease in the inflation rate to 28.6% and 21.1%, respectively (IMF forecast). Furthermore, progress on implementing roadmaps on foreign exchange reforms and modernization of monetary policy should help address foreign exchange shortages and reduce inflation. The authorities are pursuing the “Homegrown Economic Reform Plan”, which consists of a mix of macroeconomic, structural and sectorial policies, to address vulnerabilities and tackle structural bottlenecks inhibiting private sector activity. Also, numerous projects will be launched under the third “Growth and Transformation Plan 2021-2025”. According to the IMF, in the medium term, macroeconomic and structural reforms should lead to a reduction in public debt, lower external vulnerabilities, and stronger growth, investment and exports. Nevertheless, this outlook can be challenged by downside risks, in particular from domestic opposition to reforms, rising protectionism worldwide, the war in Ukraine, and climate-related shocks.  

Although GDP per capita has doubled over the last 10 years before the COVID-19 pandemic, it remains one of the lowest in the world (estimated at USD 3,434 in 2022 by the IMF – PPP). Demographic dynamics and a low initial level of development make poverty reduction challenging. Life expectancy at birth is only 64 years and the average duration of schooling is 7.8 years. According to the World Bank, the unemployment rate in 2021 stood at 3.7% of the total labour force (latest data available).

 
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 has one of the largest livestock herds in Africa and a strong hydropower energy potential, estimated at 954 TWh. It is the 5th-largest coffee producer in the world (by volume) and the 7th-largest coffee exporter (in value); the 3rd producer of oilseeds; the 11th producer of dry beans (FAO, 2022). The agricultural sector contributes to more than a third of Ethiopia’s GDP (37.6%) but is considered the foundation of the country's economy as it employs more than two-thirds of the workforce. The main agricultural products are cereals, coffee, oilseed, cotton, sugarcane, vegetables, khat, cut flowers, hides, cattle, sheep, goats and seafood. However, the country is plagued by periodic drought, soil degradation and deforestation. The most consumed cereals in the country are maize and wheat. While the country is self-sufficient in maize, it imports about 30% of its wheat requirements. Also, the agricultural sector is hindered by high levels of taxation and poor infrastructure, which makes it problematic and expensive to deliver goods to markets. The government has been making sustained efforts to add value to its agricultural products and is planning to develop large agro-industrial parks across the country.

The industrial sector gives a modest contribution to the country’s GDP (21.9%) and occupation (9% of the workforce). The main industries are food processing, beverages, textiles, leather, garments, chemicals, metals processing and cement. The manufacturing sector still has a low impact on total exports but is expected to grow in the coming years: overall, it is estimated to account for only 5% of the GDP. Recently, a large number of companies outsourced their textile production from Asia to Ethiopia.

The tertiary sector leads Ethiopia’s foreign exchange earnings, primarily thanks to the state-run Ethiopian Airlines. It accounts for 36.3% of GDP and is estimated to employ 24% of the workforce (World Bank). Tourism and telecommunications are growing at a steady pace and are expected to play a major role in the country’s growth process. Though the Ethiopian government is in the process of privatizing many of the state-owned businesses and moving toward a market economy, the public sector still holds a predominant role in the economy, with sectors such as telecommunications, financial and insurance services, air and land transportation, and retail considered as strategic and thus expected to remain out of the privatization process in the foreseeable future. Besides, under the country’s constitution, the state owns all land and only provides long-term leases to tenants.

 
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.

 
 

Find out all the exchange rates daily on our service Currency Converter.

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 is not fully open to international trade, 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 joined the free trade zone) and has long been in the process of joining the WTO. As part of this process, the government is restructuring the customs tariffs. In order to rationalize investment opportunities, it has introduced lower duties on raw materials and semi-finished products. Ethiopia recently signed the African Continental Free Trade Agreement and created special economic zones offering tax incentives and customs duties exemptions to investors. The country mainly exports vanilla, unwrought nickel, coffee, oilseeds, vegetables, cut flowers, pulses, and meat. The main imported products are petroleum oils, rice, textiles (mostly for re-exports), medicines, wheat, palm oil, vehicles and fertilizers.

According to data by Comtrade, in 2021 Ethiopia’s main customers were Somalia (11.8%), the United States (10.8%), Germany (8%), and the Netherlands (7.5%); whereas its main suppliers were China (26.4%), India (15.7%), the United States (7.6%), Turkey (5%), and Malaysia (4.1%). The peace agreements signed with Eritrea should favour economic relations between the two countries, and the water-sharing agreement concluded with Egypt and Sudan over the Nile River dam will ease the tensions between these neighbouring countries and promote economic relations. However, due to the conflict in the Tigray region and alleged human rights violations, the U.S. removed Ethiopia from the African Growth and Opportunity Act trade program, which is expected to negatively impact trade.
 
Ethiopia's trade balance is structurally in deficit, and this trend will continue due to the country's investment-led economy, which strongly encourages imports. Trade balance also partially depends on weather phenomena, which sometimes forces Ethiopia, a large agricultural producer, to import grains during droughts. In 2021, imports of goods amounted to USD 15.9 billion, whereas exports stood at USD 3.9 billion. In the same year, Ethiopia spent USD 6.6 billion in imports of services while export generated USD 5.5 billion. According to the World Bank, the country’s trade balance was negative by 9.1% of GDP (from 9.8% one year earlier). Figures from the Ministry of Trade and Regional Integration show that during the 2021/2022 fiscal year, Ethiopia exported goods worth USD 4.1 billion: of these, the agricultural sector had the highest share (72%), followed by the mining sector (14%) and the industry sector (12%).

 
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: 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. The Joint Action for Democracy in Ethiopia and the Southern Ethiopian People’s Democratic Coalition are among the opposition parties. Medrek (Ethiopian Federal Democratic Unity) is one of the country’s main opposition parties, established in 2008.

Other parties include:

- Somali People's Democratic Party (SPDP)
- Harari National League (HNL)
-Gambella Peoples Unity Democratic Movement (GPUDM).

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: December 2023