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 114 million people) Ethiopia has experienced sustained growth of around 10% per year on average over the past decade. Main drivers of growth are agricultural production and services, sustained by foreign development aid. However, due to the COVID-19 pandemic, the locust invasion and the conflict in the Tigray region, the economic growth slowed down to reach an estimated 2% GDP in 2021, down from 9% in 2019. Coface expects the GDP growth to accelerate moderately to 4% in 2022, thanks to the easing Covid-19 restrictions and the ongoing recovery of key trading partners. Downside risks include the persistence of the conflict and rising external debt levels (Focus Economics).

Ethiopia's strong economic growth was halted by the coronavirus crisis, a locust infestation and an increasingly violent conflict. The support plan implemented in response to the crisis, and in 2021 increased conflict-related expenditures and debt service, lead to the deterioration of public finances. Public deficit widened from -2.8% GDP in 2020 to -3% GDP in 2021, and is expected to further increase to -3.5% GDP in 2022 (Coface). As the conflict is affecting relations with major external creditors, the deficit will be financed mainly through domestic sources (Coface). Public debt increased from an estimated 55.4% GDP in 2020 to 57.1% GDP in 2021 (IMF). It is expected to reach 60% GDP in 2022 (Coface). The depreciation of the birr will weigh on external public debt. In high risk of debt distress, Ethiopia requested to G20 and Paris Club creditors to benefit from a debt operation under the G20 Common Framework. The country benefited from a suspension of debt service payments but despite the reforms announced, the debt restructuring process is taking time. Driven by rising food prices and the depreciation of the birr and exacerbated by the conflict, inflation soared to 25.2% in 2021 (IMF). Coface forecasts the inflation to decrease to 22% in 2022, remaining well above the central bank’s single-digit target. 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, weaker-than-expected global growth, 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. 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 2.4 years. According to the World Bank, the unemployment rate in 2020 was 2.8% of total labour force. The conflict in the Tigray region caused massive internal displacement and increased famine, putting the country on the brink of a humanitarian disaster (WFP).

 
Main Indicators 20202021 (e)2022 (e)2023 (e)2024 (e)
GDP (billions USD) 96.6199.27111.18126.19140.05
GDP (Constant Prices, Annual % Change) 6.16.33.85.36.2
GDP per Capita (USD) 994996111
General Government Gross Debt (in % of GDP) 53.753.046.440.437.4
Inflation Rate (%) 20.426.833.628.621.1
Current Account (billions USD) -4.44-3.17-4.75-5.61-4.97
Current Account (in % of GDP) -4.6-3.2-4.3-4.4-3.6

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 hydraulic energy potential, estimated at 45,000 megawatts. 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, 2020). The agricultural sector contributes to more than a third of Ethiopia’s GDP (35.5%), 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. 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 (23.1%) 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. 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 accounted for 36.8% of GDP in 2020 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.
 
The COVID-19 pandemic particularly hit the sectors of tourism, air transport, hospitability and manufacturing. The farming sector suffered from a locust infestation and coffee shipments suffered from reduced production caused by security problems and population displacement.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 66.6 9.3 24.0
Value Added (in % of GDP) 35.5 23.1 36.8
Value Added (Annual % Change) 4.0 9.6 5.3

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 relatively open to international trade, with a foreign trade-to-GDP ratio of 24% (World Bank, 2020). It is a member of the IGAD and the COMESA (but has not joined the free trade zone), and since March 2003, has 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 also 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 coffee, oilseeds, vegetables, cut flowers, pulses, meat and manufacturing products. The main imported products are petroleum oils, medicines, wheat, palm oil, vehicles and fertilizers.

Ethiopia’s main customers are Somalia, the United States, the Netherlands, Saudi Arabia, the United Arab Emirates, Germany and Djibouti. Its main suppliers are China, India, Turkey, the United States, the United Arab Emirates, Kuwait and Japan. 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. The Djibouti-Addis Ababa railway line is expected to increase Ethiopia’s exports of manufactured goods. However, due to the conflict in the Tigray region and alleged human rights violations, the US removed Ethiopia from the African Growth and Opportunity Act trade program, which will negatively impact trade in 2022.

Ethiopia's trade balance is historically 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 phenomenon, which sometimes forces Ethiopia, a large agricultural producer, to import grains during droughts. In 2020, imports of goods amounted to USD 13.12 billion, whereas exports of goods amounted to USD 3.26 billion. Ethiopia spent USD 5.38 billion in imports of services while export of services generated USD 4.32 billion. Imports of goods and services increased by 15.6% compared to 2019 while exports decreased by 0.5%. In 2020, due to the COVID-19 pandemic, exports suffered from the lack of tourism and the fall in activity of Ethiopian Airlines. Coffee production was also reduced due to security problems and population displacement (Coface).

 
Foreign Trade Indicators 20162017201820192020
Imports of Goods (million USD) 16,58816,07615,30514,55413,115
Exports of Goods (million USD) 4,6123,1632,7042,7413,258
Imports of Services (million USD) 3,6274,8446,1296,0795,375
Exports of Services (million USD) 2,9813,2644,5094,6544,318
Imports of Goods and Services (Annual % Change) 0.0-7.52.218.515.6
Exports of Goods and Services (Annual % Change) -8.17.711.817.7-0.5
Imports of Goods and Services (in % of GDP) 27.123.522.820.916.9
Exports of Goods and Services (in % of GDP) 7.87.68.47.97.1
Trade Balance (million USD) -11,917-11,206-11,021n/an/a
Trade Balance (Including Service) (million USD) -14,091-12,673-12,305n/an/a
Foreign Trade (in % of GDP) 34.931.131.228.824.0

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

 

Main Partner Countries

Main Customers
(% of Exports)
2020
Somalia 11.6%
United States 10.2%
Netherlands 7.5%
Saudi Arabia 7.4%
United Arab Emirates 6.7%
See More Countries 56.5%
Main Suppliers
(% of Imports)
2020
China 29.5%
India 10.5%
Türkiye 5.7%
United States 5.1%
United Arab Emirates 4.8%
See More Countries 44.4%

Source: Comtrade, Latest Available Data

 
 

Main Products

2.5 bn USD of products exported in 2020
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 31.5%
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) 15.4%
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) 10.2%
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 7.5%
Dried leguminous vegetables, shelled, whether or...Dried leguminous vegetables, shelled, whether or not skinned or split 7.0%
See More Products 28.4%
14.1 bn USD of products imported in 2020
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 11.2%
Medicaments consisting of mixed or unmixed...Medicaments consisting of mixed or unmixed products for therapeutic or prophylactic uses, put up in measured doses "incl. those in the form of transdermal administration" or in forms or packings for retail sale (excl. goods of heading 3002, 3005 or 3006) 3.3%
Wheat and meslinWheat and meslin 3.1%
Palm oil and its fractions, whether or not refined...Palm oil and its fractions, whether or not refined (excl. chemically modified) 3.0%
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) 3.0%
See More Products 76.5%

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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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, the new 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 Democratic Republic.
Executive Power
The highest executive powers of the Federal Government are vested in the Prime Minister and in 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 110 members, one for each nationality, and one additional representative for each one million of its population, designated by the regional councils).
 

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

COVID-19 epidemic evolution
To find out about the latest status of the COVID19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Ethiopia, please visit the Ethiopian Ministry of Health’s Twitter page with the official data.

For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest public health situation in Ethiopia and the current sanitary measures in vigour, please consult the Ministry of Health’s COVID-19 symptoms, prevention measures, and advice (in Amharic only).
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.

The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports), refer to the Latest Government Measures & Support page of the Ethiopian Investment Commission.

For a general overview of trade restrictions due to COVID-19 pandemic, please consult the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For  information on the economic recovery scheme put in place by the Ethiopian government to address the impact of the COVID19 pandemic on the Ethiopian economy, refer to the Business & Regulation Environment section of the Latest Government Measures & Support page of the Ethiopian Investment Commission.

For the general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and macroeconomic) taken by the Ethiopian government to limit the socio-economic impact of the COVID-19 pandemic, please consult the section dedicated to Ethiopia in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Ethiopian government to help small and medium-sized companies to deal with the economic impacts of the COVID19 epidemic on their activity, refer to the Business & Regulation Environment section of the Latest Government Measures & Support page of the Ethiopian Investment Commission.

For a general overview of international SME support policy responses to the COVID-19 outbreak refer to the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
There are no specific support plans for exporters in Ethiopia so far. For future possible up-to-date information please visit the website of the Ethiopian Ministry of Trade and Indsutry.
 

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Latest Update: November 2022