Ethiopia Economy Facts

Economical overview

Agriculture is Ethiopia’s economic base and accounts for almost a third of GDP. Apart from the processing of agricultural products, other industries are of no greater importance. Despite strong economic growth since 2004, Ethiopia remains one of the world’s poorest and most aid-dependent countries.

GDP growth has been around 10 percent for one and a half decades, which means that the economy is one of the fastest growing in Africa. This has enabled investments in education, poverty reduction and infrastructure projects. However, high transport costs and political unrest in the country and in the region are hampering economic development. Several construction projects are underway to improve the roads to ports in the coastal country’s neighboring countries.

• Countryaah.com: Major imports by Ethiopia, covering a full list of top products imported by the country and trade value for each product category.

Three out of four residents depend on agriculture for their livelihood. The majority are found in the informal economy and grow mainly for self-catering. The market for consumer goods is small; household income mostly goes to food.

Agriculture also accounts for the majority of exports. The coffee dominates, although oil plants nowadays bring in almost equal revenue. This is not least due to the sale of sesame seeds to China, which has become Ethiopia’s largest trading partner. The mildly narcotic plant khat is mainly sold to Somalia and Djibouti. Leather and leather goods are also important export goods, as are gold, sugar and cut flowers. Imports are significantly larger than exports.

• Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including ETH which represents the country of Ethiopia. Check findjobdescriptions to learn more about Ethiopia.

Drought and mist growth threaten

Agriculture is old-fashioned and on a regular basis the country suffers from drought and famine. Even during years of normal weather conditions, many Ethiopians, especially children, have too little to eat. The last truly major famine disaster, 1984–1985, claimed a million lives. Since then, international weather systems for weather disasters have been built up. Thus, preventive relief efforts can be put in place before the drought leads to full-scale famine. Nevertheless, millions of people needed emergency assistance when severe drought occurred in 2011, 2015, 2016 and 2017. In 2015, every third Ethiopian got too little to eat.

Even during years of normal harvests – and despite the good growth – Ethiopia needs external aid and loans to bring the economy together. The EU and the US are major donors.

Ethiopia has a large external debt, even though it was included in the World Bank’s debt-relief program for heavily indebted poor countries (HIPC) from the beginning of the 2000s. This resulted in the cancellation of loans to individual lenders. Ethiopia also became one of the 18 countries that in 2005 were granted full write-off of debts to the World Bank, the IMF and the African Development Bank. The decision was made by G8, the world’s seven richest industrialized countries, and Russia. Since then, foreign debt has risen again.

The EPRDF government, which has been in power since 1991 (see Modern History), invested from the beginning on opening up the economy and has implemented some deregulation and privatization. In the beginning of the 2010s, the government again strengthened its influence over the business sector, which risked discouraging foreign investors. Privatization was also slow: of eleven state-owned companies that were offered in 2014, only five attracted stakeholders and only three were ultimately approved for sale.

New reform agenda

When the Abiy government came to power in the spring of 2018, a series of economic reforms and privatization plans were launched, again with the aim of attracting foreign companies to invest. Companies in civil aviation, shipping, the energy sector, the sugar industry and telecommunications were intended to be sold out. However, the violent domestic political conflicts (see Current policy) have contributed to the fact that interest has remained limited and that the economy must therefore be driven by public initiatives.

At the end of 2019, the IMF granted a $ 2.9 billion three-year aid package to help the Abiy government implement the planned economic reforms. The World Bank pledged $ 3 billion in financial aid, and Abiy said a further $ 9 billion would come from other lenders, including the European Development Bank and UN agencies. Earlier, money had come from Middle Eastern countries, such as $ 3 billion from Abu Dhabi.

Ethiopia has a major shortage of foreign currency. The country needs to restructure a number of state-owned companies and make the financial sector more stable. High inflation is also a problem, as is a rapidly rising government debt.

FACTS – FINANCE

GDP per person

US $ 772 (2018)

Total GDP

US $ 84,355 million (2018)

GDP growth

6.8 percent (2018)

Agriculture’s share of GDP

31.1 percent (2018)

Manufacturing industry’s share of GDP

5.8 percent (2018)

The service sector’s share of GDP

36.5 percent (2018)

Inflation

14.6 percent (2019)

Government debt’s share of GDP

61.0 percent (2018)

External debt

US $ 26,562 M (2017)

Currency

Birr

Merchandise exports

US $ 3,030 million (2017)

Imports

US $ 14,235 million (2017)

Current account

– US $ 5 566 million (2017)

Commodity trade’s share of GDP

21 percent (2018)

Main export goods

coffee, oilseeds, live animals, leather goods, gold, pearls, precious stones (2017)

Largest trading partner

China, USA, Somalia, India, Saudi Arabia, Germany, Netherlands (2017)

2009

December

Tough punishment for suspected coup makers

Judgments fall against the suspected Ginbot members who are charged with plans to overthrow the government (see April 2009). Five receive the death penalty and 33 life imprisonment. Four of those sentenced to death are in exile, including Ginbot leader Berhanu Nega.

August

The UN decides on damages

The UN commission commissioned to investigate the debt and damages issue following the war against Eritrea is ordering Ethiopia to pay close to US $ 164 million to Eritrea. At the same time, Eritrea will pay $ 174 million to Ethiopia. Although the decision represents a “net profit” for Ethiopia, the government rejects the decision.

July

New law against terrorism faces criticism

Parliament adopts a new anti-terror law with vague definitions of terrorism. Human rights groups fear that the law can be used to restrict human and civil rights.

April

Several arrested for suspected coup attempt

About 40 people, including several army officers, are arrested on suspicion of sabotage plans and overthrowing the government. They are accused of belonging to the banned group Ginbot 7 (“May 15”, which refers to Election Day 2005). Ginbot 7 is led by Berhanu Nega, who was elected mayor of Addis Ababa in 2005 but never took office and now lives in a country escape in the United States.

January

New law makes it difficult for voluntary organizations

A new law is adopted which means that non-profit organizations (so-called NGOs) find it difficult to operate in Ethiopia. Organizations that receive more than a tenth of their money from abroad can no longer work on issues related to human rights, conflict resolution, the judiciary or children’s and women’s rights.