The economic context of Ethiopia

Economic Indicators

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 Sectors of Industry

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)	35.8	24.5	37.0
Value Added (Annual % Change)	6.3	6.9	7.9

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

Find more information about your business sector on our service Market reports.

 

 

Find out all the exchange rates daily on our service International currency converter.

 

Indicator of Economic Freedom

Definition

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

 

 

Sources of General Economic Information

Ministries

Ministry of Finance
Ministry of Trade and Regional Integration
Ministry of Mines

Statistical Office

Ethiopian Statistical Service

Central Bank

National Bank of Ethiopia (NBE)

Stock Exchange

Ethiopian Commodity Exchange

Economic Portals

Addis Fortune