Ethiopia’s location gives it strategic dominance as a jumping off point in the Horn of Africa, close to the Middle East and its markets. Landlocked, it borders Eritrea, Somalia, Kenya, South Sudan, and Sudan—its tiny neighbor, Djibouti, is also its main port. Ethiopia’s huge population of about 102 million (2016) makes it the second most populous nation in Africa (after Nigeria). But, although the fastest growing economy in the region, it is also one of the poorest, with a per capita income of $660. Ethiopia’s government nonetheless wants the country to reach lower-middle-income status by 2025.
Ethiopia’s economy experienced strong, broad-based growth averaging 10.5% a year from 2005/06 to 2015/16, compared to a regional average of 5.4%. The expansion of services and agriculture accounted for most of this, with manufacturing growth only modest. Private consumption and public investment explain demand-side growth, the latter assuming an increasingly important role. Higher economic growth brought with it positive trends in poverty reduction in both urban and rural areas. In the year 2000, 55.3% of Ethiopians lived in extreme poverty, but by 2011 this figure was 33.5%. The economic growth rate recently declined to about 8%. The government is implementing the 2nd phase of its Growth and Transformation Plan (GTP II). GTP II, which will run to 2019/20, aims to continue work on physical infrastructure through public investment
The main challenges for Ethiopia are sustaining its positive economic growth and accelerating poverty reduction, which requires significant progress in job creation as well as improved governance. The government is already devoting a very high share of its budget to pro-poor programs and investments.
Ethiopia has proven resilient. Over the past two decades, there has been significant progress in key human development indicators: primary school enrollment has quadrupled, child mortality been cut in half, and the number of people with access to clean water has more than doubled. These gains, together with more recent moves to strengthen the fight against malaria and HIV/AIDS, paint a picture of more well-being in Ethiopia.
However, Ethiopia still faces challenges in maternal mortality, nutrition, and gender. While access to education has increased, learning outcomes and the quality of education are not keeping pace with it, and there are regional and gender disparities in basic educational proficiency. Notwithstanding the progress in critical aspects of human development, Ethiopia still needs a considerable amount of investment and improved policies as well to reach its development objectives, given the country’s low starting point.
Last Updated: Oct 30, 2017