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. Although it is the fastest growing economy in the region, it is also one of the poorest, with a per capita income of $783. Ethiopia’s government aims to reach lower-middle-income status by 2025.
Ethiopia’s economy experienced strong, broad-based growth averaging 10.3% a year from 2005/06 to 2015/16, compared to a regional average of 5.4%. According to official statistics, Ethiopia’s gross domestic product (GDP) is estimated to have rebounded to 10.9% in FY2017. The expansion of agriculture, construction and services accounted for most of this, with modest manufacturing growth. 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 2000, 55.3% of Ethiopians lived in extreme poverty; 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
Ethiopia’s main challenges are sustaining its positive economic growth and accelerating poverty reduction, which requires progress in job creation and improved governance.
Sustainable ways to finance infrastructure, support private investment through credit markets, and tap into the growth potential of structural reforms can help the country maintain high economic growth.
Important measures were taken to address persistent Birr overvaluation, large external imbalances, foreign exchange shortages, and rising external debt. Inflation remained in single digits on average in
In the past two decades, there has been
Ethiopia still faces challenges in maternal mortality, nutrition, and gender equality. 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.
Last Updated: Apr 19, 2018