Ethiopia is the second-most populous country in Sub-Saharan Africa with a population of 96.5 million, and population growth rate of 2.5% in 2014. One of the world’s oldest civilizations, Ethiopia is also one of the world’s poorest countries. The country’s per capita income of $550 is substantially lower than the regional average (Gross National Income, Atlas Method). The government aspires to reach middle income status over the next decade.
The economy has experienced strong and broad based growth over the past decade, averaging 10.8% per year in 2003/04 - 2013/14 compared to the regional average of 4.8%. Expansion of the services and agricultural sectors account for most of this growth, while manufacturing sector performance was relatively modest. Private consumption and public investment explain demand side growth with the latter assuming an increasingly important role in recent years.
Economic growth brought with it positive trends in reducing poverty, in both urban and rural areas. While 38.7% of Ethiopians lived in extreme poverty in 2004-2005, five years later this was 29.6%, which is a decrease of 9.1 percentage points as measured by the national poverty line, of less than $0.6 per day. Using the Growth and Transformation Plan (GTP), the government’s goal is to reduce this further to 22.2% by 2014-2015.
Ethiopia has achieved the Millennium Development Goals (MDGs) for child mortality and water. There has also been encouraging progress particularly in gender parity in primary education, HIV/AIDS, and malaria. Positive results have also been achieved in universal primary education. Ethiopia is now strategically planning for the Sustainable Development Goals. For additional information about Ethiopia’s economy, please refer to the most recent economic updates for the country: Laying the Foundation for Achieving Middle Income Status, Strengthening Export Performance through Improved Competitiveness and Overcoming Constraints in the Manufacturing Sector.
The main challenge for Ethiopia is to continue and accelerate the progress made in recent years toward the MDGs and to address the causes of poverty among its population. The government is already devoting a very high share of its budget to pro-poor programs and investments. Large scale donor support will continue to provide a vital contribution in the near-term to finance the levels of spending needed to meet these challenges. However, even if donor support is increased, using aid effectively will require Ethiopia to improve governance, empower local authorities, and become more accountable to its citizens.
Over the past two decades, there has been significant progress in key human development indicators: primary school enrollments have quadrupled, child mortality has 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 improved well-being in Ethiopia. Notwithstanding the progress in critical aspects of human development, Ethiopia needs considerable investment and improved policies to reach its development objectives, given the country’s low starting point.
Last Updated: Sep 23, 2015