The Ethiopian Government has developed comprehensive agricultural and economic development plans that have contributed to the country’s substantial growth in agriculture, industry and services sectors.
Over the past five years, Ethiopia has enjoyed uninterrupted and impressive economic growth averaging over 8 percent annually. Economic freedom peaked in 2019 and 2020. The Gross Domestic Product (GDP) in Ethiopia was worth 111.27 billion US dollars in 2021, according to official data from the World Bank. The GDP value of Ethiopia represents 0.05 percent of the world economy. Ethiopia has managed to become the largest economy in the East Africa region and the third giant in sub-Saharan Africa. Ethiopia’s macro economy has been resilient and continued to register growth amid various bottlenecks resulting from man-made and natural challenges including the bloody conflict in the Tigray region, the Ukraine-Russia crisis, the COVID-19 pandemic and drought.
Among the sectors that showed growth, agriculture which is playing a leading role in national economic development.Ethiopia’s economy is based on agriculture, which accounts for 46% of GDP and 85% of total employment. Agriculture has witnessed 6.1 per cent growth, especiallythe productivity in wheat farming as a driving force for the results. Furthermore, the nation has planted 4.7 billion new coffee seedlings to increase the coffee production of the country, and in this fiscal year Ethiopia planned to produce 20 per cent higher coffee than the previous year. Ethiopia is also working to export fruits to the international market as it has been able to register encouraging results in the sector. Recently, the Horn of Africa nation announced that it was making preparations to export wheat to the international market starting this year. The Government of Ethiopia (GOE) has identified key priority intervention areas to increase productivity of smallholder farms and expand large-scale commercial farms. Among the top priorities identified by the GOE include: small and large-scale irrigation development, financing agricultural inputs, increasing productivity of crops and livestock, improving agricultural production methods using mechanization, post-harvest loss reduction, developing a research-based food security system, and natural resource management.
Fishing occurs on the country’s rivers and inland lakes and is primarily artisanal. Most of the fish sold locally is produced by small operators whose scale of operation and technology is inadequate for export production. Although the fishing industry is small, production more than doubled during the 1990s. The country does not engage in significant economic activity in the forestry sector.
Hydroelectricity, the most important source of power for industries and major cities, is generated at several stations, including those on the Awash River, the Blue Nile River or its tributaries, the Omo River, the Gilgel Gibe River, and the Shebele River. However, these stations represent only part of Ethiopia’s full potential, and others are planned. Some hydroelectric projects have generated considerable controversy, such as the massive Gilgel Gibe III dam and power station along the Omo River, which was inaugurated in 2016, and the massive Grand Ethiopian Renaissance Dam (GERD) and power stations along the Blue Nile River, construction of which began in 2011.
Modern manufacturing contributes about one-tenth of Ethiopia’s GDP. Products are primarily for domestic consumption. Among the most important are processed foods and beverages, textiles, tobacco, leather and footwear, and chemical products. Cottage industry and small enterprises are more important than industrial manufacturing in offering nonfarm employment and in producing a variety of consumer goods—for example, furniture, farming and construction implements, utensils, woven fabric, rugs, leathercrafts, footwear, jewelry, pottery, and baskets. Some of these products reach the tourist market.
The National Bank of Ethiopia is the country’s central bank. It issues the national currency, the birr, and is also responsible for regulatory functions. There are many commercial banks, most of which are located in Addis Ababa. The Commercial Bank of Ethiopia is the largest commercial bank, with branches throughout the country. The Development Bank of Ethiopia provides loans for agricultural and livestock development and investment in manufacturing. Since the end of the 20th century, more financial institutions have begun extending loans for business and real-estate development.
Ethiopia’s exports are almost entirely agricultural. Coffee is the primary foreign-exchange earner; other exported products include khat, hides and skins, live animals, oilseeds, and gold. Manufactures, especially machinery and transport equipment, and chemical products account for much of the value of imports; food products and fuels are also important. Significant trading partners include Saudi Arabia, China, and the United States. With more being spent on imports than earned from exports, Ethiopia’s balance of payments has been negative for many years.
The services sector, primarily tourism, contributes to about two-fifths of Ethiopia’s GDP. Although tourism was curtailed during the period of Derg rule, Ethiopia once again promotes the tourist potential of such historical wonders as the rock-hewn churches of Lalibela, the antiquities at Aksum, and the Gondar castles. Of equal attraction are Ethiopia’s diverse peoples, their intriguing cultures, and the natural beauty of their land. Unfortunately, potential has been limited because of a lack of tourism infrastructure and continuing political instability in the country. The 1998–2000 conflict with Eritrea and lingering tensions have discouraged tourists from visiting places such as Aksum, one of the most attractive destinations in northern Ethiopia.