Eritrea: Panorama econòmic
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Eritrea is one of the world’s most closed countries. It was already facing a very difficult economic situation due to chronic droughts, a steep decrease in remittances from the diaspora, autarkic policies and past tensions with Ethiopia when it was hit by the outbreak of the COVID-19 pandemic and a locust invasion. After declining by -0.5% in 2020, economic growth rebounded to 2.9% in 2021, driven by a rebound in metal exports (IMF). According to IMF latest estimates, GDP growth slightly slowed to 2.6% in 2022 and will slightly increase to 2.8% in 2023 and 2.9% in 2024. Growth should be stimulated by higher export revenues from mining activities and the construction of the Colluli potash project (Coface).
In 2022, Eritrea's economy continued to recover from the locust invasion and the effects of the COVID-19 crisis, which despite low health impacts, caused a supply and demand shock and resulted in the deterioration of public finances. Higher revenues allowed the fiscal deficit to decrease from -4.4% GDP in 2020 to -1.3% GDP in 2022 (IMF). Despite the end of the support measures adopted by the government to help businesses and assist the most vulnerable households, fiscal balance remained in deficit due to the state wage bill and capital investment in infrastructure (Coface). According to IMF estimates, fiscal deficit should shrink to -0.1% GDP in 2023 and turn positive in 2024 (0.6% GDP). Primary deficits and high real effective interest rates feed a large public debt (AfDB).
According to IMF estimates, public debt decreased from 175.4% GDP in 2021 to 163.8% GDP in 2022, and will further decline to 146.3% GDP in 2023 and 135.3% GDP in 2024 due to government efforts to accelerate debt servicing. The very high level of Eritrea's public debt, which is mainly domestic and denominated in local currency puts the country in a situation of debt distress. After several years of deflation due to low prices for consumer goods imported at an overvalued exchange rate (Coface), inflation rose to 5.6% in 2020 and 6.6% in 2021 due to supply chain disruptions (IMF). It further increased to 7.4% in 2022 due to rising food and energy prices in the context of the conflict in Ethiopia. Inflation is expected to slowly decrease to 6.4% in 2023 and 4.1% in 2024 (IMF). Strengthening economic recovery remains the priority. Normalised relations of Eritrea with its neighbours are expected to bring a substantial peace dividend and improve relations with international donors. The government gives priority to achieving security, in particular food security, and expanding human resources and physical infrastructure, in order to participate in international trade more effectively. The country faces many challenges, including vulnerability to climate and global shocks, institutional weaknesses, deficient infrastructure, lack of reliable statistics to guide policy and an unstable regional environment.
Eritrea, which has not held an election since 1993, is one of the 10 poorest countries in the world. It suffers from recurring famines that affect a large portion of the population (as in the case of El Niño in 2016) and NGOs have been banned from the country. According to the UN, human rights abuses perpetrated by the Afwerki dictatorship have led to a mass exodus (15% of the population). It is estimated that 5,000 Eritreans flee the country each month and are thought to be the second largest refugee community in Europe behind Syrians. The labour market is almost non-existent, pushing many Eritreans into the informal sector. According to the World Bank (modeled ILO estimate), unemployment rate in Eritrea was at 6.8% of total labour force in 2021. The working poor are estimated to account for 75.2% of total employment (AfDB). Eritrea is ranked 176th out of 191 countries in the Human Development Index published by UNDP.
| Main Indicators | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 2.11 | 2.21 | 2.38 | 2.67 | 2.87 |
| GDP (Constant Prices, Annual % Change) | -0.5 | 2.9 | 2.6 | 2.9 | 2.9 |
| GDP per Capita (USD) | 596 | 614 | 651 | 715 | 755 |
| General Government Gross Debt (in % of GDP) | 179.7 | 175.4 | 163.8 | 146.3 | 135.3 |
| Inflation Rate (%) | 5.6 | 6.6 | 7.4 | 6.4 | 4.1 |
| Current Account (billions USD) | 0.30 | 0.31 | 0.31 | 0.38 | 0.36 |
| Current Account (in % of GDP) | 14.2 | 14.1 | 12.9 | 14.1 | 12.4 |
Source: IMF – World Economic Outlook Database - October 2021.
Note: (e) Estimated Data
| Monetary Indicators | 2014 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Eritrea Nakfa (ERN) - Average Annual Exchange Rate For 1 EUR | 19.61 | 17.37 | 17.79 | 16.97 | 17.22 |
Source: World Bank - Latest available data.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
|---|---|---|---|
| Employment By Sector (in % of Total Employment) | 63.1 | 7.3 | 29.6 |
| Value Added (in % of GDP) | 14.1 | 21.8 | n/a |
| Value Added (Annual % Change) | 3.6 | -0.2 | n/a |
Source: World Bank - Latest available data.
| 2018 | 2019 | 2020 | |
|---|---|---|---|
| Labour Force | 1,589,292 | 1,612,622 | 1,545,718 |
Source: International Labour Organization, ILOSTAT database
| 2017 | 2018 | 2019 | |
|---|---|---|---|
| Total activity rate | 81.63% | 81.46% | 81.25% |
| Men activity rate | 88.21% | 87.95% | 87.60% |
| Women activity rate | 75.09% | 75.00% | 74.92% |
Source: International Labour Organization, ILOSTAT database
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.
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
See the country risk analysis provided by Coface.
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
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Latest Update: September 2023
