Panorama econòmic

Economic indicators

Africa's second most populous country, Ethiopia, with a population of more than 120 million people, has experienced sustained growth averaging around 10% per year over the past decade. The main drivers of this growth have been agricultural products and services, supported by foreign development aid. However, the Ethiopian economy has faced multiple challenges over the past two and a half years, including the COVID-19 pandemic, drought, conflict in the north, and the war in Ukraine, leading to significant macroeconomic and humanitarian challenges. According to the latest IMF estimates, GDP growth was 6.1% in 2023, down from 6.4% the previous year, due to strong fixed investment following the resolution of the conflict in Tigray. For 2024, the IMF anticipates growth at 6.5%, driven by private consumption, followed by another 6.5% growth in 2023.

Ethiopia's FY 2023/24 budget is 801.7 billion birr, representing a 1.9% increase, but inflation reduces its buying power by 17.8%. Over 70% of the budget is allocated to federal spending, with 26% for regions and 1.7% for local SDG projects. Capital spending is at a 10-year low, accounting for 35.5% compared to 61% for recurring costs (UNICEF). The debt-to-GDP ratio decreased to 37.9% in 2023, down from 46.4% the previous year, and is expected to decline further to 31.2% and 28.9% in the subsequent years, according to the IMF. Despite this, Fitch downgraded Ethiopia's credit rating to junk in December 2023 due to rising default risk, following a missed coupon payment on its USD 1 billion Eurobond. Ethiopia has experienced high levels of inflation in recent years, with an average of 16% over the last decade. Inflation reached 28.7% by the end of 2023, according to the National Bank of Ethiopia, with food prices, comprising 53.5% of the consumer price index, growing to 30.6% compared to the same period in 2022. Inflation is expected to decelerate to 20.7% in 2024 and 16.5% the following year, as progress is made on implementing roadmaps for foreign exchange reforms and modernizing monetary policy. The government is pursuing the "Homegrown Economic Reform Plan" and launching numerous projects under the third "Growth and Transformation Plan 2021-2025" to address vulnerabilities and stimulate private sector activity. IMF forecasts suggest that medium-term macroeconomic and structural reforms will lead to a reduction in public debt, lower external vulnerabilities, and stronger growth, investment, and exports. However, this outlook faces challenges from domestic opposition to reforms, rising global protectionism, the war in Ukraine, and climate-related shocks.

Despite doubling over the last decade, GDP per capita in Ethiopia remains one of the lowest globally, estimated at USD 2,812 in 2022 by the World Bank (PPP). Poverty reduction remains challenging due to demographic dynamics and a low initial level of development. Life expectancy at birth is only 65 years, and the average duration of schooling is 7.8 years. The unemployment rate stood at 3.4% of the total labor force in 2022, according to the World Bank, but the vast majority of the workforce is still employed in the informal economy.

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