Ethiopia’s Economy
Ethiopia has experienced double-digit economic growth, averaging 10.8% since 2005, which has mainly been underpinned by public-sector-led development. Real gross domestic product (GDP) is estimated to have grown by 10.2% in fiscal year 2014/15. The agriculture, services and industry sectors accounted for 38.8%, 46.6% and 15.2% of real GDP, respectively.
Ethiopia, having registered high economic growth since 2005 at an average 10.8% per annum, stands out as one of the fastest growing economies in the world. In 2014/15, real GDP grew by 10.2%. While the share of agriculture in the GDP declined over ten years from 47% in 2004/05 to 39% in 2014/15, that of the services sector increased from 40% to 46% in the same period.
Ethiopia’s Export
Agriculture remains the leading sector in terms of contribution to the country’s overall economy. It is a major source of food like for domestic consumption, of raw materials for the domestic manufacturing industries and of primary commodities for export. Moreover, the sector contributes 73% of employment and supplies 70% of the raw material requirements of local industries. Livestock and livestock products, as well as food crops, were the leading contributors to agriculture-sector growth in 2014/15. Ethiopia’s agriculture depends highly on traditional farming methods and a rain-fed farming system and is vulnerable to environmental and climate-related impacts.
The average value of export earnings between 2011/12 and 2014/15 was USD 3.1 billion. In 2014/15, the value of merchandise exports totaled USD 3 billion, posting an 8.5% decline year-on-year. This was due to a fall in the volume of exports (such as coffee and pulses) and decreases in gold, oilseeds and pulses prices.
Ethiopia has a rising trade imbalance, with total imports increasing by 12.5% each year on average over the last ten years. Imports, which increased from $3.6 billion in 2010 to $12.5 billion in 2017, the top of Ethiopia’s trade imbalance, drove the increase in the trade deficit. Concerned about the rising trade imbalance, Ethiopia’s government has worked to decrease imports and implemented other macroeconomic policies in recent years, resulting in a reduction in the trade deficit to $12.3 billion in 2018 and $11.6 billion in 2019. (trade.gov)
Agriculture Export In Ethiopia
Ethiopia’s exports continued to be dominated by primary commodities, as export diversification is still at a very early stage, and imports were dominated by capital goods, arising from growing demand for investment in infrastructure development. In 2014/15, Ethiopia’s exports were valued at USD 3 billion, 8.5% less than in the previous fiscal year. This decline in the values of exports came mainly from drops in the export prices of gold, coffee, and oilseeds, amongst other export products.
In the same period, imports were increased by 20.4% to USD 16.5 billion compared to the preceding year. The major imports were capital goods (41.9%), consumer goods (27.4%), semi finished goods (15.7%) and fuel (18.5%).
Ethiopia is considered as having thick borders. In the World Bank report, Doing Business 2016, the country was ranked 166th out of 189 economies in the area of trading across borders, one place down from the previous year. In addition, measures to facilitate easy movement of persons and labor such as the issuance of a common means of identification at the regional level, easing of visa requirements and the establishment of efficient immigration offices at border posts, with the required human and organizational capacities, are partially not yet applied.
The current Ethiopian government has taken a variety of policy initiatives to address the export sector’s problems. The Ethiopian government has taken measures such as simplifying export licensing, currency devaluation, a 70% loan for export-related investment, a preferential interest rate scheme that is 3.5% lower than the interest rate on non-export activity loans, and foreign exchange retention of 10% of earnings (Bekele & Mersha, 2019). Despite these incentives, the disparity between Ethiopian imports and exports has widened during the previous two decades.
Ethiopia is now facing a challenging scenario in terms of foreign exchange revenues. The persistent trade imbalance over the last two decades, as well as the necessity to borrow to finance it, has resulted in a high degree of foreign exchange shortage and debt load. In 2016, for example, the debt to gross domestic product ratio was 26%. (NBE, 2018).