Legatum Prosperity Index 2021: Ethiopia (ranked 145th).
Is Ethiopia wealthy or impoverished?
Ethiopia’s strategic location as a launching pad in the Horn of Africa, near to the Middle East and its markets, provides it strategic superiority. Ethiopia is a landlocked country that shares borders with Eritrea, Somalia, Kenya, South Sudan, and Sudan, and has relied on Djibouti’s main port for international trade for the past two decades. With the recent Eritrean peace accord, Ethiopia is expected to regain access to the Eritrean ports of Assab and Massawa as well.
Ethiopia is Africa’s second most populous country after Nigeria, with 115 million inhabitants (2020), and the region’s fastest-growing economy, with 6.1 percent growth in FY2019/20. It is, nevertheless, one of the poorest, with a gross national income per capita of $890. By 2025, Ethiopia wants to be classified as a lower-middle-income country.
Ethiopia has been one of the world’s fastest growing countries over the past 15 years (at an average of 10 percent per year). Capital accumulation, particularly through public infrastructure projects, was a major driver of growth, among other things. Due to COVID-19, Ethiopia’s real GDP growth slowed in FY2019/20 and even more in FY20220/21, with growth in industry and services falling to single digits. Agriculture, which employs more than 70% of the population, was unaffected by the COVID-19 epidemic, and its contribution to growth improved marginally in FY2019/20 compared to the previous year.
Between 2010 and 2020, persistent strong economic growth led in positive trends in poverty reduction in both urban and rural areas. The percentage of the people living in poverty has reduced from 30% in 2011 to 24% in 2016, and human development indicators have improved over time. Despite this, many flaws remain. Inequality is on the rise, owing to the growing discrepancy between urban and rural areas. The bottom 10% of the population has not grown in terms of consumption (as of 2005), notably in rural areas, and inequality is on the rise. Furthermore, COVID-19 has exacerbated existing flaws.
The government has unveiled a new 10-year development plan that will run from 2020/21 through 2029/30 and is based on the 2019 Home-Grown Economic Reform Agenda. The plan intends to maintain the phenomenal growth achieved during the preceding decade’s Growth and Transformation Plans while easing the transition to a more private-sector-driven economy.
Ethiopia’s key problems include maintaining positive economic growth and accelerating poverty reduction, both of which necessitate significant progress in job creation and stronger governance to guarantee that growth is equitable across the country. The government spends a large portion of its budget on anti-poverty initiatives and investments. Large-scale donor financing will continue to play an important role in funding pro-poor activities in the near future. The following are some of the most significant challenges:
- Ethiopia, like the rest of the world, has been hit hard by the COVID-19 pandemic’s catastrophic social and economic consequences. While exports and foreign direct investment have recovered in 2020/21, and jobs have recovered, there are likely to be some long-term scars. Urban employment has not entirely recovered, some people and businesses continue to report income losses, and poverty levels are projected to have risen.
- The battle, which began in November 2020, is expected to have an impact on agriculture productivity and food security in the country’s north, as well as stymie economic recovery.
- Ethiopia’s Human Development Index is 0.38, implying that a kid born today in Ethiopia will be 38 percent as productive as if he or she had access to a complete education and good health. This is lower than the Sub-Saharan Africa average, but slightly higher than the low-income country average. Learning poverty affects 90% of children under the age of five, and 37% of children under the age of five are stunted.
- Ethiopia has been dealing with the largest locust invasion in decades since 2020. This might jeopardize Ethiopia’s development progress and jeopardize millions of Ethiopians’ food security and livelihoods.
- A nascent private sector whose ability to grow and create jobs has been hampered by business climate and competitiveness concerns.
- The growing workforce (roughly 2 million per year) puts strain on the labor market’s absorption capacity, necessitating job improvement while also providing enough new jobs.
Is Ethiopia’s Gross Domestic Product (GDP) high?
According to Trading Economics global macro models and analysts, Ethiopia’s GDP is predicted to reach 110.00 USD billion by the end of 2021. According to our econometric models, Ethiopia’s GDP will trend around 112.00 USD billion in 2022 and 115.00 USD billion in 2023 in the long run.
What accounts for Ethiopia’s low GDP?
Ethiopia’s riches have allowed the country to retain touch with the outside world for generations, unlike most other countries in Sub-Saharan Africa. Ethiopian traders have traded gold, ivory, musk, and wild animal skins for salt and luxury items like silk and velvet since ancient times. Coffee had become one of Ethiopia’s most important cash crops by the late nineteenth century. The majority of trade traveled via two major trading routes at the period, both of which ended in the Kefa-Jima region in the far southwest. From there, one route led north to Mitsiwa via Gonder and Adwa, while the other went south to Harer and then on to Berbera or Zeila on the Red Sea via the Awash River basin.
Ethiopia, despite having tremendous resources, never developed into a major trading nation. Traders were detested by the majority of Ethiopians, who preferred to emulate the country’s warriors and priests. Greek, Armenian, and Arab traders were the economic mediators between Ethiopia and the rest of the world after establishing a footing in the country. Arabs settled in the interior as well, eventually controlling all commercial activity except small trading.
When the Italian occupation of Ethiopia ended in 1941, they left behind a country with an economic structure that had remained mostly unchanged for decades. Communications had improved, especially in the area of road construction, and attempts had been made to develop a few minor companies and introduce commercial farming, particularly in Eritrea, which Italy had occupied since 1890. However, the adjustments were minor. Due to the fact that only a tiny percentage of the people participated in the money economy, trade was primarily based on barter. Wage labor was scarce, economic units were mainly self-sufficient, international trade was minimal, and the market for manufactured goods was tiny.
Much of the economy remained constant in the late 1940s and 1950s. The government prioritized the expansion of the bureaucratic structure and ancillary services in its development initiatives. The majority of farmers farmed tiny parcels of land or raised livestock. Traditional and rudimentary farming methods offered a subsistence level of life for the population. Furthermore, many nomadic peoples raised animals and moved around in drier areas on a seasonal basis. The agricultural sector expanded modestly, while the industrial sector accounted for only a small portion of the entire economy.
Emperor Haile Selassie I (reigned 1930-74) had resumed proposals for a transformation from a subsistence to an agro-industrial economy by the early 1950s. Ethiopia required an infrastructure to exploit resources, a material base to enhance living conditions, and improved health, education, communications, and other services to complete this mission. The establishment of centrally administered development plans was a fundamental component of the emperor’s new economic policy.
The First Five-Year Plan (1957-61) aimed to connect remote regions by building a strong infrastructure, particularly in transportation, construction, and communications.
The Second Five-Year Plan (196267) marked the beginning of a 20-year plan to transform Ethiopia’s primarily agricultural economy into an agro-industrial one. Ethiopia’s economic well-being was further aided by the Third Five-Year Plan (1968-73) which aimed to improve manufacturing and agro-industrial performance. The third plan, however, showed the government’s determination to increase educational opportunities and enhance peasant agriculture, unlike its predecessors.
The gross national product (GNP) increased at a 3.2 percent annual pace during the First Five-Year Plan, compared to an anticipated number of 3.7 percent, while growth in economic sectors like agriculture, industry, and mining fell short of the national plan’s targets. Because of a shortage of trained staff, the Planning Commission never examined the performance of the Second and Third Five-Year Plans. According to data from the Ethiopian government’s Central Statistical Authority, the economy grew steadily from 1960/61 to 1973/74. Ethiopia, for example, had an average yearly growth rate of 4.4 percent in per capita gross domestic output between 1960 and 1970. (GDP). Ethiopia’s economic success was varied in comparison to its neighbors.
Ethiopia’s economy had begun to diversify by the early 1970s, not only in terms of growth but also in terms of manufacturing and services. However, most Ethiopians’ lives did not improve as a result of these reforms. About four-fifths of the population were subsistence farmers who lived in poverty because they had to pay taxes, rents, debt payments, and bribes with the majority of their poor harvest.
The Ethiopian economy was liberalized and restructured following the 1974 revolution. The economy of the country went through four phases after the revolution. The revolution’s 1974-78 phase was characterised by internal political upheaval, violent warfare, and fundamental institutional restructuring. There was little economic development; instead, the government’s austerity measures and the highly volatile political climate wreaked havoc on industries including agriculture and industry. As a result of these issues, GDP increased at a pace of only 0.4 percent each year on average.
The economy began to improve in the second phase (1978-80), as the government consolidated power and launched institutional changes. More importantly, when internal and external threats faded, security circumstances improved. GDP increased at a 5.7 percent yearly rate.
The economy suffered a setback in the third phase (1980-85). With the exception of the Ethiopian fiscal year (EFY) 1982/83, GDP growth has slowed. Manufacturing also suffered a setback, while agriculture entered a state of crisis, owing to a severe drought that resulted in widespread starvation.
The economy remained stagnant in the fourth phase (1985-1990). During this time, both GDP and the manufacturing sector rose, with GDP expanding at a 5 percent annual rate on average. The persistent consequences of the 1984-85 drought, on the other hand, undermined these accomplishments and contributed to the economy’s overall stagnation.
Since 1991, Ethiopia’s government has pursued an economic reform program that includes privatization of state-owned firms and the simplification of government regulations. The reforms have attracted much-needed foreign direct investment, despite the fact that the process is still ongoing.
In 2015, Ethiopia had 2,700 millionaires, more than double the figure from 2007. Their fortunes are mostly built-in economic rent niches (banks, mines, etc.) without investing in structural and strategic sectors (industrial production, infrastructure, etc.), and thus should not be considered a source of competition for Western multinationals.
Ethiopia’s government is speeding up attempts to recruit foreign investment, especially in the textile industry. They may now import their equipment duty-free, enjoy a ten-year tax break, rentals that are significantly lower than market rates, and nearly free water and energy. Decathlon, H&M, and Huajian are just a few of the major companies that have established themselves in the country. These businesses also benefit from a low-cost workforce, with an average monthly wage of roughly 35 euros. Finally, Ethiopia and the European Union have signed trade accords that allow them to export duty-free.
Why is Ethiopia the world’s poorest country?
Ethiopia, an African country, has made significant progress in reducing poverty since 2000, when it was estimated that their poverty rate was among the highest among all countries. The government has made significant progress toward achieving the Millennium Development Goals, such as eradicating major diseases and lowering child mortality rates. Despite these gains, the country’s poverty rate remains exceedingly high. The growth of the agriculture sector was one of the most important elements in reducing poverty. Poor farmers have been able to raise food prices in order to increase sales and revenue, but this expansion has come at the expense of the country’s poorest residents, who could not afford the increased rates. Changing Ethiopia’s economy from an agricultural-based economy to a more industry-based one is one of the most difficult tasks to overcome. Ethiopia’s current poverty-reduction plan aims to expand on the country’s existing government systems and development programs.
In Ethiopia, which region is the wealthiest?
The Amhara Highlands, according to Ethiopia’s government website, get 80% of the country’s total annual rainfall and are the country’s most fertile and climatically favorable region. The Blue Nile originates at Bahir Dar, in the Amhara Region’s Lake Tana. When the Blue Nile’s flow reaches its peak (during the rainy season from June to September), it supplies roughly two-thirds of the Nile’s water. Until the Aswan High Dam was completed in Egypt in 1970, the Blue Nile, along with the Atbara River to its north (which also flows out of the Ethiopian Highlands), caused annual Nile floods that contributed to the Nile Valley’s fertility, allowing the rise of ancient Egyptian civilization and, in turn, the development of Egyptian mythology.
Is Ethiopia Africa’s richest country?
- Nigeria: You’ve probably heard speeches or read stories in which Nigeria was referred to as Africa’s largest economy. That’s primarily due to the magnitude of its GDP. Nigeria has Africa’s biggest GDP, estimated to be $514.05 billion in 2021.
- Egypt: This North African country boasts Africa’s second-largest GDP. It has the biggest GDP in North Africa, $394.28 billion, and is one of just three countries from the region in the top 10.
- South Africa: With a GDP of $329.53 billion, this country in Southern Africa is third on the list. South Africa is one of just two Southern African countries to be included on the list.
- Algeria is the second Northern African country to appear on this list. Algeria has the fourth largest GDP in Africa, according to Statista, with $151.56 billion.
- Kenya has a GDP of $106.04 billion and is located in East Africa. It is the only country from Eastern Africa that has made the top 10 list.
- Ethiopia is the only country from the Horn of Africa to appear on this list. According to Statista, the country’s GDP is $93.97 billion dollars.
- Ghana is the second-largest economy in West Africa, with a GDP of $74.26 billion dollars.
- Ivory Coast: With a GDP of $70.99 billion, this francophone West African country ranks eighth in Africa.
What is Ethiopia known for?
Ethiopia is located in the Horn of Africa and is a landlocked country. It boasts the continent’s second-largest population of 109,358,444 people and the tenth-largest surface area of 1,100,000 square kilometers. The capital is Addis Ababa, and the country is bordered on the west by Sudan, on the east by Djibouti and Somalia, on the south by Kenya, and on the north by Eritrea.
Ethiopia was one of just two African countries to retain its independence when European powers split the continent at the Berlin Conference. It was one of the League of Nations’ four African members. After a brief period of Italian rule, it became a member of the United Nations. Ethiopia’s flag was adopted by a number of newly independent African countries. Several international groups focused on Africa met in Addis Ababa.
Territorial contraction in the north and extension in the south have resulted in the current borders. Conquest and migration were used to complete this expansion. After Haile Selassie was deposed in 1974, civil warfare erupted. It is a founder member of the Non-Aligned Movement, as well as the Group of 77 and the Organization of African Unity. The African Union, UNECA, and the Nile Basin Commission all have their headquarters in Addis Ababa. Ethiopia has one of the most strong militaries in Africa. It has its own alphabet, calendar, and time system. The country has the most UNESCO World Heritage sites in Africa.
The terrain is diverse, including waterfalls and volcanic hot springs. It has some of Africa’s highest and lowest mountains. Sof Omar, Africa’s largest cave, is located in Ethiopia. Dallol is home to one of the world’s hottest spots. Ethiopia is home to 80 ethnic groups today. The two largest are Oromo and Amhara. Ethiopia is known for being the birthplace of the coffee bean. It’s also famous for gold medalists and rock-hewn chapels. Ethiopia produces the most honey and coffee in Africa and has the continent’s largest cattle population.
Ethiopia is affiliated with all three Abrahamic religions. In the fourth century, it declared Christianity to be its official religion. While the bulk of the population is still Christian, one-third of the population is now Muslim. At Negash, it features Africa’s earliest Muslim town and was the location of Islam’s first hijra. Until the 1980s, Ethiopia had a sizable Jewish population. Ethiopia is the spiritual home of the Rastafarian religion. Ethiopia has Africa’s second-largest hydroelectric potential and accounts for 85 percent of the Nile’s flow. Despite this, it had a series of famines in the 1980s, perhaps killing millions of people. The economy has gradually recovered and is currently the largest in East Africa and one of the world’s fastest growing. The country’s political situation is remains precarious.
Which African country is the wealthiest?
Egypt is the richest country in Africa in terms of total GDP (PPP INT$) for 2021. Egypt is Africa’s third-most populous country, with 104 million inhabitants. Egypt’s economy is a diverse one, with tourism, agriculture, and fossil fuels dominating, as well as a burgeoning information and communications technology industry.
Nigeria is Africa’s most populous country, with 211 million people contributing to its GDPnearly double the population of Egypt. Nigeria is a diverse economy with a lower-middle-income concentrate on petroleum and (to a lesser extent) agriculture. It’s also a developing market with burgeoning financial, service, communications, and technology industries.
Ethiopia’s political situation is stable.
Ethiopia’s 2018 transition failed to bring the country back to normalcy. Instead, periodic ethnic and political bloodshed has driven the country to its knees since then. And the government’s battle with the Tigray People’s Liberation Front (TPLF) in the north, which began in November 2020, has thrown the country into even more chaos.