Ethiopia - Country Commercial Guide
Market Overview

Discusses key economic indicators and trade statistics, which countries are dominant in the market, and other issues that affect trade.

Last published date: 2022-07-21

Ethiopia has a large domestic market with a total population of about 110 million people (2020), making it the second most populous country in Africa after Nigeria. After an intense period of COVID-19 pandemic and a prolonged and devastating civil conflict, the Ethiopian macro economy is finding itself in a difficult war-time footing, facing immense humanitarian and security costs, as well as a heavy toll in terms of lost social and physical infrastructure. Heading into 2023, however, conditions appear to be emerging for the economy to possibly move away from a conflict mode and towards recovery and reconstruction. 

Over the 15 years until 2019, Ethiopia’s economy had been amongst the fastest growing in the world at an average of 9.5 % per year. Among other factors, growth was led by capital accumulation, in particular, through public infrastructure investments. Ethiopia’s real gross domestic product (GDP) growth slowed down to 6.3% in FY2020/21 compared to the previous year’s historic growth due to COVID-19, with growth in industry and services easing to single digits. However, agriculture was not significantly affected by the pandemic according to the World Bank. 

The business climate is undergoing significant changes with broad policy reforms. Government is in the process of privatizing leading state-owned enterprises and signaling shift toward market-based reforms and a new flexibility with respect to economic policymaking.  While the economy continues to grow - albeit at a slow pace, and presents opportunities, there are also hurdles to doing business in Ethiopia. The current leadership is focused on improving the country’s ease of doing through an inter-ministerial committee led by the Prime Minister. The progress is being monitored by the government in coordination with the Ethiopian Investment Commission (EIC)  

The agriculture sector has historically been the engine of the Ethiopian economy, but it has recently given way to the expansion of the service sector. According to the National Bank of Ethiopia (NBE), agriculture, industry and services have contributed 32.5%, 29.3% and 39.6% to the GDP, respectively, during the 2020/21 Ethiopian fiscal year as opposed to 32.7%, 29% and 40% in 2019/2020.  The agriculture sector’s share of GDP shrank by 18% between 2006 and 2021, while the service and industrial sector’s share grew by 0.3% and 19.1%,  respectively. The industry and manufacturing sectors’ share gradually rose, expanding their share of GDP over the past ten years. The construction industry, particularly roads, railways, dams, industrial parks and housing development, is the main driver of growth in the industrial sector, contributing to more than half of the sector’s growth. Service sector growth is dominated by expansion in communication and transport services, hotel and restaurant businesses, as well as wholesale and retail trading. 

In May 2021, Moody’s downgraded Ethiopia’s credit worthiness to Caa2 with negative outlook.  S&P and Fitch downgraded Ethiopia to CCC with a negative outlook. These ratings are due to heightened political instability caused by the conflict in the northern part of the country, which derailed the government’s transformational agenda and constrained access to international financing.  During 2021/22, the year-on-year inflation rate gathered momentum and rose due to price increases in both food and non-food items.  In May 2022, Ethiopia’s inflation stood at an annualized rate of 37.7%. 

Real interest rates in Ethiopia remain largely negative. The minimum bank deposit rate of 7.0%, bond yield of 4%, and treasury bill yield of 8.8% are lower than the annual inflation rate of approximately 35.1%. In December 2021, the official exchange rate of the dollar to birr rose to 49.1936 with the birr devaluing by 25.6% in less than a year. The birr has continued to follow a steady depreciation, with the NBE following a crawling peg exchange rate policy. The black-market exchange rate for the same period has ranged between 68-82 birr per dollar, a premium of 38%-67% over the official rate.  

In September 2019, the Government of Ethiopia launched its new economic policy strategy termed the Home-Grown Economic Reform Agenda, designed to eliminate macroeconomic imbalances and lay the foundation for sustainable and inclusive growth. The reform aims to transition the Ethiopian economy from a public sector led model to one that is driven by the private sector. In December 2019 the IMF approved a program for Ethiopia of nearly $3 billion in support of the Home-Grown Reform, which according to government sources will require a total of $10 billion of new funding. The GOE is also committed to building a climate resilient green economy and reaching U.N. sustainable development goals. Ethiopia is focusing on mitigating greenhouse gas emissions by expanding electric power generation from renewable sources for domestic and regional markets. 

The Ethiopian birr is a non-convertible currency, and allocation of foreign exchange (U.S. dollars) to the private sector is determined by the National Bank of Ethiopia (NBE). The NBE operates within the context of a large trade deficit and the need to meet sovereign debt obligations stemming from government infrastructure projects funded by foreign debt, which enjoys priority for scarce foreign currency. 

Ethiopia faces a growing trade deficit with total imports increasing on average by 12.5% per year during the previous 10 years. The rise in the trade deficit has been driven by rising imports, which ballooned from $4.8 billion in 2010 to $14.4 billion in 2015, the peak of Ethiopia’s trade deficit. Concerned by the widening trade balance, the Government of Ethiopia (GOE) works to suppress imports and has undertaken other macroeconomic measures in recent years, which has resulted in a narrowing of the trade deficit to $10.6 billion in 2020/21.  

According to the NBE annual report, 27.2% of total import spending ($3.9 billion) was on capital goods and 38.3% ($5.4billion) on consumer goods. The U.S. exported $590 million worth of goods to Ethiopia in 2020, a 35% decrease from that of the previous year, accounting for 3.4% of Ethiopia’s total imports. Despite the decrease from 2019 to 2020, Ethiopia’s imports from the United States have increased steadily throughout the past decade, representing approximately a fivefold increase from 2007 through 2020.  In 2021 U.S. Exports to Ethiopia continue to decrease but U.S. imports from Ethiopia has been on an incremental trend. 

In 2020, Ethiopia’s major goods exports included coffee (25.1%), gold (18.6%), cut flowers (13%), oil seeds (11.5%), chat (11.1%), pulses (6.5%), leather and leather products (1%). Ethiopia’s total export earnings by value increased by 21% from the previous year.  

The top five destinations for Ethiopia’s exports in 2020 were Switzerland (18.8%), Netherlands (8.1%), Saudi Arabia (5.8%), Somalia (5.8%), United Arab Emirates (4.6%) and the United States (4.5%). By region, Ethiopia’s exports comprised of Europe (41.3%), Asia (31%), Africa (17.4%), and Americas (9.4%). Ethiopia primarily exports coffee, leather, and leather products to the United States. 

The vast majority of Ethiopia’s imports come from Asia (61.3%) followed by Europe (22%), the Americas (7.6) of which the United States accounts for a large share (3.4%), and other countries in Africa (8.9%). Imports from China accounted for 22.8% of Ethiopia’s total foreign supplies. U.S. exports to Ethiopia are primarily aircraft sales, construction equipment, agricultural machinery, farming, and engineering services. Aircraft and aviation parts represented a majority of total U.S. exports to Ethiopia. 

Many U.S. companies based in the United Arab Emirates (UAE) do business in Ethiopia using Dubai as an intermediary export platform due to proximity and availability of reliable air shipping and air services. Please refer to the following table of U.S. -Ethiopia bilateral trade figures. 

Table 1:  U.S. – Ethiopia Bilateral Trade 

Unit: U.S. Dollars 


U.S. Exports to Ethiopia 

U.S. Imports from Ethiopia 








































Source: Department of Commerce, Global trade Atlas and National Bank of Ethiopia 

Chinese companies, supported by the government’s trade and project finance agencies, are active in Ethiopia and aggressively pursue projects in the infrastructure and textile sectors. Indian and Saudi Arabian firms are mainly involved in the agricultural sector. Many Indian companies have also begun to invest in the government-sponsored industrial textile parks. Dutch companies play a prominent role in the floricultural industry and Turkish companies are increasingly engaged in manufacturing, particularly textiles and garments, as well as in construction. 

The Ethiopian People’s Revolutionary Democratic Front (EPRDF), a coalition of four ethnic based, regional parties, and its allies held power from 1991 until its dissolution in 2019. In 2015, the EPRDF and its affiliates won all of the 547 parliamentary seats in national and regional elections. Current Prime Minister (PM) Abiy Ahmed came to power in April 2018 through a vote by the House of Peoples Representatives (the lower house of Parliament). The vote followed his selection in March 2018 as chairman of the ruling EPRDF. Following his appointment as chairman of the EPRDF and Prime Minister of Ethiopia, the executive committee of the EPRDF decided by majority vote to dismantle that party structure and form a new party without ethnic affiliation, the Prosperity Party (PP), in December 2019. Most members of the former EPRDF joined the newly formed PP. 

With the spread of COVID-19, the August 2020 election was first postponed to June 5, 2021 and then again to June 21, 2021. When Ethiopia’s sixth general election was held at that point, the leading Prosperity Party won 510 of the 547 House of Parliament seats that will allow the Party to form a ruling government for the next five years. About 80% of Ethiopian municipalities were able to vote in June 2021), 37 million voters were registered with 90% turn out on Election Day. 

The GOE has investment incentives aimed at attracting FDI, particularly export-oriented projects. U.S. companies that invest in Ethiopia benefit from tariff and duty-free incentives through Ethiopia’s membership in the Africa Continental Free Trade Agreement (AfCFTA).  Along with Mali and Guinea, Ethiopia lost its Africa Growth Opportunity Act (AGOA) in 2021, with the U.S. citing concerns of human rights violations.  Advocates for Ethiopia’s participation in AGOA believe the U.S. should strengthen and improve trade relations with Africa, especially Ethiopia, through programs such as AGOA.  

Political risk for international investors can be mitigated through products offered by the African Trade Insurance Agency (ATI), which Ethiopia joined in 2016. ATI provides specialized services that cover political and trade risks. ATI also enables Ethiopian insurance companies to facilitate the sale of goods on a letter of credit, while limiting trade and political risks related to losses due to nationalization, breach of concession agreements, import or export embargoes, inconvertibility or transfer risks, political violence, terrorism, confiscation, license cancellation and sabotage. 

The top five reasons why U.S. companies should consider doing business in Ethiopia are: 

  • As a regional hub with access to a broad market, Ethiopia is the second most populous country in Africa, with over 70% of the population under the age of 30, and had one of the fastest-growing economies in the world for significant number of years until 2019.  Post civil conflict, the country can be expected to return to the reform trajectory and expand its middle class and their purchasing power. 

  • Costs of production in Ethiopia such as for land, labor, and energy are low with improved economic infrastructure and competitive incentive packages relative to African and other global markets. 

  • Ethiopia is now beginning to liberalize its economy and privatize state-owned enterprises and industry sectors, allowing U.S. firms to participate in areas previously closed to international participation. 

  • U.S. products and services are highly respected among Ethiopians for their quality and dependability. 

  • Prior to the U.S. temporary freeze on economic development support to Ethiopia in response to the internal conflict and humanitarian crisis in the Tigray region, U.S. Exim bank had an expanded capacity to finance transactions beyond $10 million. The Development Finance Corporation (DFC), which in October 2019 became the successor agency of OPIC, was also increasingly engaged in and delivering project finance to Ethiopia. These financial tools, among others, are expected to be reinstated once the freeze on economic development support is lifted.