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Ethiopia Economy
 
 
 

General

Ethiopia has one of the fastest growing economies in the world, according to The Economist. Ethiopia has shown a fast-growing annual GDP and it was the fastest-growing non-oil-dependent African nation in 2007 and 2008. Since 1991, there have been attempts to improve the economy; however, there has been some political opposition to the policies as well as a 2008 drought which slowed progress. The effectiveness of these policies is reflected in the ten-percent yearly economic growth from 2003-2008. Despite these economic improvements, urban and rural poverty remains an issue in the country.

Ethiopia is often ironically referred to as the "water tower" of Eastern Africa because of the many (14 major) rivers that pour off the high tableland. It also has the greatest water reserves in Africa, but few irrigation systems in place to use it. Just 1% is used for power production and 1.5% for irrigation.

Historically, Ethiopia's feudal and communist economic structure has always kept it one rainless season away from devastating droughts. But Ethiopia has a big potential and it is one of the most fertile countries. According to the New York Times, Ethiopia "could easily become the breadbasket for much of Europe if her agriculture were better organised."

Provision of telecommunications services is left to a state-owned monopoly. It is the view of the current government that maintaining state ownership in this vital sector is essential to ensure that telecommunication infrastructures and services are extended to rural Ethiopia, which would not be attractive to private enterprises.

The economy of Ethiopia is based on agriculture, which accounts for 46.3% of gross domestic product (GDP), 60% of exports, and 80% of total employment.

Ethiopia's agriculture is plagued by periodic drought, soil degradation caused by overgrazing, deforestation, high population density,[citation needed] high levels of taxation and poor infrastructure (making it difficult and expensive to get goods to market). Yet agriculture is the country's most promising resource. A potential exists for self-sufficiency in grains and for export development in livestock, grains, vegetables, and fruits. As many as 4.6 million people need food assistance annually.

Agriculture accounts for almost 41% of the gross domestic product (GDP), 80% of exports, and 80% of the labour force. Many other economic activities depend on agriculture, including marketing, processing and export of agricultural products. Production is overwhelmingly of a subsistence nature, and a large part of commodity exports are provided by the small agricultural cash-crop sector. Principal crops include coffee, pulses (eg, beans), oilseeds, cereals, potatoes, sugar cane and vegetables. Exports are almost entirely agricultural commodities, with coffee as the largest foreign exchange earner, and its flower industry becoming a new source of revenue for 2005/2006 (the latest year available) Ethiopia's coffee exports represented 0.9% of the world exports, and oilseeds and flowers each representing 0.5%. Ethiopia is Africa's second biggest maize producer. Ethiopia's livestock population is believed to be the largest in Africa, and as of 1987 accounted for about 15% of the GDP.

Industry and manufacturing constitute about 4% of the overall economy, although it has shown some growth and diversification in recent years. Much of it is concentrated in Addis Ababa. Food and beverages constitute some 40% of the sector, but textiles and leather are also important, the latter especially for the export market. A program to privatise state-owned enterprises has been underway since the late 1990s.

Aside from wholesale and retail trade, transportation, and communications, the services sector consists almost entirely of tourism. Developed in the 1960s, tourism declined greatly during the later 1970s and the 1980s under the military government. Recovery began in the 1990s, but growth has been constrained by the lack of suitable hotels and other infrastructure, despite a boom in construction of small and medium-sized hotels and restaurants, and by the impact of drought, the recent war with Eritrea, and the spectre of terrorism. In 2002 more than 156,000 tourists entered the country, many of them Ethiopians visiting from abroad, spending more than $77 million.

The mining sector is quite small in Ethiopia. The country has deposits of coal, gemstones, kaolin, iron ore, soda ash and tantalum, but only gold is mined in significant quantities. In 2001 gold production amounted to some 3.4 tons. Salt extraction from salt beds in the Afar Depression, as well as from salt springs in Dire and Afder Woredas in the south, is only of internal importance and only a negligible amount is exported.

Aside from water-power and forests, Ethiopia is not well endowed with energy sources. The country derives about 90% of its electricity needs from hydro-power, which means that electricity generation, as with agriculture, is dependent on abundant rainfall. Present installed capacity is rated at about 650 megawatts, with planned expansion to 1,330 megawatts. In general, Ethiopians rely on forests for nearly all of their energy and construction needs; the result has been deforestation of much of the highlands during the last three decades.


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