Ethiopia country overview

The economy of Ethiopia

Geography, People, Culture, and Economic Profile

Ethiopia information index

Industry of Ethiopia


Modern manufacturing has revolutionized Ethiopia’s economy, with a significant contribution to the country’s GDP, accounting for approximately 10%. The focus of production is mainly on meeting domestic consumption needs, ensuring that the nation is self-sufficient in key sectors such as processed foods and beverages, textiles, tobacco, leather, footwear, and chemical products. While these industries play a crucial role in the country’s economy, it is important to acknowledge the significant impact of cottage industries and small enterprises on nonfarm employment and the production of various consumer goods. These smaller businesses are responsible for the production of essential items such as furniture, farming and construction implements, utensils, woven fabric, rugs, leather crafts, footwear, jewelry, pottery, and baskets. The products manufactured by these smaller enterprises not only cater to the local market but also find their way into the global market, particularly in the tourism sector. Handcrafted goods such as traditional pottery, intricate jewelry, and beautifully woven fabrics are highly sought after by tourists looking to take home a piece of Ethiopia’s rich cultural heritage. Overall, the diverse manufacturing sector in Ethiopia, comprising both large industries and small enterprises, plays a crucial role in driving economic growth and providing employment opportunities for the country’s population. The synergy between modern manufacturing and traditional craftsmanship creates a vibrant and dynamic marketplace that ensures the continued prosperity of Ethiopia’s economy.


The National Bank of Ethiopia plays a crucial role in the country’s economy as the central bank, with responsibilities such as issuing the national currency, the birr, and overseeing regulatory functions to ensure the stability and growth of the financial sector. In Addis Ababa, the capital city, there are numerous commercial banks catering to the needs of businesses and individuals alike. Among these, the Commercial Bank of Ethiopia stands out as the largest, with a wide network of branches across the country. In addition to commercial banks, the Development Bank of Ethiopia plays a vital role in supporting the country’s economic development by providing specialized loans for agricultural and livestock development, as well as investments in the manufacturing sector. This targeted approach helps to drive growth in key sectors of the economy, creating jobs and increasing overall productivity. Furthermore, in response to the growing demand for financing options, a diverse range of financial institutions have emerged in recent years, offering loans for various purposes such as business expansion and real estate development. This increased access to credit has facilitated the growth of small and medium-sized enterprises, as well as enabling individuals to invest in property and other assets. Overall, the dynamic financial landscape in Ethiopia reflects a growing economy with expanding opportunities for businesses and individuals alike.


Ethiopia heavily relies on agricultural exports, with coffee being the main contributor to foreign exchange earnings. Other exported products include khat, hides and skins, live animals, oilseeds, and gold. Imports mainly consist of manufactures, particularly machinery, transport equipment, and chemical products. Food products and fuels also play a significant role in imports. Key trading partners for Ethiopia include Saudi Arabia, China, and the United States. Unfortunately, Ethiopia has been experiencing a negative balance of payments for several years, as more is spent on imports than earned from exports.


The services sector, particularly tourism, contributes approximately 40% to Ethiopia’s GDP. Despite the decline in tourism during the Derg rule, Ethiopia is once again promoting its historical wonders, including the rock-hewn churches of Lalibela, the antiquities at Aksum, and the Gonder castles. Additionally, the diverse peoples, captivating cultures, and natural beauty of Ethiopia are equally appealing. However, the lack of tourism infrastructure and ongoing political instability in the country have limited its potential. The conflict with Eritrea from 1998 to 2000 and the resulting tensions have discouraged tourists from visiting attractions like Aksum, which is one of the most alluring destinations in northern Ethiopia.

Labour and taxation

Ethiopian legislation permits workers, excluding civil servants, to establish and engage in unions. The Confederation of Ethiopian Trade Unions, the largest labor organization, serves as an umbrella body for various independent federations. Additionally, the Ethiopian Teachers’ Association holds a prominent position.

Tax revenue plays a significant role in funding the government, typically accounting for over half of the budget. Enhancements made to tax collection methods in the late 1990s have resulted in a rise in tax revenue. Noteworthy taxes include import duties, income and profit tax, and sales tax.

Transportation and telecommunications

Ethiopia has made significant progress in the development of its road system. During the Italian occupation from 1935 to 1941, highways were established to connect Addis Ababa with the provinces. After World War II, the Imperial Highway Authority constructed new feeder roads to reach isolated areas. However, road construction and maintenance faced challenges during the conflicts of the 1980s and ’90s. In 1997, the government initiated a long-term road development program, resulting in the construction of new roads and repairs to the existing network in the following decades.

The secession of Eritrea in 1994 caused Ethiopia to lose direct access to the Red Sea ports of Aseb and Mitsiwa. As a result, the Djibouti-Addis Ababa railway became more crucial. Originally built between 1897 and 1917, the railway was jointly operated by Djibouti and Ethiopia. However, it fell into disrepair, and despite repair efforts, large sections of the tracks were unusable in the early 21st century. Eventually, train operations ceased completely by late 2010. To address this, a new electrified rail line was constructed along the old track, completing in 2016. This rail line significantly reduced travel time between Djibouti city and Addis Ababa, accommodating cargo trains at speeds of up to 75 miles (120 km) per hour and passenger trains at up to 100 miles (160 km) per hour. The Ethiopian government’s long-term plan includes the creation of an extensive rail network across the country, with the completion of a light-rail mass transit system in Addis Ababa in 2015.

Ethiopia’s air transport system has achieved remarkable success in Africa. The country has numerous airports, and Ethiopian Airlines (EA), a state-owned but independently operated carrier, has a well-developed internal network connecting major cities and tourist destinations. EA also provides excellent international service to destinations worldwide. Bole International Airport, located near Addis Ababa, serves EA and other international airlines, and is recognized as a center for pilot training and aircraft maintenance.

Telecommunications systems in Ethiopia are relatively underdeveloped. The use of landline and mobile phones is not widespread, although mobile phone usage is increasing. Internet access is limited. Since the late 1990s, the government has actively worked to expand telecommunications infrastructure and services in the country.

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