Economy
Ethiopia EEA Report Highlights Fast Growth Alongside Structural Vulnerabilities
StockMarket.et · 13 hours ago · Read the Full Story on StockMarket.et
AI SUMMARY
The Ethiopian Economics Association has published its first Macroeconomic Outlook, finding that robust headline growth masks persistent structural challenges in employment, inflation, public finance, and trade.
- The Ethiopian Economics Association (EEA) published its first Macroeconomic Outlook, covering the period from 1993 to 2025.
- The EEA's ARIMA model projects real GDP growth above 9% annually for the next three years, driven primarily by industry and a mining boom.
- Employment elasticity of growth remains low across sectors, with agriculture adding almost no jobs despite employing most workers, and industry producing more output with fewer workers.
- Services absorb the fastest-growing share of labor, indicating a shift toward informal, low-productivity jobs rather than modern firms.
- An ARDL model estimates that each 1% increase in broad money adds about 1.55 percentage points to headline inflation, while the nominal effective exchange rate shows no statistically significant effect.
- EEA model-estimated inflation for 2025 stands at 28.5%, contrasting with the Ethiopian Statistics Service report of 13.9%, which the authors treat as an outlier.
- Government revenue has fallen below 10% of GDP since 2020, dropping to about 7.5% in 2024, with tax revenue hovering around 7%.
- Public debt is forecast by the EEA to exceed 60% of GDP within three years, driven largely by external debt increases following the currency devaluation.
- Export earnings from leather products fell from $132.4 million in 2018 to $17.4 million in 2025, while working tanneries decreased from 35 to 7 due to raw hide shortages.
- The loss of AGOA duty-free access in January 2022 directly reduced U.S.-bound exports from $358.6 million in 2021 to $275.6 million by 2023.
- The EEA recommends tightening monetary policy, fully unifying the foreign-exchange market, improving tax administration, shifting spending to capital investment, and supporting labor-intensive manufacturing.
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