Eritrea Economy Profile 2008

Economy - overview

Since independence from Ethiopia in 1993, Eritrea has faced the economic problems of a small, desperately poor country, accentuated by the recent implementation of restrictive economic policies. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice (PFDJ). Like the economies of many African nations, the economy is largely based on subsistence agriculture, with 80% of the population involved in farming and herding. The Ethiopian-Eritrea war in 1998-2000 severely hurt Eritrea's economy. GDP growth fell to zero in 1999 and to -12.1% in 2000. The May 2000 Ethiopian offensive into northern Eritrea caused some $600 million in property damage and loss, including losses of $225 million in livestock and 55,000 homes. The attack prevented planting of crops in Eritrea's most productive region, causing food production to drop by 62%. Even during the war, Eritrea developed its transportation infrastructure, asphalting new roads, improving its ports, and repairing war-damaged roads and bridges. Since the war ended, the government has maintained a firm grip on the economy, expanding the use of the military and party-owned businesses to complete Eritrea's development agenda. The government strictly controls the use of foreign currency, limiting access and availability. Few private enterprises remain in Eritrea. Eritrea's economy is heavily dependent on taxes paid by members of the diaspora. Erratic rainfall and the delayed demobilization of agriculturalists from the military continue to interfere with agricultural production, and Eritrea's recent harvests have not been able to meet the food needs of the country. The government continues to place its hope for additional revenue on the development of several international mining projects. Despite difficulties for international companies in working with the Eritrean government, a Canadian mining company signed a contract with the GSE in 2007 and plans to begin mineral extraction in 2010. Eritrea also anticipates opening a free trade zone at the port of Massawa in 2008. Eritrea's economic future depends upon its ability to master social problems such as illiteracy, unemployment, and low skills, and more importantly, on the government's willingness to support a true market economy.

GDP (purchasing power parity)

$4.751 billion (2006 est.)

GDP (official exchange rate)

$1.425 billion (2007 est.)

GDP - real growth rate

2% (2007 est.)

GDP - per capita (PPP)

$1,000 (2007 est.)

GDP - composition by sector

agriculture: 21.7%
industry: 22.6%
services: 55.7% (2007 est.)

Population below poverty line

50% (2004 est.)

Household income or consumption by percentage share

lowest 10%: NA%
highest 10%: NA%

Inflation rate (consumer prices)

15.5% (2007 est.)

Investment (gross fixed)

21% of GDP (2007 est.)

Labor force

NA

Labor force - by occupation

agriculture: 80%
industry and services: 20% (2004 est.)

Unemployment rate

NA%

Budget

revenues: $232.7 million
expenditures: $467.6 million (2007 est.)

Industries

food processing, beverages, clothing and textiles, light manufacturing, salt, cement

Industrial production growth rate

2% (2007 est.)

Electricity - production

274 million kWh (2005)

Electricity - consumption

228 million kWh (2005)

Electricity - exports

0 kWh (2005)

Electricity - imports

0 kWh (2005)

Oil - production

0 bbl/day (2005 est.)

Oil - consumption

5,000 bbl/day (2005 est.)

Oil - imports

4,924 bbl/day (2004)

Oil - exports

54.59 bbl/day (2004)

Oil - proved reserves

0 bbl (1 January 2006 est.)

Natural gas - production

0 cu m (2005 est.)

Natural gas - consumption

0 cu m (2005 est.)

Natural gas - exports

0 cu m (2005 est.)

Natural gas - imports

0 cu m (2005)

Natural gas - proved reserves

0 cu m (1 January 2006 est.)

Current Account Balance

-$343.1 million (2007 est.)

Agriculture - products

sorghum, lentils, vegetables, corn, cotton, tobacco, sisal; livestock, goats; fish

Exports

$16.82 million f.o.b. (2007 est.)

Exports - commodities

livestock, sorghum, textiles, food, small manufactures

Exports - partners

Italy 26.7%, France 13.8%, Australia 8.2%, Sudan 7.9%, US 7.8%, China 6.2%, Saudi Arabia 5.5%, Jordan 5.2% (2006)

Imports

$565.9 million f.o.b. (2007 est.)

Imports - commodities

machinery, petroleum products, food, manufactured goods

Imports - partners

Italy 15.8%, Saudi Arabia 15.7%, China 15.6%, Netherlands 6.7%, Turkey 6.2%, Germany 5.3%, Brazil 4.3% (2006)

Reserves of foreign exchange and gold

$22.08 million (31 December 2007 est.)

Debt - external

$311 million (2000 est.)

Economic aid - recipient

$355.2 million (2005)

Currency (code)

nakfa (ERN)

Exchange rates

nakfa (ERN) per US dollar - 15.5 (2007), 15.4 (2006), 14.5 (2005), 13.788 (2004), 13.878 (2003)
note: the official exchange rate is 15 nakfa to the dollar

Fiscal year

calendar year