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Eritrea vs. Ethiopia

Economy

EritreaEthiopia
Economy - overview

Since formal independence from Ethiopia in 1993, Eritrea has faced many economic problems, including lack of financial resources and chronic drought. Eritrea has a command economy under the control of the sole political party, the People's Front for Democracy and Justice. Like the economies of many African nations, a large share of the population - nearly 80% in Eritrea - is engaged in subsistence agriculture, but the sector only produces a small share of the country's total output. Mining accounts for the lion's share of output.

The government has strictly controlled the use of foreign currency by limiting access and availability; new regulations in 2013 aimed at relaxing currency controls have had little economic effect. Few large private enterprises exist in Eritrea and most operate in conjunction with government partners, including a number of large international mining ventures, which began production in 2013. In late 2015, the Government of Eritrea introduced a new currency, retaining the name nakfa, and restricted the amount of hard currency individuals could withdraw from banks per month. The changeover has resulted in exchange fluctuations and the scarcity of hard currency available in the market.

While reliable statistics on Eritrea are difficult to obtain, erratic rainfall and the large percentage of the labor force tied up in military service continue to interfere with agricultural production and economic development. Eritrea's harvests generally cannot meet the food needs of the country without supplemental grain purchases. Copper, potash, and gold production are likely to continue to drive limited economic growth and government revenue over the next few years, but military spending will continue to compete with development and investment plans.

Ethiopia - the second most populous country in Africa - is a one-party state with a planned economy. For more than a decade before 2016, GDP grew at a rate between 8% and 11% annually – one of the fastest growing states among the 188 IMF member countries. This growth was driven by government investment in infrastructure, as well as sustained progress in the agricultural and service sectors. More than 70% of Ethiopia’s population is still employed in the agricultural sector, but services have surpassed agriculture as the principal source of GDP.

Ethiopia has the lowest level of income-inequality in Africa and one of the lowest in the world, with a Gini coefficient comparable to that of the Scandinavian countries. Yet despite progress toward eliminating extreme poverty, Ethiopia remains one of the poorest countries in the world, due both to rapid population growth and a low starting base. Changes in rainfall associated with world-wide weather patterns resulted in the worst drought in 30 years in 2015-16, creating food insecurity for millions of Ethiopians.

The state is heavily engaged in the economy. Ongoing infrastructure projects include power production and distribution, roads, rails, airports and industrial parks. Key sectors are state-owned, including telecommunications, banking and insurance, and power distribution. Under Ethiopia's constitution, the state owns all land and provides long-term leases to tenants. Title rights in urban areas, particularly Addis Ababa, are poorly regulated, and subject to corruption.

Ethiopia’s foreign exchange earnings are led by the services sector - primarily the state-run Ethiopian Airlines - followed by exports of several commodities. While coffee remains the largest foreign exchange earner, Ethiopia is diversifying exports, and commodities such as gold, sesame, khat, livestock and horticulture products are becoming increasingly important. Manufacturing represented less than 8% of total exports in 2016, but manufacturing exports should increase in future years due to a growing international presence.

The banking, insurance, telecommunications, and micro-credit industries are restricted to domestic investors, but Ethiopia has attracted roughly $8.5 billion in foreign direct investment (FDI), mostly from China, Turkey, India and the EU; US FDI is $567 million. Investment has been primarily in infrastructure, construction, agriculture/horticulture, agricultural processing, textiles, leather and leather products.

To support industrialization in sectors where Ethiopia has a comparative advantage, such as textiles and garments, leather goods, and processed agricultural products, Ethiopia plans to increase installed power generation capacity by 8,320 MW, up from a capacity of 2,000 MW, by building three more major dams and expanding to other sources of renewable energy. In 2017, the government devalued the birr by 15% to increase exports and alleviate a chronic foreign currency shortage in the country.

GDP (purchasing power parity)
$9.402 billion (2017 est.)
$8.953 billion (2016 est.)
$8.791 billion (2015 est.)

note: data are in 2017 dollars

$200.6 billion (2017 est.)
$181 billion (2016 est.)
$167.6 billion (2015 est.)

note: data are in 2017 dollars

GDP - real growth rate
5% (2017 est.)
1.9% (2016 est.)
2.6% (2015 est.)
10.9% (2017 est.)
8% (2016 est.)
10.4% (2015 est.)
GDP - per capita (PPP)
$1,600 (2017 est.)
$1,500 (2016 est.)
$1,500 (2015 est.)

note: data are in 2017 dollars

$2,200 (2017 est.)
$2,000 (2016 est.)
$1,900 (2015 est.)

note: data are in 2017 dollars

GDP - composition by sector
agriculture: 11.7% (2017 est.)
industry: 29.6% (2017 est.)
services: 58.7% (2017 est.)
agriculture: 34.8% (2017 est.)
industry: 21.6% (2017 est.)
services: 43.6% (2017 est.)
Population below poverty line
50% (2004 est.)
29.6% (2014 est.)
Household income or consumption by percentage share
lowest 10%: NA
highest 10%: NA
lowest 10%: 4.1%
highest 10%: 25.6% (2005)
Inflation rate (consumer prices)
9% (2017 est.)
9% (2016 est.)
9.9% (2017 est.)
7.3% (2016 est.)
Labor force
2.71 million (2017 est.)
52.82 million (2017 est.)
Labor force - by occupation
agriculture: 80%
industry: 20% (2004 est.)
agriculture: 72.7%
industry: 7.4%
services: 19.9% (2013 est.)
Unemployment rate
5.8% (2017 est.)
10% (2016 est.)
17.5% (2012 est.)
18% (2011 est.)
Budget
revenues: 2.029 billion (2017 est.)
expenditures: 2.601 billion (2017 est.)
revenues: 11.24 billion (2017 est.)
expenditures: 13.79 billion (2017 est.)
Industries
food processing, beverages, clothing and textiles, light manufacturing, salt, cement
food processing, beverages, textiles, leather, garments, chemicals, metals processing, cement
Industrial production growth rate
5.4% (2017 est.)
10.5% (2017 est.)
Agriculture - products
sorghum, lentils, vegetables, corn, cotton, tobacco, sisal; livestock, goats; fish
cereals, coffee, oilseed, cotton, sugarcane, vegetables, khat, cut flowers; hides, cattle, sheep, goats; fish
Exports
$624.3 million (2017 est.)
$485.4 million (2016 est.)
$3.23 billion (2017 est.)
$2.814 billion (2016 est.)
Exports - commodities
gold and other minerals, livestock, sorghum, textiles, food, small industry manufactures
coffee (27%, by value), oilseeds (17%), edible vegetables including khat (17%), gold (13%), flowers (7%), live animals (7%), raw leather products (3%), meat products (3%)
Exports - partners
China 62%, South Korea 28.3% (2017)
Sudan 23.3%, Switzerland 10.2%, China 8.1%, Somalia 6.6%, Netherlands 6.2%, US 4.7%, Germany 4.7%, Saudi Arabia 4.6%, UK 4.6% (2017)
Imports
$1.127 billion (2017 est.)
$1.048 billion (2016 est.)
$15.59 billion (2017 est.)
$14.69 billion (2016 est.)
Imports - commodities
machinery, petroleum products, food, manufactured goods
machinery and aircraft (14%, by value), metal and metal products, (14%), electrical materials, (13%), petroleum products (12%), motor vehicles, (10%), chemicals and fertilizers (4%)
Imports - partners
UAE 14.5%, China 13.2%, Saudi Arabia 13.2%, Italy 12.9%, Turkey 5.6%, South Africa 4.6% (2017)
China 24.1%, Saudi Arabia 10.1%, India 6.4%, Kuwait 5.3%, France 5.2% (2017)
Debt - external
$792.7 million (31 December 2017 est.)
$875.6 million (31 December 2016 est.)
$26.05 billion (31 December 2017 est.)
$24.82 billion (31 December 2016 est.)
Exchange rates
nakfa (ERN) per US dollar -
15.38 (2017 est.)
15.375 (2016 est.)
15.375 (2015 est.)
15.375 (2014 est.)
15.375 (2013 est.)
birr (ETB) per US dollar -
25 (2017 est.)
21.732 (2016 est.)
21.732 (2015 est.)
21.55 (2014 est.)
19.8 (2013 est.)
Fiscal year
calendar year
8 July - 7 July
Public debt
131.2% of GDP (2017 est.)
132.8% of GDP (2016 est.)
54.2% of GDP (2017 est.)
53.2% of GDP (2016 est.)
Reserves of foreign exchange and gold
$236.7 million (31 December 2017 est.)
$218.4 million (31 December 2016 est.)
$3.013 billion (31 December 2017 est.)
$3.022 billion (31 December 2016 est.)
Current Account Balance
-$137 million (2017 est.)
-$105 million (2016 est.)
-$6.551 billion (2017 est.)
-$6.574 billion (2016 est.)
GDP (official exchange rate)
$5.813 billion (2017 est.)
$80.87 billion (2017 est.)
Commercial bank prime lending rate

NA

13.5% (31 December 2017 est.)
12.2% (31 December 2016 est.)
Stock of domestic credit
$5.787 billion (31 December 2017 est.)
$5.223 billion (31 December 2016 est.)
$27.66 billion (31 December 2017 est.)
$25.78 billion (31 December 2016 est.)
Stock of narrow money
$3.084 billion (31 December 2017 est.)
$2.734 billion (31 December 2016 est.)
$9.042 billion (31 December 2017 est.)
$8.757 billion (31 December 2016 est.)
Stock of broad money
$3.084 billion (31 December 2017 est.)
$2.734 billion (31 December 2016 est.)
$9.042 billion (31 December 2017 est.)
$8.757 billion (31 December 2016 est.)
Taxes and other revenues
34.9% (of GDP) (2017 est.)
13.9% (of GDP) (2017 est.)
Budget surplus (+) or deficit (-)
-9.8% (of GDP) (2017 est.)
-3.2% (of GDP) (2017 est.)
GDP - composition, by end use
household consumption: 80.9% (2017 est.)
government consumption: 24.3% (2017 est.)
investment in fixed capital: 6.4% (2017 est.)
investment in inventories: 0.1% (2017 est.)
exports of goods and services: 10.9% (2017 est.)
imports of goods and services: -22.5% (2017 est.)
household consumption: 69.6% (2017 est.)
government consumption: 10% (2017 est.)
investment in fixed capital: 43.5% (2017 est.)
investment in inventories: -0.1% (2017 est.)
exports of goods and services: 8.1% (2017 est.)
imports of goods and services: -31.2% (2017 est.)
Gross national saving
5.5% of GDP (2017 est.)
6% of GDP (2016 est.)
6.8% of GDP (2015 est.)
32.1% of GDP (2017 est.)
32.7% of GDP (2016 est.)
32.4% of GDP (2015 est.)

Source: CIA Factbook