Will inflation decline soon?

After several years of political instability, Ethiopia remains a challenging environment: the security situation in some regions is still unstable, which deters investors as much as high inflation rates. As a result, Africa’s second most populous country is unable to match the double-digit growth rates of the past decade for the time being.

However, growth rates are now well above the African average again. In addition, the government has introduced measures to open up the heavily regulated economy and reduce bureaucracy, for example in the telecommunications and food sectors. Liberalisation is also planned in the financial sector.

Furthermore, policymakers are pushing ahead with infrastructure expansion, for instance with regard to Addis Ababa Airport, which is one of Africa’s most important aviation hubs. The construction projects offer opportunities for companies, as do the country’s vast energy resources and food production for its approximately 132 million inhabitants.

Economy. According to Germany Trade & Invest, the economy grew by 8.1 per cent in 2024. For this year and 2026, economists predict growth rates of 6.6 and 7.1 per cent. The gross domestic product per capita rose in the last 20 years from the equivalent of 133 to 1320 US-Dollars. Inflation recently stood at 21.5 per cent, but could fall to around 12 per cent next year. National debt has reached around 41.8 per cent of GDP.

Population. Ethiopia has around 132 million inhabitants; the population recently grew at an annual rate of 2.6 per cent. In the last 20 years, the fertilty rate has fallen from 6.4 to 4.0 children per woman. Life expectancy was at 67 years recently (twenty years ago: 53). Around 55 per cent of the population has access to electricity (twenty years ago: 13,4 per cent).

Governance. On Transparency International’s latest Corruption Perceptions Index, Ethiopia ranks 99th out of 180 countries. With a score of 37 points (two points less than 2021), Ethiopia is on a par with countries such as Argentina, Indonesia and Morocco.

Sources and further information:

World Bank: https://data.worldbank.org/country/ethiopia

Germany Trade & Invest: https://www.gtai.de/de/trade/aethiopien-wirtschaft/wirtschaftsdaten-kompakt#/ETH/overview

Transparency International: https://www.transparency.org/en/cpi/2024/index/nga