Business EEA Report Showcases Grim Macroeconomic Diagnosis
EEA Report Showcases Grim Macroeconomic Diagnosis
May 24, 2025
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A long-awaited report from the Ethiopian Economics Association (EEA) paints a stark picture of the country’s macroeconomic health, exposing deepening fiscal strains, declining productivity, and worsening living standards over the past two decades.
The findings, covering 2001–2023, highlight systemic challenges that threaten Ethiopia’s economic stability despite periods of rapid growth earlier in the century.
The report reveals alarming trends in public debt, which skyrocketed after 2015, reaching USD 62.5 billion in 2023—equivalent to USD 575.60 per citizen. This surge has placed Ethiopia in “high debt stress”, with export earnings and revenue failing to keep pace with obligations.
By 2022, the country’s debt performance had fallen below the Sub-Saharan African average, signaling urgent need for reform.
“Ethiopia’s actual fiscal deficit, when compared to East Africa and Sub-Saharan Africa, reflects growing challenges in achieving fiscal sustainability,” reads EEA publication.
While public revenue grew by over 200 percent during the reporting period, inflation and shrinking purchasing power meant budget allocations saw only modest real increases.
The 10-chapter report covers everything from agricultural production and industrial performance to exports, financial sector developments, and fiscal policy and governance.
“The financial sector remains underdeveloped and shallow, limiting its ability to support economic transformation and private sector development. Credit allocation to productive sectors like agriculture is low, while informal borrowing remains widespread,” it reads.
It is not clear to what extent the report read into Ethiopia’s Homegrown Economic Reform (HGER), whose implementation began in earnest in 2024 with the purported aim of tackling challenges like macroeconomic imbalances, high debt, and limitations in the private sector’s access to finance.
“Recent shifts show increased credit to the private sector, signaling a move toward supporting business growth (but) despite profitability, efficiency in the banking sector has declined highlighting the need for operational improvements,” it reads.
Poverty rates declined slightly from 30.9 percent in 2018/19 to 26.1 percent in 2021/22, but remain worse than the 24 percent recorded in 2015/16, suggesting a long-term deterioration, according to the EEA.
The report indicates that real consumption expenditure dropped for most households except the wealthiest, with the poorest Ethiopians suffering the sharpest welfare declines. Conflict, instability, and policy inconsistency since 2020 have exacerbated these trends, eroding trust in governance and disrupting economic plans.
The report also cautioned about a worrying deterioration in the quality of policymaking.
“Ethiopia’s policy environment had declined rapidly, marked by inconsistent and imprudent economic policies, worsened by internal conflict and instability. Governance has significantly deteriorated since 2020, with increased unpredictability, undermining consensus-building and public trust,” it reads.
Economists argue that armed conflict and insecurity have made the government’s Ten-Year Development Plan less relevant, contributing to macroeconomic instability, rising poverty, and reduced investment confidence.
“The economy suffers from falling foreign direct investment (FDI), slowed growth, increased trade barriers and overall economic contraction due to conflict-related disruptions,” reads the report.
The Association highlights that productive capacity grew until 2019, but then stagnated, limiting the ability to boost output and social progress, adding natural capital and the private sector have not been effectively mobilized to strengthen productive capacity.
“A widening gap between aggregate supply and demand is a major inflation driver; reversing this requires restoring strong growth,” it reads.