International Trade in Ethiopia

News Related to International Trade in Ethiopia

Business outline for Ethiopia

Economic Overview

After five years of strong growth (11.5% average), the Ethiopian economy slowed down slightly because of the crisis and the drought, the GDP growing at 10% in 2010. The main growth vectors remain agricultural production and services, sustained by exports and the continuous influx of development aid and foreign direct investments.

The plan implemented with the cooperation of the IMF in August 2009 and extended in October 2010 prioritizes the preservation of economic stability, which the global economic crisis had caused the country to suffer, due to the reduction in exports, financial transfers, FDI and the flow of development aid. Ethiopia has managed to juggle the inflation and reconstituting its monetary reserves, however in order to accelerate growth, it still needs to improve its business climate, liberalise trade and develop its financial system.

Ethiopia is amongst the world poorest countries, and suffers from chronic food shortages and climatic instabilities.

FDI in Figures

The FDI inflow into the country has been increasing since 2003 and because of the low financialization of the Ethiopian economy, was only slightly affected by the financial crisis.  The government has committed itself in a program of economic reforms and liberalization. However, it continues to control the services sector.
There are a number of restraints to foreign investment, namely the poor condition of infrastructures, the difficulties related to land acquisition, strict foreign exchange control, the very high transactions costs and the weakness of organizations.
The agriculture (particularly horticulture) and leather goods sectors are the ones attracting most FDI into the country. The main investor countries are Saudi Arabia, China, the United States and India.

Foreign Trade Overview

Ethiopia is open to international trade, foreign trade representing almost 40% of the GDP. It is a member of the IGAD and the COMESA (but its has not joined the free trade zone), and since March 2003, it has been in the process of joining the WTO.

 A restructuring of customs tariffs is taking place with a view to rationalize investment opportunities by charging lower duties on raw materials and semi-finished products, and comparatively higher rates on finished products.

Ordinarily in deficit, the trade balance continues to drop due to the economic dynamism driving imports, as well as on the slower growth of exports.

Ethiopia mainly exports coffee, khat, gold, leather, animals and oleaginous plants, to China, the Netherlands, Somalia and Germany. The country imports mainly food, petroleum products, chemical products, machinery, motor-vehicles, cereals and textile, from China, Saudi Arabia, India, Italy and the United States.