Despite a slight dip in its economic growth, Ethiopia has been able to offset the negative effects of the current drought that has resulted in below average rains in the southern and eastern parts of the country. According to a recent World Bank report titled, “Why So Idle? Wages and Employment in A Crowded Labor Market,” even though the government spent more to lessen the effect of the drought, the lack of rain had little impact on Ethiopia’s GDP thanks to the nation’s diversified economy.
Sectors such as construction, manufacturing, services, and trade contributed a total of 5.9 percent to the GDP.
“State data for the 2015-2016 fiscal year shows that Ethiopia has a growth rate of eight percent, down from 10.4 percent in 2014-2015. However, this growth has proved resilient in the face of the current drought and is expected to continue,” the report notes.
Inflation also decreased from 11.8 percent in October 2015 to 5.6 percent in 2016 despite an increase of food prices due to the drought.
Last year, the country’s rate of urban employment was 17 percent, which is much higher than the sub-Saharan Africa average of 11 percent.
A six-month state of emergency declared by the current government has also proven to be a challenge for the country’s economy. In October, the Ethiopian government declared the emergency following deadly ethnic protests over the unequal distribution of political, social, and economic resources.
According to the report, there are several economic areas that the government can improve on, including keeping inflation low, investing in skilled labor, and providing more entrepreneurship opportunities.