The International Monetary Fund (IMF) forecasts real growth of 9.2% for the 2025–26 fiscal year. But renewed fighting in the north, high reconstruction costs and climate-related crop problems are threatening the country's economic recovery. London-based financial analyst Abdulmenan Mohammed warns of the consequences of further escalation.
"If there is a major conflict [...] the current economic growth will not be sustainable," he told DW. The war that raged in Tigray and other parts of Ethiopia between 2020 and 2022 inflicted extensive damage. Infrastructure was destroyed, businesses lost production capacity and agricultural land could no longer be cultivated in some areas.
A World Bank-backed damage and needs assessment puts the damage caused by several conflicts in Ethiopia between November 2020 and December 2021 at more than $22.6 billion (€20.2 billion). Economic losses amounted to around $6 billion. The estimated bill for reconstruction and economic recovery stands at approximately $19.7 billion, which covers the total funding needed, not annual costs or damage caused by the current escalation.
A reconstruction plan covered the period from 2023 to 2028. However, it remains uncertain whether the work can be fully funded and completed within that timeframe. Financial analyst Abdulmenan Mohammed believes the economic consequences of the Tigray war were even more severe.
In addition to the direct destruction, he points to lost economic output, high inflation and foreign currency shortages at the time. International trade conditions also deteriorated: in 2022, Ethiopia lost its benefits under the US African Growth and Opportunity Act (AGOA), which had allowed certain African exports to enter the US market duty-free. Following the Pretoria peace agreement in November 2022, the economy began to recover.
According to the IMF, it grew by 7.2% in 2022–23 and 8.1% in 2023–24. The organization puts growth at 9.2% for 2024–25 and forecasts a further 9.2% for 2025–26. Agriculture, mining and electricity generation are among the main drivers.
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