Ethiopia is projecting real GDP growth of 10.2 per cent in the 2025/26 fiscal year, a sharp upward revision from its earlier 8.9 per cent forecast, according to Prime Minister Abiy Ahmed. The revised outlook reflects stronger-than-expected performance across key sectors, rising export earnings, and early gains from ongoing macroeconomic reforms under an IMF-backed programme. If realised, the projection would place Ethiopia among the fastest-growing economies globally in 2026 and reinforce its position as a leading growth engine in sub-Saharan Africa.
Ethiopia’s revised growth forecast emerges at a time when the global economy is expanding unevenly. Advanced economies are experiencing slower growth amid restrictive monetary conditions, while several emerging and developing economies are contending with debt pressures, weak capital inflows and subdued external demand. Against this backdrop, a double-digit growth projection stands out not merely as a statistical outlier but as an indicator of domestic momentum anchored in structural adjustments rather than cyclical recovery alone.
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According to reporting by Reuters, the upward revision follows stronger economic performance in the first half of Ethiopia’s fiscal year, which runs from July to July. Government assessments point to faster-than-anticipated expansion in agriculture, manufacturing, construction and services, alongside improving export receipts and stabilising macroeconomic indicators. These dynamics suggest that growth is being supported by both supply-side capacity and demand-side recovery rather than narrow sectoral gains.
Central to Ethiopia’s current growth trajectory is its macroeconomic reform agenda, pursued under a four-year Extended Credit Facility agreement with the International Monetary Fund approved in 2024. The programme is designed to correct longstanding structural imbalances, including foreign exchange distortions, fiscal pressures and state-led inefficiencies.
One of the most consequential reforms has been the gradual liberalisation of the foreign exchange regime. By allowing greater flexibility in currency pricing, authorities have improved export competitiveness and reduced incentives for parallel market activity. This shift has begun to unlock export potential while improving transparency in external transactions, a prerequisite for sustained private investment and trade expansion.
Fiscal consolidation efforts, including subsidy rationalisation and improved revenue mobilisation, have also contributed to a more stable macroeconomic environment. While these measures carry short-term adjustment costs, they have strengthened policy credibility and restored a degree of investor confidence, particularly among multilateral lenders and development partners.
Exports as the Immediate Growth Catalyst
Export performance has been one of the most visible drivers behind Ethiopia’s revised growth outlook. According to government disclosures, corroborated by sector-specific reports, Ethiopia recorded more than US $2.4 billion in export earnings in the first quarter of the 2025/26 fiscal year, exceeding official targets.
Coffee remains the anchor of Ethiopia’s export economy, benefiting from strong global prices, improved quality controls and tighter export management. In the previous fiscal year, coffee exports generated approximately US $2.65 billion, the highest level on record, providing a significant boost to foreign exchange inflows. Gold exports have also performed strongly, supported by elevated international prices and increased formalisation of artisanal production.
Beyond commodities, incremental gains in manufactured exports, particularly textiles and leather goods, reflect the gradual maturation of Ethiopia’s industrial parks strategy. While manufacturing still accounts for a modest share of total exports, its contribution to employment and value addition continues to expand, reinforcing the broader growth base.
Sectoral Foundations of Expansion
Ethiopia’s growth structure remains relatively balanced by regional standards. Agriculture continues to account for roughly a third of output, underpinned by productivity improvements and expanded irrigation coverage. Despite climate-related risks, the sector has shown resilience, supported by targeted input subsidies and extension services.
Industry, particularly construction and manufacturing, is projected to record faster growth rates than the overall economy. Large-scale infrastructure projects, including transport corridors and energy investments, have sustained construction activity, while manufacturing output has benefited from improved power supply and export-oriented incentives.
The services sector, now the largest contributor to GDP, has expanded on the back of trade, transport, telecommunications and financial services. Growth in logistics and wholesale trade reflects rising domestic demand and export throughput, while digital financial services are gradually broadening access to formal finance.
Debt, Stability and the Limits of Momentum
Despite the optimistic growth outlook, Ethiopia’s macroeconomic position remains constrained by unresolved debt restructuring negotiations. Following its 2023 default on a US $1 billion Eurobond, Ethiopia entered talks with bilateral and private creditors under the G20 Common Framework. Progress has been uneven, and recent reports indicate growing tensions with some bondholders over the pace and terms of restructuring.
These uncertainties pose risks to medium-term financing conditions and could weigh on investor sentiment if not resolved decisively. Moreover, regional security concerns, including sporadic instability in parts of northern Ethiopia, continue to represent non-economic risks that could disrupt investment and fiscal planning if escalated.
From Growth Rates to Economic Transformation
Sustaining growth above 10 per cent will require more than favourable base effects or temporary export windfalls. The durability of Ethiopia’s expansion will depend on its ability to translate output growth into productivity gains, employment creation and rising household incomes.
With a rapidly growing population, labour absorption remains a critical challenge. Manufacturing, agro-processing and modern services are expected to play a central role in shifting employment away from low-productivity activities. Continued investment in skills development, infrastructure reliability and regulatory certainty will be essential to support this transition.
Ethiopia’s Place in Africa’s Growth Map
If achieved, Ethiopia’s projected growth rate would reinforce its role as a regional economic anchor in East Africa and a key participant in continental trade integration under the African Continental Free Trade Area. Improved export capacity and logistics connectivity could deepen regional value chains and strengthen intra-African trade flows, particularly in agricultural processing and light manufacturing.
From a global perspective, Ethiopia’s experience illustrates how reform sequencing, external support and domestic policy alignment can restore growth momentum even under constrained conditions. The challenge ahead lies in consolidating these gains while navigating debt resolution and maintaining social and political stability.
Outlook: High Growth, High Stakes
Ethiopia’s revised 10.2 per cent growth projection for 2025/26 represents a significant recalibration of economic expectations. It signals confidence in reform outcomes, export performance and sectoral resilience. Yet it also raises the stakes for policymakers, as sustaining such momentum will require disciplined macroeconomic management, credible debt resolution and inclusive growth strategies.
Whether this forecast marks a durable turning point or a temporary acceleration will depend on how effectively Ethiopia converts current momentum into long-term structural transformation.
