Figure 1: Merchandise Trade Balance in Ethiopia (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to Ethiopia have decreased to USD 15.2 billion in 2018, from an annual average of USD 16.5 billion from 2015 to 2017[1]. Exports also decreased to USD 2.8 billion in 2018 from an annual average of USD 3.0 billion from 2015 to 2017[2]. The stronger decrease in imports improved Ethiopia’s merchandise trade balance to a deficit of -USD 12.4 billion in 2018 from a trade deficit averaging -USD 13.5 billion from 2015 to 2017[3]. The declining exports has not led to a significant deterioration of gross official reserves due to slower demand for imports caused by depreciation of the ETB.
Figure 2: Gross Official Reserves in Ethiopia (2016/17-2022/23)
Source: IMF 2018, Ethiopia 2018 Article IV Report. Note: (*) Figures from 2018/19 onwards are projections from IMF, 2018.
Gross official foreign exchange reserves increased to USD 3.4 billion in 2018/19 from an annual average of USD 3.1 billion from 2015/16 to 2017/18[4]. During this period, the ETB depreciated by -13.3% in 2018 to ETB 27.4 per USD (2017: -7.9%)[5]. The incremental depreciation in the currency has driven the faster decline in imports following the minor depreciation in 2015 and 2016. The ETB depreciated by an annual average of -6.1% from ETB 20.6 per USD in 2015 to ETB 23.8 per USD in 2017[6]. Gross official reserves are projected to increase to USD 3.9 billion in 2019/20, which is equivalent to 1.9 months’ import cover[7]. In the forward-looking medium-term from 2020/21 to 2022/23, gross official reserves are projected to increase to an annual average of USD 6.0 billion (approx. 2.5 months’ import cover)[8]. The slow growth in exports and decline in imports has led to a minor improvement on the persistent current account deficit.
Ethiopia’s current account balance improved to a deficit of -USD 5.7 billion in 2018/19, from a deficit averaging -USD 6.1 billion from 2015/16 to 2017/18[9]. In addition to the decline in merchandise imports, which improved the current account balance, services exports increased after competitiveness was improved by the ETB depreciation. Services exports increased to USD 4.8 billion in 2018/19 (2017/18: USD 4.2 billion)[10]. The current account balance is projected to deteriorate slightly to a deficit of -USD 5.9 billion (approx. -7.5% of GDP) in 2019/20[11]. In the forward-looking medium-term from 2020/21 to 2022/23, the current account balance is projected to improve to a deficit averaging -USD 5.2 billion (approx. -5.9% of GDP)[12].
Figure 3: Current Account Balance in Ethiopia (2016/17-2022/23)
Source: IMF 2018, Ethiopia 2018 Article IV Report. Note: (*) Figures from 2018/19 onwards are projections from IMF, 2018.
However, Ethiopia is still heavily dependent on agricultural exports, particularly coffee, vegetables and oil seeds; which have made exports earnings volatile due to exports being vulnerable to the adverse impact of climate change. For example, Ethiopia is still battling with the aftermath of the 2015/16 El Niño drought and below-average 2016 autumn rains that have led to new drought in lowland pastoralist areas in the southern and south-eastern parts of the[13]. In addition, the Horn of Africa (HoA) region is currently experiencing a prolonged drought due to below-average rain which has led to the deterioration of farmland and pastures, loss of livestock, sharply increased food prices, and water scarcity in large areas of Somalia, Ethiopia, and Kenya[14]. The HoA drought has increased the number of Ethiopians who are food insecure to 8.5 million from the January 2017 food insecurity affecting 5.7 million Ethiopians after the El Niño drought[15]. Coffee, vegetables and oil seeds constituted 59.5% of Ethiopia’s total export earnings in 2018 which has remained largely unchanged from the average of 60.0% from 2015 to 2017 (2014: 63.5% of exports)[16]. In spite of this concentration of exports, Ethiopia is well integrated in terms of regional trade with neighbouring countries in COMESA but its trade is unbalanced.
The top export from Ethiopia to COMESA is vegetables, which constituted 9.8% of total exports in 2018 (2015-‘17: 9.2% of total exports)[17]. The value of vegetables exports from Ethiopia to COMESA decreased slightly to USD 275.5 million in 2018 from an annual average of USD 282.0 million from 2015 to 2017[18]. The other top-four exports from Ethiopia to COMESA are coffee (2.9%), live animals (2.5%), spices (1.0%) and cement (0.7%) which is an additional 7.1% of total exports from Ethiopia in 2018. Therefore, the top-five exports constituted 16.9% of total exports from Ethiopia in 2018 (2015-‘17: 17.1% of total exports)[19]. The value of the top-five exports from Ethiopia to COMESA decreased slightly to USD 473.6 million in 2018 from an average of USD 521.8 million from 2015 to 2017[20].
Figure 4: Nominal Exchange Rate in Ethiopia (2015-2018)
Sources: NBE 2019, Inter-bank Daily Foreign Exchange Rate in (USD) - Archive.
The value of total exports from Ethiopia to COMESA decreased to USD 613.1 million (approx. 21.9% of total exports) in 2018 from an average of USD 670.1 million (approx. 22.0% of total exports) from 2015 to 2017[21]. These are very high levels of intra-regional trade given that the COMESA average intra-regional exports level was 11.9% of total exports in 2018. The COMESA intra-regional exports, meaning total exports amongst COMESA countries, as a share of total exports to the world increased from an average of 10.5% from 2015 to 2017[22].
Ethiopia’s top-five imports from COMESA are petroleum, plastics, food, metallic fasteners and scrap metal. Although these imports are diversified they constituted only 0.9% of total imports to Ethiopia in 2018 (2015-‘17: 0.8% of total imports)[23]. The value of the top-five imports from COMESA to Ethiopia decreased to USD 132.9 million in 2018 from an annual average of USD 136.0 million from 2015 to 2017[24].
The value of Ethiopia’s total imports from COMESA decreased to USD 362.1 million (approx. 2.4% of total imports) in 2018 from an annual average of USD 391.6 million (approx. 2.4% of total exports) from 2015 to 2017[25]. These are poor or below-average levels of intra-regional trade given that the COMESA average intra-regional imports level was 6.5% of total imports in 2018[26]. The COMESA intra-regional imports, meaning total imports amongst COMESA countries, as a share of total imports from the world increased only slightly from an average of 5.5% from 2015 to 2017[27].
Table 1: COMESA Regional Trade for Ethiopia (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Ethiopia maintains a persistent merchandise trade surplus in COMESA which decreased to USD 251.0 million in 2018 (2015-’17: USD 278.5 million). Hence, there is still significant room for Ethiopia to increase imports from COMESA countries. This would make Ethiopia’s intra-regional trade balance in COMESA more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2018. Ethiopia 2018 Article IV Report, International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 26 September 2019].
[5] NBE 2019. Inter-bank Daily Foreign Exchange Rate in (USD) – Archive, National Bank of Ethiopia: Addis Ababa. Available At: https://www.nbe.gov.et/ [Last Accessed: 26 September 2019].
[6] NBE 2019. Inter-bank Daily Foreign Exchange Rate in (USD) – Archive, ibid.
[7] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[8] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[9] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[10] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[11] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[12] IMF 2018. Ethiopia 2018 Article IV Report, ibid.
[13] RW n.d. Ethiopia: Drought – 2015-2019, on the ReliefWeb Website, viewed on 10 October 2019, from https://reliefweb.int/.
[14] RW n.d. Ethiopia: Drought – 2015-2019, ibid.
[15] FAO 2019. Ethiopia, on the Food and Agriculture Organisation Website, viewed on 10 October 2019, from http://www.fao.org/.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
[25] UNCTAD 2019. UNCTADStat Database, ibid.
[26] UNCTAD 2019. UNCTADStat Database, ibid.
[27] UNCTAD 2019. UNCTADStat Database, ibid.
