Ethiopia: Considering to Boost the Service Sector

In the current phase of the Growth and Transformation Plan (GTP II), Ethiopia has planned to reduce shares of the agricultural sector in the Gross Domestic Product (GDP) to 36% in favor of industry and service sectors.

For the last decade, the overall share of agriculture in Ethiopia was a little over 45%, which put the sector at a leading position in terms of contribution to the economy. Nevertheless in the last two years, the service sector has taken the leading position for the first time with a record investment representation which is expected to cover 41.3% of the GDP over the next five years.

The Ethiopian economy is dominated by the agriculture and service sectors with each accounting for about 45% of gross domestic product (GDP), leaving only about 10% for the manufacturing sector according to the Ministry of Finance and Economic Development (MoFED).

Expansion of the service and agricultural sectors account for most of the overall growth of the country while manufacturing sector performance is relatively modest. Private consumption and public investment has grown with the latter assuming an increasingly important role in recent years says the World Bank.

“The development in the service sector is the result of growing demand and under supply. For example, the number of hotels in Addis Ababa has tripled in the last three years to around 6,000 hotel rooms. The booming competition in this market could potentially double the number in near future” said Alexander Burtenshaw country manager of in Ethiopia.

The other target is to increase the export revenue to $12 billion during the Second Growth and Transformation Plan period. The country has secured $3 billion of the targeted $5 billion during the First Growth and Transformation Plan period. The government targets to boost export revenue by 29% in each year exporting local productions. It also stipulates in 2020, the country will generate $16 billion in export revenue, while the manufacturing sector will account for 25% of total exports.

Industrial sector is expected to grow by over 18% in the next five years. The manufacturing sector will play a significant role to attain increased exports while air transportation and tourism are targeted to bring a huge chunk of hard currency. The manufacturing sector will also focus on light industries, while the government has planned to give special attention to big industries. Tax revenue is also expected to reach 17% of the GDP from 12.5 %.

Development in the financial and industrial sectors is another key area that the government will focus on to facilitate stable economic growth. As in previous years, financial institutions are expected to have considerable involvement in export investments. Export trade, including tourism and air transport are targeted to represent 25% of the GDP by mid-2020.

Leave a Reply

Translate »