Ethiopia is projected to remain among Africa’s fastest‑growing economies over the next two years, supported by robust agricultural output, recovering investment and gradual macroeconomic stabilisation, according to the United Nations’ World Economic Situation and Prospects 2026 report. The UN expects stronger performance in large least developed countries such as Ethiopia to help lift average growth in the world’s poorest economies to 4.6 percent in 2026 and 5.0 percent in 2027, although this still falls short of the 7 percent target set in the Sustainable Development Goals.
The report notes that Ethiopia’s recent growth has been underpinned by improved macroeconomic management, better harvests and relatively favourable commodity price trends, which have supported rural incomes and domestic demand. As one of the biggest economies in East Africa, Ethiopia is contributing significantly to the subregion’s projected expansion of about 5.8 percent in 2026 and 5.7 percent in 2027, keeping East Africa among the continent’s top‑performing blocs.
However, the outlook remains clouded by elevated public debt, limited fiscal space and rising climate‑related risks that are straining already tight budgets. The UN warns that many least developed countries, including Ethiopia, face a challenging external environment marked by higher global interest rates, weaker aid flows and heightened trade uncertainty following recent tariff hikes in major markets.
Progress on poverty reduction is also under pressure, with extreme poverty increasingly concentrated in sub‑Saharan Africa despite the post‑pandemic recovery. The report cautions that slow per‑capita income growth, recurrent droughts and other climate shocks, and pockets of fragility could erode social gains unless growth becomes more inclusive and climate‑resilient.
The UN identifies deeper regional integration, including full implementation of the African Continental Free Trade Area, and scaled‑up investment in infrastructure, green energy and productive sectors as critical to sustaining Ethiopia’s growth momentum. It also calls for stronger international support on debt relief and concessional financing for countries like Ethiopia to preserve space for social spending and development investments.
