Ethiopia has emerged as one of Africa’s leading economic performers, achieving a robust 7.2% growth rate, bolstered by a thriving agricultural sector, increased gold and electricity production, and significant reforms, as reported in the World Bank’s latest Global Economic Prospects report. Despite this positive momentum, the country faces considerable debt distress, even as its growth outlook remains one of the most promising on the continent.
The World Bank’s report, released on Tuesday, highlights Ethiopia’s economy as a regional standout. While growth is moderating from previous highs, it remains strong at 7.2%, driven by comprehensive reforms that have alleviated long-standing constraints and boosted output in key sectors.
The report projects that “growth is expected to moderate to a still-robust 7.1% in 2026 and then rise to 7.7% in 2027,” citing improved monetary conditions, productivity gains, and a recovery in investment.
However, the report also issues a cautionary note: “Ethiopia remains in debt distress, with elevated sovereign spreads amid ongoing debt restructuring negotiations with bondholders.”
In a regional context, Guinea led Sub-Saharan Africa with an estimated 7.5% growth over the past year, followed closely by Benin at 7.3% and Ethiopia. Looking ahead, Rwanda is also expected to see strong growth, projected at 7.2% in 2026 and 7.6% in 2027.
Global Context
Globally, the economy has proven more resilient than anticipated despite trade tensions, with growth projected at 2.6% in 2026 and 2.7% in 2027—a slight upward revision, largely driven by better-than-expected performance in the United States.
Nevertheless, the World Bank warns that the 2020s are on track to be the weakest decade for global growth since the 1960s. A troubling divide is widening: while nearly all advanced economies have surpassed pre-pandemic income levels, about one in four developing economies still has lower per capita incomes.
“With each passing year, the global economy has become less capable of generating growth and seemingly more resilient to policy uncertainty,” said Indermit Gill, the World Bank Group’s Chief Economist. He urged governments to “aggressively liberalize private investment and trade, rein in public consumption, and invest in new technologies and education” to avoid stagnation.
The report highlights a pressing jobs challenge for developing economies, with 1.2 billion young people set to enter the workforce in the next decade. It advocates for a three-pillar strategy: strengthening capital, improving the business environment, and mobilizing private investment.
With public debt in developing economies at a half-century high, the report underscores the urgent need for fiscal credibility, calling for well-designed and enforced fiscal rules to stabilize debt and foster growth.
