# **3. Main Trends**

This section provides an overview of key trends on output and employment in Ethiopia. In particular, it tracks changes in the level, growth and composition of production (value added) and employment. In addition, it investigates sectoral productivity and provides estimates of employment elasticities by economic sector.

## **3.1. Gross Value Added**

Table 1 presents data on Gross Value Added (GVA). Total GVA increased four-fold in merely two decades, from 128 billion birr in 1991 to 510 billion birr in 2011 (in constant prices).<sup>6</sup> GVA in construction grew eight-fold, while the value added generated by trade, transport & communications, and other services nearly increased by a factor of seven. Agriculture registered the lowest relative expansion – less than tripled its initial value. However, in terms of each sector’s contribution to the overall GVA increase (i.e. 383 billion birr), agriculture accounted for nearly 38 percent of this expansion, while other services and trade accounted for 24 and 21 percent, respectively. Hence, despite its relatively lower growth – 5 percent over the entire period – agriculture still provided the greatest contribution to the rise in GVA. This is due to its large weight in the economy, which we will show below.

<u>Table 1: Gross Value Added</u>

||Constan|t birr(bi|llion,20|10/11pr|ices)|Average an|nualgrowth|(%)|||
|---|---|---|---|---|---|---|---|---|---|---|
||1991|1996|2001|2006|2011|1991-96|1996-01|2001-06|2006-11|1991-11|
|Gross Value Added<sup>*</sup>|127.7|160.2|204.3|282.4|510.2|4.8|5.2|6.9|10.7|6.9|
|Agriculture|83.9|98.8|111.9|145.2|223.1|3.5|2.9|5.9|7.9|5.1|
|Mining & Quarrying|1.4|1.5|2.0|2.6|7.7|4.4|6.5|5.6|24.1|10.2|
|Manufacturing|4.0|6.4|8.3|11.2|20.5|10.3|5.5|6.3|10.1|8.1|
|Electricity & Water|1.3|1.5|2.5|3.6|6.5|2.6|11.3|7.6|9.0|7.6|
|Construction|2.7|3.7|5.9|11.1|21.5|7.3|10.1|13.5|11.5|10.6|
|Trade|14.6|21.3|30.8|46.2|99.3|9.2|7.7|8.6|13.8|9.8|
|Transport & Comms|3.2|4.6|7.4|11.9|22.3|8.1|9.9|10.1|10.8|9.7|
|Other Services|16.7|22.3|35.6|50.7|109.3|6.1|9.9|7.4|14.5|9.5|

* Values not adjusted for financial intermediation services indirectly measured (FISIM) Source: Government of Ethiopia

Economic growth has been accelerating steadily over the past 20 years. In the early 1990s, real GVA grew at an average of about 4.8 percent, compared with 5.2 percent in the late 1990s. This decade witnessed a transition in political power and consequently a first wave of economic reforms. Between 1998 and 2000, the Ethiopia-Eritrea war had a significant impact on the economy. Economic performance continued to improve in the early 2000s, reaching an average growth rate of 6.9 percent – despite facing one of the most severe droughts in two decades. In the second half of the 2000s, economic growth accelerated substantially to over 10 percent per year. The annual data suggest a clear trend break around 2003 – the year of the drought (Figure 1). From that point forward, economic activity has accelerated at an unprecedented pace.

> 6 GVA is notoriously difficult to measure. Estimates often depend on critical assumptions and may lack consistency across space and time – e.g. due to changes in methodology and/or failure to update prices. Nonetheless, the (official) data used in this paper are the best estimates available for Ethiopia.

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