Eritrea: Economic Outline

Economic Indicators

The economic situation has strongly deteriorated since 2002 due to the severe chronic droughts (two thirds of the population are affected by these) a decrease in remittances, autarchic monetary policy led by the government, the heavy costs of military spending and persisting tension with Ethiopia. After contracting in 2008 (-9.8%) and resuming growth in 2009 (3.6%), the economy was only growing slowly in 2010 (1.8%) and the future outlook is hardly more optimistic.

The government’s economic strategy consists in managing macroeconomic imbalances by controlling and regulating prices until the security situation permits a transition towards market economy. This policy has lead to a currency shortage and a drop in the private sector activity. The scale of the public debt as a proportion of the GDP is also worrisome, although Eritrea remains up to date with the reimbursement of its debt. With its limited natural resources, the country depends on remittances coming from its diaspora, as well as on international aid and must deal with the challenges of reconstruction. The government’s priorities are ensuring security (especially food security), develop the human resources and physical infrastructures in order to improve its insertion in international trade, namely concerning exports, as well as promote the influx of foreign investment.

Eritrea is a poor country devastated by the independence war and by the conflict with Ethiopia. Its slow growth and high inflation rate (20% in 2010) has lead to deterioration of life conditions, in a population which includes a great number of refugees and emigrants (1.5 million persons). Illiteracy and unemployment affect a great proportion of the population.

Main Indicators	2009	2010	2011	2012 (e)	2013 (e)
GDP (billions USD)	1.86e	2.12	2.60	3.06	3.49
GDP (Constant Prices, Annual % Change)	3.9e	2.2	8.2	6.3	3.5
GDP per Capita (USD)	360e	398e	473	541	598
General Government Gross Debt (in % of GDP)	145.7e	144.8	134.4	127.6	125.1
Inflation Rate (%)	33.0e	12.7	13.3e	12.3	12.3
Current Account (billions USD)	-0.14	-0.12	0.02	0.11	0.10
Current Account (in % of GDP)	-7.6e	-5.6e	0.7	2.9	-

Source: IMF - World Economic Outlook Database - Last Available Data.

Note: (e) Estimated Data

Monetary Indicators	2008	2009	2010
Foreign Debt (million USD)	961	1,019	-
Eritrea Nakfa (ERN) - Average Annual Exchange Rate For 1 USD	15.38	15.38	15.38

Source: World Bank - Last Available Data.

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Main Sectors of Industry

Breakdown of Economic Activity By Sector	Agriculture	Industry	Services
Employment By Sector (in % of Total Employment)	-	-	-
Value Added (in % of GDP)	14.5	22.4	63.0
Value Added (Annual % Change)	3.6	-0.2	3.4