flag Eritrea Eritrea: Economic Outline

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Eritrea is one of the world’s most closed countries. It was already facing a very difficult economic situation due to chronic droughts, a steep decrease in remittances from the diaspora, autarkic policies and past tensions with Ethiopia when it was hit by the outbreak of the COVID-19 pandemic and a locust invasion. After declining by -0.6% in 2020, economic growth rebounded to 2.9% in 2021, driven by a rebound in metal exports (IMF). According to IMF estimates, GDP growth will further accelerate to 4.8% in 2022 before slowing down to 3.8% in 2023. Growth should be stimulated by a return to normal in services, higher export revenues from mining activities and the construction of the Colluli potash project (Coface).

In 2021, Eritrea's economy started to recover from the locust invasion and the effects of the COVID-19 crisis, which despite low health impacts, caused a supply and demand shock and resulted in the deterioration of public finances. Higher revenues allowed the fiscal deficit to decrease from -5.2% GDP in 2020 to -4.8% GDP in 2021 (Coface). Despite the end of the support measures adopted by the government to help businesses and assist the most vulnerable households, fiscal balance is expected to remain in deficit in 2022 (-1.5% GDP) due to the state wage bill and capital investment in infrastructure (Coface). Primary deficits and high real effective interest rates feed a large public debt (AfDB). According to IMF estimates, public debt decreased from 184.9% in 2020 to 175.1% in 2021, and will further decline to 159.3% in 2022 and 149.5% in 2023 due to government efforts to accelerate debt servicing. The very high level of Eritrea's public debt, which is mainly domestic and denominated in local currency puts the country in a situation of debt distress. After several years of deflation due to low prices for consumer goods imported at an overvalued exchange rate (Coface), inflation rose to 4.8% in 2020 due to supply chain disruptions (IMF). It declined to 4.3% in 2021 and is expected to remain stable in 2022 (4.2%) due to higher commodity prices (oil and food), before dropping to 2.5% in 2023 (IMF). Post-pandemic economic recovery remains the priority. Normalised relations of Eritrea with its neighbours are expected to bring a substantial peace dividend and improve relations with international donors. The government gives priority to achieving security, in particular food security, and expanding human resources and physical infrastructure, in order to participate in international trade more effectively. The country faces many challenges, including vulnerability to climate and global shocks, institutional weaknesses, deficient infrastructure, lack of reliable statistics to guide policy and an unstable regional environment.

Eritrea, which has not held an election since 1993, is one of the 10 poorest countries in the world. It suffers from recurring famines that affect a large portion of the population (as in the case of El Niño in 2016) and NGOs have been banned from the country. According to the UN, human rights abuses perpetrated by the Afwerki dictatorship have led to a mass exodus (15% of the population). It is estimated that 5,000 Eritreans flee the country each month and are thought to be the second largest refugee community in Europe behind Syrians. The labour market is almost non-existent, pushing many Eritreans into the informal sector. According to the World Bank (modeled ILO estimate), unemployment rate in Eritrea was at 7.9% of total labour force in 2020. The working poor are estimated to account for 75.2% of total employment (AfDB). Eritrea is ranked 180th out of 189 countries in the Human Development Index published by UNDP.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 1.98e2.082.252.482.65
GDP (Constant Prices, Annual % Change) 3.8e-0.62.94.83.8
GDP per Capita (USD) 567588e626678711
General Government Gross Debt (in % of GDP) 189.4e184.9175.1159.3149.5
Inflation Rate (%) -16.44.84.56.23.5
Current Account (billions USD) 0.240.230.280.320.31
Current Account (in % of GDP) 12.110.912.412.711.6

Source: IMF – World Economic Outlook Database - October 2021.

Note: (e) Estimated Data


 
Monetary Indicators 20142017201820192020
Eritrea Nakfa (ERN) - Average Annual Exchange Rate For 1 GHS 4.143.533.292.902.69

Source: World Bank - Latest available data.

 

Main Sectors of Industry

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 63.1 7.3 29.6
Value Added (in % of GDP) 14.1 21.8 n/a
Value Added (Annual % Change) 3.6 -0.2 n/a

Source: World Bank - Latest available data.

 

The Active Population in Figures

201820192020
Labour Force 1,589,2921,612,6221,545,718

Source: International Labour Organization, ILOSTAT database

 
201720182019
Total activity rate 81.63%81.46%81.25%
Men activity rate 88.21%87.95%87.60%
Women activity rate 75.09%75.00%74.92%

Source: International Labour Organization, ILOSTAT database

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.

Score:
42,3/100
World Rank:
173
Regional Rank:
45

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 
 

Country Risk

See the country risk analysis provided by Coface.

 

Indicator of Political Freedom

Definition:

The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.

Ranking:
Not Free
Political Freedom:
7/7

Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House

 

Indicator of Freedom of the Press

Definition:

The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).

World Rank:
180/180

Source: World Press Freedom Index, Reporters Without Borders

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Sources of General Economic Information

Main Online Newspapers and Portals
Eritrea Daily, Eritrea news
Allafrica.com, Eritrea news
Afrol, Eritrea news
Einnews.com, Eritrea news
Eritrea BBC Media Profile
Useful Resources
Bank of Eritrea (website under construction)
 
 

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Latest Update: May 2022