Ethiopia's economy is growing fast, but renewed fighting in the north could put that growth at risk, DW reported. AllAfrica and The Eastleigh Voice also carried the report. The International Monetary Fund (IMF) forecasts real growth of 9.2% for the 2025-26 fiscal year. Reconstruction costs and climate-related crop problems add to the strain.
"If there is a major conflict […] the current economic growth will not be sustainable," London-based financial analyst Abdulmenan Mohammed told DW. He said a new war would force the government to spend more on soldiers, equipment and logistics. At the same time, tax revenue from the affected regions could fall. In his view, money meant for infrastructure, education and social services would instead be tied up in military spending.
Prices are another worry. The IMF forecasts average inflation of 11.7% for 2025-26. Mohammed said inflation would likely rise if the conflict escalates. More domestic borrowing could squeeze private firms out of the credit market. Military demand for foreign currency could also weaken the birr and make fuel, imported goods and industrial inputs more expensive.
Mohammed named agriculture, tourism and hospitality as the most exposed sectors. He said farmers are hit hardest because much of the fighting happens in rural areas. Some parts of the country already face poor rains and weak harvests. Travel advisories could also keep visitors away from hotels and tour operators.
The 2020-2022 war in Tigray and other regions left deep scars. A World Bank-backed assessment puts the damage from conflicts between November 2020 and December 2021 at more than $22.6 billion. It also counts about $6 billion in economic losses and a reconstruction bill of about $19.7 billion. In 2022, Ethiopia lost duty-free access to the US market under the African Growth and Opportunity Act (AGOA). According to The Eastleigh Voice, about 750,000 people remain internally displaced because of the Tigray conflict.
The economy recovered after the Pretoria peace deal of November 2022. IMF figures show growth of 7.2% in 2022-23 and 8.1% in 2023-24. Agriculture, mining and electricity are driving the expansion. Debt remains a burden: Ethiopia defaulted in late 2023 after missing a Eurobond interest payment. An IMF-backed reform programme began in 2024. A 2023-2028 reconstruction plan exists, but it is unclear whether it can be fully funded on time.