Ethiopia's recent history is one of resilient growth in a conflict laden region. The country has made tremendous progress across economic, social and human development indicators, albeit from a low starting point. Since the end of the civil war in 1991, Ethiopia has quadrupled primary school enrollment, halved child mortality rates, and doubled the percentage of people with access to clean water.1 Ethiopia achieved the most rapid increase in access to improved sanitation facilities of any African country since 1990, moving from just 2.5% access to roughly 29% in 2016.2 The country has also been able to combine such improvements in service delivery with the third most significant decline in fertility rates and the third largest decline in the undernutrition rate among African countries since 1990. Since the early 2000’s, Ethiopia’s economy has been one of the ten fastest-growing in the world. From 2004 to 2013, the country’s average annual Gross Domestic Product (GDP) growth rate exceeded 10%, which was more than four percentage points higher than the average for Africa’s 26 other low-income countries.3 Unlike Equatorial Guinea, Chad, Angola and Liberia (the other top five fastest-growing African countries), Ethiopia has achieved rapid economic growth without relying on natural resource exports. Moreover, the Government of Ethiopia (GoE) has accomplished much of this development in the context of the Horn of Africa, a region with a long history of instability and violence. In its most recent national development document, the Growth and Transformation Plan II (2014/15-2019/20), the government laid out ambitious development targets in health, education, economic growth, and infrastructure, among other areas. It set a target of achieving lower-middle income status by 2025. The modeling presented in this report suggests Ethiopia will likely not achieve that target until closer to 2030. This report uses the International Futures (IFs) modeling system to explore Ethiopia’s current development trajectory. It then considers scenarios that simulate ambitious, but realistic, 5-year interventions (2017-2021) across different development sectors, and explores the effects of these interventions on development outcomes to 2030 or beyond. The goal of this report is to explore Ethiopia’s national development trajectory and examine the potential effects and tradeoffs of different policy interventions through the construction of alternative scenarios. Despite recent progress, Ethiopia maintains some of the lowest levels of access to basic services of any country in the world. It continues to rank near the bottom of the United Nations Development Programme’s Human Development Index (HDI), scoring 174th out of 188 countries in 2015.4 In 2016, Ethiopia was ranked 174th (out of 186 countries) in terms of access to clean water, and 161st in terms of access to improved sanitation. The country has one of the lowest primary education survival rates in the world; nearly half of all students who begin primary school do not reach Grade 8. Lastly, Ethiopia is largely an agrarian society, with close to 70% of the labor force involved in the agricultural sector, primarily as subsistence farmers, making a large proportion of the population vulnerable to climate-related shocks. Despite the significant proportion of labor involved in agriculture, Ethiopia registers some of the lowest agricultural yields globally (ranked 154th).5 Low agricultural productivity results in a high level of food insecurity and some of the highest burdens of hunger and undernutrition in Africa. Even as Ethiopia continues its development and seeks to transition its economy toward higher value-added sectors like manufacturing and services, agriculture will remain a crucial segment of economic growth, and an important component of Ethiopia’s development trajectory. Ethiopia’s recent economic growth has been driven by strategic, government-led, public investment in infrastructure. The government has also benefitted from high levels of foreign aid from its partners in the international community (averaging near 11% of GDP since the mid-1990s). Foreign aid to Ethiopia is, however, forecast to decline (as a percent of GDP) over the next five to ten years, straining the government’s capacity to continue delivering public services. Low revenue generation, coupled with a rapidly expanding population (the population grew an estimated 2.6% in 2016 alone), will require improved government capacity to accelerate development and meet the needs of Ethiopia’s growing population. Questions surrounding the GoE’s capacity are complicated by the current security situation. Large protests erupted in November 2015 and continued through much of 2016, concentrated in the regions of Oromia and Amhara. Protesters have been demanding increased political and economic inclusion. The government response has largely failed to settle the unrest, and a State of Emergency was imposed in October 2016. These protests have exposed deep rooted horizontal inequalities and tensions between Ethiopia’s diverse ethnic groups6 and brought to the surface longstanding frustrations over perceived systematic political and economic exclusion of a large segment of the population.Despite reducing poverty by roughly 45 percentage points over the past 20 years, approximately 25 million Ethiopians still live in extreme poverty (less than US$1.90 per day) today. Ethiopia is forecast to reduce the percentage of the population living in extreme poverty to 10% by 2030. Even with that progress, nearly 16 million Ethiopians could be living below the extreme poverty line in 2030. This report explores tradeoffs across strategic investments in key development sectors and their impact on human, economic and social development in Ethiopia
