In the 2020s, horrific war has defined Ethiopia. So has high economic growth.

While sporadic altercations and shooting incidents erupt not far away in South Sudan, 34-year-old coffee grower Yohannes Getachew has tended his 700 acres in southwestern Ethiopia undisturbed for years. The calm around his family’s farming enterprise nourishes an unlikely economic boom. Hundreds of miles to the north, prolonged fighting has plagued farmers in the states of Afar, Amhara and, most tragically, Tigray – areas where about a third of Ethiopians live.

“It has been quite a disaster for the country, what the chain of wars brought,” he says. “However, our area has been peaceful, and we harvested our coffee and other spices all this time. What we have been worried about was the natural climate change, nothing else.”

Pockets of peace in a country as large as California and Texas combined partly explain how Ethiopia – once the world’s poorest nation – keeps growing its economy far faster than most African countries amid violent ethnic conflicts. Many have feared the turmoil would shatter the country along communal lines, yet the economic outlook suggests otherwise. The International Monetary Fund forecasts 6.6 percent GDP growth in Ethiopia in 2025 and 7.1 percent in 2026, while sub-Saharan Africa as a whole will expand 4.2 percent, at best.

Another shock absorber is the sheer number of Ethiopians: around 130 million, Africa’s largest national population after Nigeria. Not everyone is up in arms.

A dozen years ago, Ethiopia was open and mostly safe terrain, with only scattered police checkpoints and no-go areas, usually near Somalia or where local disputes over land or water flared. In 2014 and 2015, protests erupted among the majority Oromo people, mainly at universities in Oromia state, demanding more political say in a country that Tigrayans, just 6 percent of the population, had ruled for more than two decades.

Political shift and shock

The deadly counterpunch by security forces, which human rights monitors say killed hundreds of people, ripped up the political settlement. In 2018, the ruling coalition collapsed, ushering in an Oromo politician, Abiy Ahmed, as Ethiopia’s surprise new prime minister. His outreach to Eritrea, a foe for decades, won him a Nobel Peace Prize.

“We understood our nations are not the enemies,” Abiy said in his Nobel acceptance speech in December 2019. “Instead, we were victims of the common enemy called poverty. We recognized that while our two nations were stuck on old grievances, the world was shifting rapidly and leaving us behind.”

Today grievances among Ethiopians are the problem. The threat of kidnapping or land mines set along roads during fighting between the military and Tigrayan rebels in 2021 and 2022 confines most international experts, diplomats and visiting business execs to the high-altitude capital Addis Ababa. The U.S. State Department warns Americans to reconsider travel to Ethiopia because of “sporadic violent conflict and civil unrest” beyond Addis Ababa and cautions, “the security situation may deteriorate without warning.”

While farming coffee, wheat and the staple grain teff makes agriculture Ethiopia’s biggest economic driver, Abiy promotes green energy and the digital economy as pivotal to the future. He told a technology conference in Addis recently that Ethiopia made a “bold and necessary choice” five years ago to create “a modern, inclusive, foundational and scalable digital identity system accessible to every resident regardless of location, income or background.” Fayda, meaning “value” in the national language Amharic, will serve as the primary ID for accessing public services, obtaining a passport and internal movement.

Even as the country staggered through the Tigrayan conflict, Abiy’s government awarded Kenya’s Safaricom a license for USD 850 million to build an advanced mobile phone and data network to compete with the government-run Ethio Telecom. On Abiy’s watch, Ethiopia has completed Africa’s largest dam, the Grand Ethiopian Renaissance Dam (GERD) on the Nile River near Sudan, which cost at least USD 4 billion. While Egypt has portrayed the mile-long hydropower project as a threat to its downstream water flow, Abiy has called GERD “a shared opportunity.”

Extreme poverty success

Leading up to the COVID-19 pandemic, Ethiopia had slashed extreme poverty and child mortality while spreading primary health care and education deep into rural areas. Microsoft founder and philanthropist Bill Gates praised Ethiopia for cutting deaths of children under 5 years old by more than half in two decades. The country scaled up health posts 15-fold since 2005, boosted vaccine supplies and tracking and deployed “an incredible cohort” of health extension workers, Gates told an audience at the African Union and online in a June 2025 speech.

The two-year war that erupted in 2020 between the federal government and the Tigray People’s Liberation Front (TPLF), the dominant faction in the former ruling coalition, cost Ethiopia more than USD 28 billion, while killing at least 102,000 people ages 15 or older, according to a recent study in the journal Population Health Metrics. The researchers based their estimate on deaths reported in a survey of the Tigrayan diaspora. Other estimates are far higher: the former Nigerian president and African Union mediator Olusegon Obasanjo told the Financial Times in 2023 that as many as 600,000 died, presumably including combatants.

“Our findings evidence extreme loss of life during the recent conflict in Tigray, and a reversal of decades of progress towards reduced premature mortality,” the population researchers said. “We encourage relevant actors to consider our findings in light of a stagnant peace process and the prospect of another war in Tigray.”

While tensions remain high in Tigray and between Ethiopia and Eritrea, so far calm has prevailed. U.S. Secretary of State Marco Rubio emphasized the need for “dialogue and regional stability,” during a July 22, 2025, call with Abiy, according to the State Department. Rubio also “commended Ethiopia’s economic reforms” and noted “their potential to expand opportunities for U.S. trade and investment.”

During the 2020-2022 conflict, TPLF forces advanced toward Addis Ababa with the aim of toppling Abiy’s government, before being halted by a counter-offensive supported by Chinese, Iranian and Turkish drones, according to analysts at Britain’s Royal United Services Institute for Defence and Security Studies. The rebel force fell back into Tigray and faced a blockade on food and medical supplies. “Siege warfare favors the better-resourced party,” the analysts wrote in 2022. “Compared to the Tigray regional government, the Abiy coalition has more human, financial and diplomatic resources at its disposal.”

Fierce war, fragile peace

In November 2022, an agreement signed in Pretoria, South Africa, between the TPLF and the federal government ended the conflict. This deal called for a ceasefire, the release of budgetary funds and other steps to stabilize Ethiopia.

Yet the socioeconomic wounds of the war remain fresh. Tigray, Amhara and Afar are facing acute budget shortages and some regional governments are struggling to pay civil servants. In Amhara, the fighting between government forces and Fano militias – locals who believe they are being ethnically targeted – has escalated to include heavy artillery and drone strikes. The violence has devastated schools, health centers and roads and disrupted food supplies. In the fertile Gojjam zone, ongoing clashes have turned farmlands into battlegrounds, forcing farmers to abandon their fields. 

Abiy has described Ethiopia’s economic growth as a “miracle” capable of leading the country out of aid dependency. Political-economy researcher Dalaya Ashenafi says Ethiopia’s GDP calculation sometimes has more to do with the politics of international finance than hard data and may not reflect the true economic state of the country. The IMF looks at historical performance, fiscal and monetary developments, security dynamics and sectoral trends, analysts say. Economist and public policy expert Getachew Alemu says IMF projections are often detached from “microeconomic” realities on the ground because they rely on national accounts data from the Ministry of Finance.

Tourism seeks reset

Economists agree that services, agriculture, mining and construction are among the sectors showing resilience and expanding economic output. Tourism has suffered even as Ethiopian Airlines, Africa’s largest carrier, booms on international traffic and the country plans a sprawling new hub airport 25 miles outside Addis Ababa. Ethiopia would like more travelers to venture into the country and visit top attractions like the famed rock-cut churches of Lalibela, a UNESCO World Heritage Site in tense Amhara. Hilton has announced that it will open the first international hotels in the cities of Adama, 60 miles from Addis Ababa, and Dire Dawa in the east as part of an expansion in Ethiopia in coming years.

Since the war ended, the Ethiopian capital has captured Abiy’s attention. Dressed in a gray zip-up jacket, khaki pants and a baseball cap, the prime minister strolled one recent evening with young Ethiopians on a wide walkway alongside a new bicycle lane parallel to a busy street. The Corridor Project is one of the largest initiatives in the city, budgeted at more than USD 800 million. The urban refresh includes the construction of parks and libraries and the dismantling of old, cherished neighborhoods. Abiy has rebuffed inquiries from Ethiopian lawmakers about the source of funding for an official palace being built atop a hill.

The IMF has long encouraged Ethiopia to devalue its currency, and the government has complied albeit with controversy. Getachew disputes the common assumption that a 10 to 15 percent drop in a currency leads to 1 to 2 percent growth in the economy. “That logic doesn’t apply in Ethiopia,” he says, “because we’re an import-dependent economy” and a devaluation “only worsens our trade balance.”

Ethiopia floated its currency in July 2024 to meet IMF conditions for a USD 3.4 billion loan program to restructure the economy for long-term growth. The birr has weakened to around 135 to the dollar from 57 before the devaluation. Ashenafi said the devaluation was aimed at boosting foreign currency reserves and encouraging international investment. However, the policy fails to account for the economic pain it causes domestically, she cautions. “Fertilizer prices have spiked, making agriculture even more difficult. This devaluation is hurting productivity, not helping it.”

Supporters of the government’s economic reforms argue that current hardships are the price of long-term transformation. In urban areas, many people are being pushed to the outskirts, and the growing number of individuals moving back in with their parents underscores the financial strain. Adding more pressure: the ending of American aid after decades, creating a billion-dollar hole in the country’s development finances. A tax on all workers may be needed to fill that gap.

In June 2025, Ethiopia scrapped all subsidies on fuel and imposed a 15 percent tax on fuel sales, as part of modernizing the taxation system. That move adds another burden on Ethiopians in a country still wavering between war and peace.