Structural transformation via services or manufacturing? Evidence from Ethiopia

Policy brief Dec 2025 economic transformation and Labour markets

Ethiopia’s economy has grown rapidly, but its structural transformation has been uneven and incomplete. This reveals a disconnect between output growth and structural inclusion, reflecting weak alignment between skills, employment, and tradability.

A hybrid strategy is needed: one that expands labour-intensive manufacturing, upgrades informal services, aligns education with market demand, and develops tradeable sectors beyond agriculture and air transport.