The basis of the economy is rain-fed agriculture, which means that crop production fluctuates widely according to yearly rainfall patterns. Services, including retail trade, public administration, defense, and transportation, constitute the second largest component of the economy. Manufacturing and mining are a distant third and fourth.
Agriculture is the most important sector of Ethiopia’s economy, constituting nearly 40 percent of gross domestic product. The sector provides by far the largest percentage of exports and employs up to 80 percent of the population.
Ethiopia is home to an estimated 7 million pastoralists who tend a large number of livestock—a survey in 2003 counted 35 million cattle, 25 million sheep, and 18 million goats. A large portion of them are found in the dry lowlands of the east, southeast, and south.
Two bush crops flourish in the south—coffee, the major export earner, in the southern highlands, and chat, a mild stimulant that is also exported, in the southeastern lowlands.
The mining sector is quite small in Ethiopia. The country has deposits of coal, gemstones, kaolin, iron ore, soda ash, and tantalum, but only gold is mined in significant quantities.
Although it has shown some growth and diversification in recent years, much of the industry is concentrated in Addis Ababa. Food and beverages constitute some the higher percent of the sector, but textiles and leather are also important, the latter especially for the export market.
Aside from waterpower and forests, Ethiopia is not well endowed with energy sources. The country derives its electricity needs from hydropower.
Aside from wholesale and retail trade, transportation, and communications, the services sector consists almost entirely of tourism.
Ethiopia’s most important markets are in Europe, especially Germany, the United Kingdom, and Italy, and in Japan, and China all of whom purchase large quantities of coffee. Djibouti and Saudi Arabia are other outlets for Ethiopia’s exports.
Ethiopia imports a large range of consumer and capital goods. The most important imports are consumer goods, transport, agricultural, and industrial products, fuel, and semi-finished goods. In the past, imports came primarily from Europe, especially Italy and Germany, India and more recently from China.
In the far southwest on both sides of the Omo River are perhaps 80 groups of Omotic-speakers, of whom the Wolaita are the most numerous. They are hoe cultivators; some specialize in craftwork and weaving. In the far southwest and western borderlands with Sudan are groups who speak Nilo-Saharan languages. They are hoe cultivators and cattle keepers. In the west are the Anuak and the Nuer, who are the most numerous. Farther north are smaller groups, such as the Gumuz and the Berta, and, in western Tigray, the Kunema.