Despite economic growth between 2011-2016, poverty and inequality in Ethiopia remain challenges: - While median consumption increased 12% nationally, growth was unequal, with little to no growth for the bottom 15%. - Inequality rose slightly, with higher consumption growth in urban vs. rural and top vs. bottom deciles. - Poverty severity changed little and regional differences persist, increasing in some rural areas. Ensuring equitable growth that benefits all, especially the rural poor, will be key to continuing poverty reduction efforts in Ethiopia.

1. Poverty and household welfare
in Ethiopia, 2011-2016

2. Introduction
• Presents household-level welfare trends between 2011 and 2016
• National, urban/rural, regional, ecological zones
• Consumption expenditure is used as a measure of welfare
• Based on the last two rounds of Household Consumption
Expenditure Surveys (HCES)
• It has the following sections:
• Trends in household welfare: 2011-2016
• Patterns of growth in consumption expenditure
• A brief snapshot of current monetary living standards
• What have we learnt?
• How to go forward?

3. Trends in household welfare: 2011-
2016

4. Despite the El Nino drought, consumption
significantly increased between 2011 and 2016
9,520
10,750
9,331
10,657
14,230
9,944
0
4,000
8,000
12,000
16,000
National Urban Rural
Medianannualconsumptionperadult
2011 2016
Median annual consumption per adult in December 2015 prices
- At national level, the median
annual consumption per adult
increased from ETB 9,520 to
ETB 10,657, a 12 percent
increase
- The increase in consumption
was substantially stronger in
urban areas (32%)

5. Consumption increased in all regions except Afar
and Amhara
Reginal median annual consumption per adult in December 2015 prices
- Rural median consumption decreased slightly in Afar and Amhara
- Urban median consumption increased in all the regions
0
4,000
8,000
12,000
16,000
20,000
Tigray Afar Amhara Oromia Somali B. Gumuz SNNP Gambella Harari Addis Ababa Dire Dawa
Medianannualconsumptionperadult
2011 2016

6. Map of the five ecological zones

7. Consumption increased in all ecological groups
groups
Median annual consumption per adult in December 2015 prices by ecological zones
- Urban consumption increased noticeably in all ecological zones while
in rural areas the increase was low in general
0
2,000
4,000
6,000
8,000
10,000
12,000
Drought prone highland Drought prone lowland Humid moisture reliable lowland Moisture reliable highland Pastoral
Medianannualconsumptionperadultin
December2015Birr
2011 2016

8. Patterns of growth in consumption
expenditure

9. No consumption growth at the bottom of the
distribution
National average annual growth rates of consumption by percentile: 2011 - 2016
- The pattern of
consumption growth varies
- For the bottom 15%, there
was no growth at all
- At the top of the
distribution, growth
reached close to 6%
- Overall, consumption
increased by 2.4 percent
per year.

10. In urban areas, there was positive consumption
growth even at the bottom
Average annual growth rates of consumption by percentile between 2011 and 2016
- Growth rates were strong and positive across the whole urban distribution (5.9% per
year) and higher at the top of the distribution
- In rural areas, growth rates were more variable and low in general
- For the poorest 15%, growth was zero or negative; similar pattern was observed between
2005 and 2011
- Relatively higher growth rate was observed at the top of the distribution

11. Higher consumption growth at the top deciles
0
5000
10000
15000
20000
25000
30000
35000
40000
Poorest 2 3 4 5 6 7 8 9 Richest
Averageannualconsumption
Consumption deciles
Overall 2011 Overall 2016
Real annual consumption expenditure for each decile between 2011 and 2016: national
- Consumption grew in all the deciles except the first one
- The highest consumption increase was observed in the top decile

12. Consumption growth low in rural areas
Real annual consumption expenditure for each decile between 2011 and 2016: urban and
rural
0
10000
20000
30000
40000
50000
60000
Poorest 2 3 4 5 6 7 8 9 Richest
Urban 2011 Urban 2016
Poorest 2 3 4 5 6 7 8 9 Richest
Rural 2011 Rural 2016
- In urban areas, there was consumption growth across the distribution;
stronger at the top of the distribution
- Growth in rural areas was in general low and none for the poorest two deciles

13. Slight increase in inequality
0.298
0.329
0.371
0.380
0.274
0.285
0.000
0.100
0.200
0.300
0.400
2011 2016 2011 2016 2011 2016
National Urban Rural
Ginicoefficient
• There was slight
increase in Gini
coefficient
• Increase in inequality
at national level is
mostly due to the
increased inequality
between urban and
rural areas.
• But: Inequality remains
low in regional & global
perspective
Gini coefficient in 2011 and 2016

14. A brief snapshot of current
monetary living standards

15. Monetary living standards still low for most of the people
- Despite strong poverty reduction and
and significant consumption growth,
standards of leaving in Ethiopia remain
low
- Monetary living standards are fairly low
for the bottom 80% of the population
- It sharply increases in the fifth quintile
which is predominantly urban and more
educated
Daily expenditures per capita, in Birr in 2016
10.6
18.0
22.9
29.5
58.9
0.0
10.0
20.0
30.0
40.0
50.0
60.0
Q1 Q2 Q3 Q4 Q5
Expenditurespercapitaperday
Quintiles of consumption per capita

16. Compared to countries with similar income level,
poverty in Ethiopia is low
VietnamWest Bank and Gaza
Tajikistan
Nicaragua
Kenya
TunisiaMorocco
Nepal HondurasBangladesh
Myanmar
Vanuatu
Guatemala
Lao PDRHaiti
Solomon Islands
Zimbabwe India
Ghana Namibia
Congo, Rep.Senegal
Togo
Comoros
Malawi
South Africa
Benin
Gambia, The
Zambia
Cameroon
Pakistan
Ethiopia
Uganda
Burundi
Madagascar
Guinea
Rwanda
Lesotho
Burkina Faso
Yemen, Rep.
Congo, Dem. Rep.
Mozambique
Côte d'Ivoire
Sierra Leone
Liberia
Niger
Chad
Guinea Bissau
Indonesia
Micronesia
Sao Tome
Tuvalu
0
20406080
6 7 8 9 10
Log of GDP per capital (2011 PPP)
-0.22
-0.08
-1.60 -1.40 -1.20 -1.00 -0.80 -0.60 -0.40 -0.20 0.00
Vietnam
Ghana
Uganda
Bangladesh
Kenya
Rwanda
Ethiopia
Zambia
Elasticity Semi-elasticity
- In comparative perspective, poverty in Ethiopia is low relative to its income level
- But the extent to which economic growth has translated into poverty reduction
has also been low
Linear association between GDP per capita and poverty rates Growth elasticity of poverty: 2005-2015

17. Poverty severity didn’t decrease much and there is
high regional difference
Rural poverty severity across regions: 2011 and 2016
- Poverty severity in rural areas hardly changed between 2011 and 2016 (3.2 vs 3.1)
- It increased in the rural areas of Oromia, Harari and Dire Dawa
0.000
0.010
0.020
0.030
0.040
0.050
Tigray Afar Amhara Oromia Somali B. Gumuz SNNP Gambella Harari Dire Dawa
Severityofpoverty
2011 2016

18. What have we learnt?
• Consumption increased significantly between 2011 and 2016,
especially in urban areas and at the top of the distribution
• Growth in rural areas was low
• The poorest population doesn’t seem to be able to benefit from the
fast economic growth, particularly in rural areas
• Inequality increased slightly, though it is still low by international
standard
• Severity of poverty still high, despite 15 years of fast economic growth

19. How to go forward?
• How to ensure the poorest of the poor in rural areas benefit from
growth?
• How to leverage the positive dynamism in urban areas for national
poverty reduction?
• How to strengthen the role of the labor market in poverty reduction?
• What role can human capital play in continuing the welfare
improvements in such a way that the very poor also benefit?
• How to cope with the challenges that fast population growth will pose
on future poverty reduction endeavors?