It experienced considerable growth in recent years, indicated by an improvement in gross domestic product in 2011 of 8.7 percent and in 2012 of 7.5% over 2011,[3] and has a total of $8.090 billion as of 2020.

Eritrea's recent economic growth has been characterised by considerable volatility, partly due to its dependence on predominantly rainfed agriculture, which accounts for about one-third of the economy.

Real GDP growth is estimated to have recovered to around 12% in 2018, after an average contraction of -2.7% between 2015 and 2018, caused by frequent droughts and lower mining output.

[5] Reported inflation in Eritrea was negative between 2016 and 2018, following the exchange of currency in circulation in November 2015, which led to a contraction in the money supply.

[5] In recent years, Eritrea has pursued a tighter fiscal policy to address persistent deficits that emerged after the intensification of regional instability in 1998.

By 2018, the country recorded a fiscal surplus of about 11 % of GDP, mainly due to significant reductions in capital expenditures and the introduction of some revenue-raising measures.

[5] Short-term growth prospects remain challenging due to fiscal constraints and limited opportunities under existing restrictions.

Eritrea continues to face a difficult macroeconomic environment, characterized by an unsustainable debt burden—including arrears to the World Bank—as well as vulnerabilities in the financial and external sectors.

The displacement of 1 million Eritreans as a result of the war with Ethiopia, and the widespread presence of land mines have played a role in the declining productivity of the agricultural sector.

[4] As of 2011, the government encouraged large-scale cultivation of cactus to help alleviate the human suffering and, in the future, increase export revenues.

However, Eritrea's long coastline offers the opportunity for significant expansion of the fishing industry from its current, largely artisanal, stage.

Tensions with Yemen over fishing rights in the Red Sea flared up in 1995 and again in 2002, and Eritrea's difficult relations with other nations could hamper further development of the industry.

[4] In 2011, AngloGold Ashanti moved into Eritrea to explore the Arabian-Nubian Shield for gold through a 50/50 joint venture set up in 2009 with Thani Dubai Mining.

According to the U.S. Department of Commerce, opportunities exist for both on- and offshore oil and natural gas exploration; however, these prospects have yet to come to fruition.

The Eritrean government has expressed interest in developing alternative energy sources, including geothermal, solar, and wind power.

In early 2005, likely in an effort to increase foreign capital reserves, the Eritrean government decreed that all transactions in Eritrea must be conducted in nakfa.

[4] Inflation continues to be a problem in Eritrea, particularly as years of drought push grain prices higher and defense expenditures remain high.

Eritrea's main suppliers were Brazil, China, Egypt, India, Italy, Germany, Saudi Arabia, and South Africa.

On 16 September 2018, Eritrean President Isaias Afwerki and Ethiopian Prime Minister Abiy Ahmed signed a peace agreement in Jeddah, Saudi Arabia between the two countries after a bitter war that lasted 20 years (from 1998 to 2018).