Impact of COVID-19 Pandemic on Ethiopia’s Economy: Two Perspectives
Desta, Sarlo Distinguished Professor of Sustainable Development
As the coronavirus started surging
like a tidal wave throughout Ethiopia, The Ethiopian policy makers began
preaching that staying at home, hand washing, mask-wearing, and
maintaining social distancing would slow down the spread of the disease.
Based on an illusion that the above
policies would be fully implemented and thereby start rekindling
Ethiopia’s economy, Prime Minister Abiy of Ethiopia (hereafter refereed
to Abiy), in his briefing to the House of Peoples’ Representatives on
October 19, 2020, boldly asserted that Ethiopia’s real GDP has increased
by 6.1 percent in 2020.
Using the same data published by the
Ethiopian Government, however, the International Monetary Fund (October
2020) reported that Ethiopia’s real Gross Domestic Product increased by
only 1.9 percent in 2020 (October 2020).
The Abiy’s Government and the
International Monetary Fund (IMF) both rightly agree that Ethiopia’s
economy has declined as the Ethiopian people underwent the coronavirus
health crisis. Nonetheless, while Abiy implicitly assumes that
Ethiopia’s GDP is recovering and the economic growth rate might reach
its level from before the pre-COVID-19 baseline stage, the IMF report
indicates that Ethiopia’s economy is still sliding downward and that its trajectory indicates
that Ethiopia will record an economic growth rate of zero in 2021 (IMF,
Given these two irreconcilable
perspectives, the aim of this paper is to trace Ethiopia’s economic
status during the COVID-19 pandemic period. In simple terms, the study
attempts to trace Ethiopia’s COVID-19 pandemic status, using the
alphabetic-shaped analytical framework known as the V,
W, U, K, and L curves.
curve denotes a steep decline of the GDP followed by a quick recovery phase. The
W-shaped curve, also known as a “double dip recession,” indicates sequential
waves of downturn, then upturn, then another contraction of the GDP due to
another wave of the outbreak of coronavirus. The U-shaped
curve reflects that the GDP will bottom out in a recession for a long
period before economic recovery emerges. The
K-shaped curve indicates that after a recession, the economy faces different
magnitudes during the same period. That is, while some sectors undergo
recovery, others simultaneously face decline. Lastly, the least desired by
any country is to see its economy undergoing the L-shaped curve, which demonstrates a long period of downturn
(economic depression) without recovery of the GDP.
As stated above, the V-shaped recessionary curve implies a steep drop followed by a
sharp, rapid recovery of economic growth. Faced with an economic recession (a consecutive decline of the GDP
for two quarters), responsible governments spend sufficient amounts on
stimulus packages, offer direct payment to citizens, give loan guarantees
and tax relief to businesses to mitigate the substantial economic decline,
and make the economy bounce back to its pre-pandemic baseline. For
example, during the recent COVID-19 episode, countries such as Denmark,
Norway, South Korea, Taiwan, and Vietnam undertook public health
mitigation efforts and used appropriate stimulus packages to save lives
and livelihoods, and thereby were able to minimize economic loss (Bjorklund
and Ewing, October 14, 2020).
Mapping out Ethiopia’s economy using
the V-shaped curve, one can’t help but notice that the Ethiopian
government has attempted to use monetary intervention, fiscal stimulus
packages, price ceilings on essential items, lower interest rates, IMF
support (through Rapid Financing Instruments), and other multilateral
assistances to reinvigorate Ethiopia’s economic loss induced
by the coronavirus pandemic. However, since Ethiopia was faced with a
fragile economic environment and poor health infrastructure prior to
COVID-19, the allocated funds were insufficient to prop up businesses and
Moreover, in Ethiopia, resistance
persists to the stringent health-related preventive measures, such as
stay-at-home and social distancing, that were imposed during the spread of
the viral coronavirus, because the measures by and large emerged from the
characteristics of industrialized countries and were not adapted to
appropriately fit the Ethiopian condition (see Mobarak and Bernett-Howel,
April 10, 2020). For example,
the “stay-at-home” policy couldn’t be practically implemented in the
Ethiopian context because most people in Ethiopia work in the informal
sector of the economy and depend on cash from daily hands-on-labor to feed
their families. As Weldesdilassie and Woldehanna (2020) persuasively put
it, four or five family members in Ethiopia live in a single room.
Therefore, implementing blunt lockdown and social distance policies to
curtail the spread of the COVID-19 virus is likely to cause disastrous
damage to the Ethiopian economy.
In short, as stated above, since the
limited federal stimulus funds that were disbursed by the government were
not sufficient and most of the health-related preventive measures were not
appropriately designed to fit Ethiopian culture, in retrospect, it is
possible to argue that they have hardly helped Ethiopia’s economy to
bounce back to its pre-COVID-19 period.
Actually, it needs to be underlined
that though unintended, the containment measures implemented by the
Ethiopian government caused aggravated unemployment, made the prices of
basic commodities skyrocket, and have contributed to the disruption of
families’ lives and children’s education.
Therefore, instead of leaving
everything up to governments that have perpetuated “Pandemic fatigue,”
it would be better to encourage civil societies, local communities, church
and mosque centers, and civic centers to play major roles in effectively
socializing their adherents to use locally produced face masks and counter
the lingering effects of the coronavirus pandemic. In other words, to
strengthen communities and build resilience in Ethiopia against the
coronavirus and other potential epidemics, community awareness and mass
mobilization processes need to be set as vital preconditions (See Desta
and Berhe, 2020).
To summarize, for the last eight
months, because of the coronavirus rupture, Ethiopia’s economy is at a
stand-still and helplessly floundering in a U-shaped recessionary curve. It is most likely that Ethiopia’s
economy will take a very long time to recover, because in addition to
COVID-19, the Abiy’s Government is not doing anything substantial to
settle the massive political unrest or sensibly handle the rampant human
rights violations in the country.
For example, in the midst of the
COVID-19 pandemic, not concerned about the downtrodden masses, Abiy was
seen relaxing and driving toys at his resort and retreat center while some
Ethiopian communities were battling huge and voracious swarms of hungry
desert locusts. As narrated by Cullinan (30 July, 2020), early assessment
of Ethiopia indicates that “…desert locusts have caused the
destruction of nearly 800 square miles of cropland and more than 5,000
square miles of pasturelands, as well as the loss of more than 350,000
metric tons of cereal – resulting in 1 million people in need of food
Thus, it is reasonable to conclude that
Abiy’s statement to Ethiopia’s House of Peoples’ Representatives
that Ethiopia’s GDP during the upsurge of coronavirus in 2020 has
increased by 6.1 percent is a political ploy. Given that there are wide
discrepancies between Abiy’s report to Ethiopia’s House of Peoples’
Representatives and the report published by the IMF, it is possible to
argue that Abiy is self-absorbed and lacks respect for his constituents
— the Ethiopian people.
Baldwin, R. and di Maruro, B. (2020). “Mitigating
the COVID Economic crisis: Act Fast and DO whatever it Takes.
A CEPR Press VOXEU.org e Book.
Bjorklund, K. and Ewing, A. (October 14, 2020). “The
Swedish Covid-19 Response is a Disaster. It shouldn’t be a Model for the
Rest of the World.”
Cullinan, M. (30, July 2020). “ The Impact of desert
locusts in the Horn and Eastern Africa.” Action
against Hunger. Accessed at https://reliefweb.int/report/somalia/qa-impact
A. and Berhe, H. (2020). “Establishing Sustainable Handwashing
Water Strategies to Manage the Spread of COVID-19 in the Regional State of
International Monetary Fund (October 2020). “Regional
Economic Outlook: Sub-Saharan Africa A difficult Road to Recovery.”
International Monetary Fund; World Economic and Financial Surveys.
Rodeck, D. (July 15, 2020). “Alphabetic Soup:
Understanding the Shape of a COVID-19 Recession”. Forbes Advisor. Accessed
Retrieved October 19, 2020.
Trading Economics, (2020). “Ethiopia GDP Annual
Growth Rate”. Accessed at https://trading economics.com/Ethiopia/gdp-growth-annual.”
Retrieved October 21, 2020.
Weldesiassie, A. and Woldehanna, T. (April 2020).
”The Economic Implications of COVID-19
in Ethiopia and policy Measures”. Policy
Studies Institute (PSI).
DISCLAIMER: The views and opinions of the authors expressed herein do not necessarily state or reflect ethioobserver position. ethioobserver does not exercise any editorial control over the information therein. ethioobserver cannot accept any responsibility or liability for any actions taken (or not taken) as a result of reading the material displayed.