The Coronavirus is causing serious damage not only in Ethiopia but also in the global economy. According to Professor Tasew Woldehana, President of Addis Ababa University and Economist, the governments’ measures to reduce and prevent fatal induced by the virus will cause short-term and long-term effects on the global economy. Production and marketing activities will be curtailed, especially when peoples’ activities are locked in order to prevent the spread of the virus for a period of time. As a result, the economy is getting a decline.
The professor told Addis Zemen Daily that the problem that the virus can have on the Ethiopian economy is twofold. The first one is a disadvantage to the Ethiopian economy as a consequence of the pandemic outbreak internationally, especially in countries where Ethiopia deals with trade, social and political relations. Ethiopia is exporting mostly agricultural and small quantities of industrial products. In the global recession, due to the virus, a decline in demand will result in goods the country exports.
While oil prices on the world market have temporarily benefited countries such as Ethiopia since the capacity of oil-producing countries has weakened in the long run, demand for imported goods from Ethiopia will decrease; foreign direct investment will be weakened. For example, the income of Ethiopian Airlines lost during the Corona period, is one of the proofs.
Tourism revenue in Ethiopia has also been completely cut off due to the virus. He said that this has resulted in a high unemployment rate among hotels to tourist destinations those income depends on it.
According to the professor, there are many Ethiopians living abroad. They send an average of six billion Dollars a year to their families. Most diaspora work day-to-day jobs so they can be laid off when the virus strikes. Or they’ll stop working. As a result, the money they send to Ethiopia will stop. People who manage this will have problems. It also exacerbates the shortage of foreign currency. Even if the virus does not enter our country, its occurrence abroad can only have economic consequences.
The second problem the professor pointed out is the economic impact due to the outbreak of the virus in Ethiopia. He said that the measures the government has taken to protect people from the virus may weaken the economy. For example, purchasing capacity will be reduced following the restriction of human activity.
Service providers face a shortage of markets, and factories cannot import raw materials. Production potential is decreasing. Industries and service providers pay workers without work. It can make small businesses to be closed or weaken their market. Large businesses also face problems that challenge their capabilities. They will end up in debt where they cannot produce in the next two to three years by finishing their capital. He further explained that the decline of the service and manufacturing sectors will finally cause economic failure.
If the spread of the virus is not easily suppressed and when the movement is limited from urban to rural areas of the country and vice versa, the agricultural work will also be affected. The decline in agricultural production means that the country’s economy is likely to have a major impact, as 40 percent of its gross domestic product comes from agriculture.
He suggests that the measures taken by the government to restrict the movement as part of remedial to minimize the economic impact must not be taken in the same way in all parts of the country. Adding, he said that the measures to be taken must be different and vary according to the area and community groups. Moreover, mini markets have to be opened in every area. Addis Ababa, for example, is known for its largest markets of Mercato and vegetables’ market place. Dividing up these big markets introduces small markets in every area and creates an environment where people can shop properly keeping appropriate social distancing.
Large and small business institutions need appropriate support from the government to get their jobs done without compromising people’s social distancing. To protect the institutions’ lockout and keep the workers on the job, a situation in which they would be able to get a low-interest rate loan, facilitate the extension of their loans and provision of incentive as required must be available so that the businesses should continue to operate without being shut down.
He also emphasized that the work of strengthening social security should be a focus of the Corona era. For low-income communities, the government does not have the capacity to raise money from its savings like developed countries. So, those who live on the day-to-day jobs and low-income communities may go into looting.
There will be a great number of poor people, especially in urban areas particularly because of Corona. “Before the occurrence of the social crisis, we need to strengthen social security by developing a system where everyone can contribute to this,” he suggested.
When answering the question what will be the economic fate of Ethiopia after the outbreak? Professor Tasew said: “The policy actions that we are taking now and after Corona will determine the fate of Ethiopia’s economy. If we restrict all activities and make everyone stay at home now saying ‘let anything happens,’ factories will be shut down and will fail. All small and medium enterprises are laid off. So the next two and three years can push us back 20 to 30 years even if we pass protecting on the Coronavirus.”
On the contrary, by opening up a number of small markets that are not exposed to the virus; sustaining activities of manufacturing industries by creating a positioning system that does not expose their employees to the virus; employing utmost capacity of external support and assistance as much as possible and applying incentive packages for the manufacturing industry to mitigate declining of its production capacity and protecting businesses enterprises from derail, economic harm can be minimized.
He advised the private sector economy not to close the industry and trade driven by fear as government support is promising. Each service provider and manufacturer must continue to operate their manufacturing industries and facilitating workplaces in a scientific manner, without violating appropriate social distancing. This will prevent the institution from lockdown and workers from being dispersed and will save the country from collapse, he said.
The Ethiopian Herald May 19/2020
BY BACHA ZEWDIE
