With the spread of the coronavirus across the globe, no one seems to be certain about the future. While the scope of the virus is widening alarmingly every second, the number of infected people and the death toll is skyrocketing with no end in sight. Countries with better health infrastructure, like the US and Europe, have been stretched beyond capacity. Facing the worst shock since World War II, the aviation sector is among the worst hit. The same is true for the hospitality sector, which is literally registering no revenues with the closure of airports, the obliteration of the tourism sector and cancellation of events.
As workers stay at home and physical distance becomes the new normal, factories are forced to shut down their plants. Global supply chains have also been disrupted since the outbreak of COVID-19. It is no different in Ethiopia, where possibly 2 million people could lose their jobs as per estimates by the Jobs Commission. The economic impacts are vast and multi-layered.
Ethiopia could experience decline in forex flow due to a decline in exports of major commodities, including flower and textile products, as well as a fall in foreign direct investment and remittance flow.
The devastating impact of the pandemic is set to be felt by every sector of the economy. Steadily driving the productive endeavor of companies to a grinding halt for possibly months and still managing to keep the work force on the roster is the puzzling reality companies have to solve. With little or no income for months, it is going to be a life and death situation for most businesses to stay afloat as expenses like salary and rent are going to be there to stay.
Companies with relatively big capital can suck in the financial pressures of the pandemic and maintain their existence while small companies such as SMEs are set to be hit hard by the incoming gigantic waves. Although all businesses, regardless of size, are going to suffer from the pandemic, bigger ones have thus far shown more steel in them. Reports indicate that over a billion people worldwide and 2 million people in Ethiopia are going to lose their jobs as a result.
In a societal system where everything depends on money, whether virtual or paper, activities that curtail transactions and the flow of currency have a devastating effect on life. As a result, the hard time businesses are facing nowadays is going to reflect badly on the lives of their employees and the families they support. Sudden acute shortage of the medium of social and economic transaction would definitely go a long way to disrupt life as we know it.
For the second time in a dozen years and completely righting off neoliberal claims, governments have to come to the rescue of private businesses. A number of governments have already done so across the world. The Ethiopian government has also availed a stimulus package. Whether the amount allotted is enough or not remains to be seen but the most important issue remains to be the efficient distribution of the financial resources. Identifying the right amount of financial stimulus needed by a sector and seeing to it that the resource is shared equitably among businesses in the sector is crucial to bolster its efficacy.
Going ahead, the dire situation created by the pandemic shows the vulnerabilities of the monetary system both nationally and internationally. It also shows that job creation schemes are precarious and don’t stand up well against weather changes. As the Ethiopian Finance Minister, Eyob Tekalign, pointed out the pandemic is a short term problem with long term impacts. Therefore, EBR calls for more lasting changes to the monetary and job creation systems as they definitely could use reinforcements to match their crucial roles in society. These changes might lead to considerable shifts in the way society is administered. EBR
9th Year • Apr.16 – May.15 2020 • No. 85