Shocks from the COVID-19 Crisis in Ethiopia

It is estimated that due to the COVID-19 pandemic over 140 million people will fall into extreme poverty and suffer from food insecurity and hunger, with many of these individuals coming from sub-Saharan Africa. Given the importance of agricultural prices for the income of farmers and food prices in these countries, this chapter case researches the shock of the pandemic in Ethiopia from before the COVID-19 outbreak to the end of 2021. The economic shock of the pandemic is explored by examining the macroeconomy, poverty and food insecurity, and social conditions of the country with recommendations on how to best recovery. Before the impact of COVID-19, the Ethiopian macroeconomy had massive imbalances in economic outputs, unemployment, and inflation. Currently, the economic recovery process has exhibited some positive signs of bouncing back. The macroeconomic big picture of Ethiopia indicates the need for investors and policymakers to mitigate the consequences of the pandemic by jumpstarting gross domestic product, employment, and inflation via constructive, safe, and secure fiscal policy. A two-pronged approach is discussed: economic and socio-ecological. Economic imbalances in the country need to be reevaluated to better understand how the poor and most vulnerable can be best helped. Linkages between economic and social measures are considered, including how to best deal with the pandemic’s aftereffects and how to mitigate future economic shocks. Socio-ecological development and environmental degradation must also play an important part of the recovery process and should not be discounted. Finally, to accelerate structural change, in terms of agriculture transformation, industrialization, and digitalization, these sectors should be given a long-term ecologically-friendly priority as they impact poverty reduction and improve communal well-being.