In Ethiopia, the coronavirus pandemic triggered an economic crisis that has jeopardised the country’s development model of the past decade. Belated reforms, major logistics costs and a shortage of foreign currency have sharply slowed economic modernisation. Civil war in the Tigray region also threatens the country’s political stability and worsens the humanitarian crisis. With no resources, Ethiopia lacks the means to face up to the pandemic’s economic fallout, and is still highly dependent on international aid. The ratio of foreign currency debt to export receipts has become excessively high. The country has requested foreign debt treatment as part of the G20s’ common framework for debt restructuring
In their spring outlook, the IMF economists expect to see a multi-speed (and incomplete) recovery of the global economy in 2021. Indeed, speed is the key word for 2021 because the emerging countries are racing against time on several fronts. In our eyes, the greatest short-term risks are linked to the race between the rollout of vaccinations and the spread of the pandemic, and between higher food prices and the partial catching-up of revenues for low-income households. If this divergence persists, we could see a rise in social risks, which may have a much more destabilisation capacity than financial risks.
The recovery in economic activity that began at the end of the spring continued through the summer, with China leading the way, and oil and metals prices have picked up. But doubts are emerging as the pace of the recovery seems to be slowing, as reflected by exports recent loss of momentum. Above all, there are currently worries regarding the persistence of the pandemic and the risk of lockdown extensions or even new lockdowns in several countries. There are, however, some factors of support: continued easing of monetary policies, market tolerance of rising budget deficits and a reduction in the debt of the most vulnerable countries by official lenders. However, the leverage of those factors should not be overstated.
