fShare

Tweet

Since 2008, the world economy has been overshadowed by global financial market uncertainty, a significant economic slowdown, and a drastically global commodity price fluctuation. Payment failure of housing loans for middle income people (subprime mortgages) in the American housing market has triggered a global financial crisis. The crisis quickly widespread to all sectors of the economy, not only in the United States (US), but also in the European countries and almost all over the world. What about the impact of the global financial crisis in Sub Sahara Africa? In globalization, with increasingly integrated world economic system, it is difficult to isolate a region from the dynamics of other regions. When it started in 2008, there is an assumption that impacts of the crisis to Sub-Saharan Africa countries will only be small. According to Allen and Giovannetti (2011), it is because of the limited level of financial depth and the low level of integration of the financial systems of Sub-Saharan Africa countries with financial markets in the US and Europe. However, with the continued expansion of the transmission of the global financial crisis, the perception is starting to change. Coupled with close relationship between Europe to Africa in several ways, such as trade, foreign aid, and the flows of people (migration), it is difficult to ignore the impacts of global financial crisis on social-economic changes.

For many countries in Sub-Saharan Africa, transmission of the global crisis is particularly through international trade. Sub-Saharan African countries, especially those located in the eastern part of the African continent, are characterized by their economic openness. They have high dependence on international trade sector (exports-imports) and foreign aid or grant from the European countries and the United States. The dependence makes them vulnerable to the worsening global financial crisis. The economic slowdown also led to the tightening of migration flows to the Western Europe, because it is thought to increase unemployment. In addition, transmission channel of the crisis may also come from decreasing remittance, which is a main contributor to foreign exchange for those countries.

When most of the world's countries are affected by the crisis, the economy of the Ethiopia continues to grow positively. Narratives about the crisis, stagnation and various negative perceptions about Ethiopia began to change since the early 2000s. Ethiopia's Gross Domestic Product (GDP) growth since 2004 has continued to show positive performance trends, even reaching double digits, except in 2009, 2012 and 2016. However, Ethiopia's real economic growth over 2004 - 2016 was the highest in Africa, with an average of 10.65% per annum. The International Monetary Fund (IMF) places Ethiopia as one of the five countries with the highest economic growth rate in the world in 2013 - 2014, at 10.3%. Meanwhile, Ethiopia's per capita GDP as one indicator of the standard of living of its population has also increased rapidly. Having tended to be static in the range of USD 200 in the 1980s and 1990s, Ethiopia's per capita GDP began to grow steadily since 2003. In fact, it had a new record of USD 325 in 2008 and reached USD 706 in 2016 or the highest in the history of this nation. This contributes to the improvement of Ethiopian macroeconomic conditions.

As the country with the fifth largest economic rank in Sub-Saharan Africa and the largest in East Africa, Ethiopia certainly has a strong global connection. However, referring to Ductor and Leiva-Leon (2016), that increased connections through global economic and financial integration also contributed to the interdependence of the inter-state business cycle, which could stimulate increased global systemic risks due to shocks or crises occurring in a country has the potential to spread its impact to other countries. However, like Kenya, Ethiopia continues to experience growth supported by three sectors (agriculture, infrastructure, digital economy) and the role of China.

This research aims to analyze:

1. growth and development in agriculture sectors (coffee and cut flowers) which are Ethiopia’s main export commodities;
2. development in financial technology that is an innovation in times of global financial crisis and new economic powerhouse for Sub-Saharan Africa countries;
3. The role of infrastructure development in Ethiopia; and
4. The increasing role of China in Ethiopia’s economy.

Researchers:  Ahmad Helmy Fuady, Erwiza, Saiful Hakam, Muzzar Kresna

Area/Country: Africa

Tema: Development

Tahun: 2015

Bidang Penelitian/Kompetensi: Evidence