|
Globalisation’s symptoms are increasingly obvious
everywhere, and Ethiopia’s capital is no different.
From the English that permeates street talk and
fashion designs to methods of doing business and
even the company’s that conduct it, it is obvious
that both the private sector and government need to
pay close heed to international economic
developments.
But are the fears of recession in the United States
(US) troubling here?
After the booming late 90s fuelled by the tech
revolution and good times of the past few years –
notwithstanding a slight slowdown at the turn of the
Western millennium – it seems easy to count on the
superpower to continue driving world growth,
especially in consumer demand. However, with
troubling data coming from retailers after a
disappointing holiday season and, even most
worrying, the panic in banking emerging from the
sub-prime mortgage crisis, there is reason to fret
over a slowdown.
Markets across the globe bear this out with sharp
downturns. The impact in developed countries made so
immediately apparent by stock markets is not
reverberating in this country with a regime
notoriously suspicious of modern equity listings for
fears of speculative instability. But effects could
be felt soon.
The manner in which macroeconomic changes enter
Ethiopian markets is subtler. The huge Diaspora
population in the US nearing 100,000 may already
feel their pockets growing thinner. Drying out
consumer spending would hit Diaspora shop owners
hard and the housing crunch no doubt puts pressure
to take stock of dropping asset values.
The instant effect may be a downturn in remittances.
This difficult to estimate stock lay at around 371
million dollars in 2006, though probably much higher
as informal avenues for transmission that escape
Western Union or bank transfer fees are available.
Though this impressive figure is not solely from the
US, the European nations are not far from the
economic woes and will likely feel the same effects.
The substantial population of money senders residing
in Middle Eastern oil producing countries may
continue with similar sums though, at least in the
short-run.
The importance of remittances is mind-boggling. With
the rampant and troubling inflation that seems to be
levelling off but that remains at levels quite
damaging to middle and lower class budgets – the
majority – it is a wonder how some urbanites get by.
As wages are bound to be a little hesitant to adjust
to price levels, especially with a huge unemployed
labour force waiting at company doors and more
seemingly qualified graduates each year, money from
abroad is undoubtedly helping to sustain many. The
blossoming high-end retailers and restaurants
sprouting up that are busy at all hours of the day,
including work hours, are a good sign that
remittances are fuelling a non-negligible portion of
consumer spending.
But declines in the sale of non-durables and less
time spent eating out may not be the only nor most
harmful effects of less money available from
Diaspora. The massive investments coming from those
with international experience and savings may slow
to a trickle if that savings is needed back in the
new countries’ of residence. The huge push the
government has undertaken in conjunction with the
millennium may have paid off, though it is difficult
to isolate the effects of official campaigns. But
this has been occurring in fairly rosy economic
times abroad. It may become more difficult to
attract this source of capital if times change.
On the aid side of the coin, still extremely
important to Ethiopia’s economy despite defiant
official rhetoric, the slowdown may have tough
consequences as well. Though European countries,
where aid is predominately channelled through state
sources, may not be quite as susceptible to
downturns causing reductions in aid transfers as the
US, slower tax revenue and deficit stipulations in
European Union (EU) agreements could have an effect.
US charity systems are historically dependent on
private contributions that may slow as the need for
the tax benefits decreases with lower capital gains
to be offset and tighter pocketbooks. But when
considering US government ties, the geopolitical
strategic aid is usually what comes to mind as
opposed to trade ties.
But both the world and Ethiopian picture need not be
too dim as the US’s importance is unquestionably
decreasing as the engine of economic growth. In
steps the rising powerhouse of China who is a lot
more visible on the investment side of things by
numbers or taking a drive around the numerous
Chinese infrastructure projects. China’s economy, as
opposed to the West, does not show any signs of
departing from its upward trends and thus the
investments will probably continue to role.
The Asian powerhouse too is unhampered by the
socio-political considerations that have pushed
moves like HR 2003 in the US. Though the country
that is increasingly a financer across the globe
will likely come under scrutiny as the Olympics draw
near, it is unlikely to hamper its growing role in
Ethiopia.
In short, the US’s decreased standing in the world
economy may be a plus for Ethiopia as it can count
on investments continuing to role in from the East.
However, China is a source of cheap goods for
traders at the micro level and not for remittances
and thus the consumer side of the coin still may be
in trouble if US woes deepen.
|
