Like elsewhere, the economic impact of the pandemic was immediately felt in the service sector, which contributes 44% to GDP growth and 70 percent to urban employment. Earlier estimations by CEPHEUS projected a GDP loss of 2.5%; while the Ethiopian Economics Association estimated as high as 9.9% of GDP loss in the worst scenario. Another study by Professor Alemayehu Geda projected the economy to contract by 11.1% if the economic shock persists until the end of the year in December. What all these estimations have in common is their assumption of a modest level of transmission that will not necessitate severe restrictions and disrupt economic activities in the country. The recent alarming increase in the number of cases, however, indicates that the economy is to face much more damage than what was estimated by these studies.

At a time when most developed nations are entering the open-up phase from lockdowns that brought their economies to a standstill, Ethiopia is to embrace the most difficult stage of the pandemic. With the talk of recovery elsewhere, this article reflects on the type of growth path the Ethiopian economy will take during and in the post-COVID period.

In light of the unprecedented challenge the virus poses to the world economy, Economists are confronted with a challenge-of-the-century to predict the trajectory of the economy during and in post-COVID world. To this end, they have been hurling a bunch of alphabets and shapes to represent the growth trend. The first of which was a V-shaped growth path. A V-shaped recovery was the most popular path at the early stages of the pandemic. It assumed an economy that went to a free-fall when total lockdowns abruptly discontinued economic activities will swiftly rebound to its pre-COVID level in a short period of time. Nonetheless, the virus was found to be more lethal, infecting millions and killing hundreds of thousands. Furthermore, with no end in sight to the pandemic and the availability of a vaccine to the public in the near future inconceivable, it has forced countries to extend their lockdowns and embrace a new normal for the post-COVID period. This has caused permanent damage to the economy thereby making a swift recovery ludicrous. These economies, therefore, will be forced to stay at a lower growth bar for some time before starting to recover at a faster rate. This has brought a U-shaped economic growth path to the discussion, which, in fact, is the more plausible one.

Other growth trajectory economies would possibly take due to the pandemic is a W and L-shaped growth paths. The former assumes a second wave of the virus that would inflict another strike to the economy forcing economies to take lockdown measures for the second time. The possibility of such a growth path remains to be seen in the weeks following the relaxation of the lockdown in hard-hit countries. Initial experiences from Asian countries like China and South Korea, however, show that entering into a massive lockdown equivalent to the previous ones seems unlikely. Finally, an L-shaped growth path is one that represents an economy devastated by the pandemic. This represents a scenario where containment methods were ineffective and the relief and stimulus packages introduced were insufficient. In such an economy, the virus has broken the backbone of the economy and the economy will crawl at the lower end of growth for an extended period.