Factors Affecting Economic Crisis in Ethiopia: A Literature Review

Abstract

The majority aims of this study of the literature reviews are to investigate factors influencing the economic crisis in Ethiopia, which is a developing country in East Africa. Ethiopia has experienced a range of economic difficulties over the last few decades, such as huge rates of inflation, quickly increasing unemployment, dropping currency value, and restricted access to credit. This study looks at both internal and external factors—such as population growth, unstable politics throughout the religions, enough infrastructure and governance, and the amount of outstanding external debt—that affect the nation's economy. Vary academic papers, reports, and articles from institutions, government agencies, and international organizations are examined in this study. This study offers insights and a thorough grasp of the complex factors affecting Ethiopia's economy through the incorporation of prior research on the topic. Findings from this literature review reveal that political instability, characterized by protests, ethnic tensions, and political transitions, greatly hampers the economic development of Ethiopia. This instability reduces investor trust, interferes with corporate operations, and deters foreign direct investment. The economic crisis is made worse by ineffective governance, which is characterized by corruption, inefficient bureaucracy, and inadequate execution. Inadequate infrastructure additionally hinders commerce, investment, and production. Examples of this include restricted access to telecommunication, transportation, and electrical networks. Although a potential resource in terms of human capital, rapid population expansion also presents difficulties, such as rising unemployment rates and dwindling funding for healthcare and education. External causes are a major contributing element to Ethiopia's economic problems as well. The country's main exports, oilseeds, textiles, and coffee, are highly impacted by changes in global commodity prices, which also lead to trade imbalances and unstable revenue streams. Furthermore, the burden of external debt restricts government spending and limits resources for development projects. To overcome these challenges and mitigate the economic crisis, this literature review suggests several policy recommendations. These include improving political stability through transparent governance and inclusive policies, investing in infrastructure development to enhance productivity and competitiveness, and diversifying the economy to reduce reliance on primary commodities.