The Economywide Impact of the COVID-19 in Ethiopia: Policy and Recovery Options
27 July 2020
This study assesses the potential economywide impacts of the COVID-19 in Ethiopia. It uses a dynamic computable general equilibrium (CGE) model calibrated to a social accounting matrix for FY 2010/11 and covers the period from FY 2010/11 to FY 2029/30. The analysis accounts for the main channels through which the COVID-19 affects the economy. The domestic transmission channels include reduced labor market participation, lower productivity, and rising domestic trade costs. External channels include higher international trade costs, a drop in export demand, lower import supply, a reduction in foreign direct investment (FDI), reduction in remittances, and lower import price of oil. The impact of the COVID-19 crisis is analysed using three scenarios, namely business as usual (or the baseline), and the COVID-19 scenario considered under mild and severe assumptions. Economic impacts resulting from the COVID-19 crisis are expected to have differentiated impacts on a wide range of economic and social indicators. The results capture the impact on national accounts, the fiscal framework, the external accounts, the labor market, and household welfare. The distributional impact is captured through the effect on key economic sectors and on household groups distinguished by income quintiles and rural urban areas. The COVID-19 pandemic has spread to the Ethiopian economy through multiple international and domestic channels. The infection rate is increasing, and the death toll is rising. All regions are affected with higher spread in the capital city, Addis Ababa. It is likely that the duration of the pandemic will be at a minimum six months. The scenarios designed are based on a six-month duration with mild and severe scenarios.