This research paper focuses on the COVID-19 effects on economic growth, sectoral value-added and the external sector.
Three scenarios were conducted with the UN Global Policy Model, in which the effect of COVID-19 is compared to what would have been the economic conditions without COVID-19. The analysis shows that the macroeconomic effect of COVID-19 in Ethiopia is to reduce growth, exports, imports and public revenue. It will also lead to an increase in public expenditure, public deficit, external debt and the debt-service ratio.
The combined effect of all these may lead to macroeconomic instability that includes inflation, shortage of foreign exchange and pressure on balance of payment in 2020/21, unless it is wisely managed. It also stresses that the macroeconomic balance of the country was already in a precarious condition before the pandemic’s effect.
In addition, the paper discusses possible socio-economic effect of COVID-19 by focusing on unemployment and poverty, including its gender dimension. The paper finally draws general policy implications and suggestions for economic recovery.
