The Macroeconomic and Social Impact of COVID-19 in Ethiopia in the Global Context - Background Study for UNCTAD

30 June 2021

This paper focuses on the effect of the pandemic on economic growth, sectoral value-added, the external sector both from Ethiopia and global perspective based on the UN Global Policy Model analysis. Three scenarios were envisaged, in which the effect of COVID-19 is compared to what would have been the economic condition 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 debt-service ratio. The combined effect of all these may lead to macroeconomic instability that includes inflation, shortage of foreign exchange and a pressure on balance of payment in 2020/21 unless it is wisely managed. The macroeconomic balance of the country is already in a precarious condition before the pandemic’s effect. The paper also discusses possible socio-economic effect of COVID-19 by focusing on unemployment and poverty that includes its gender dimension and then draws on general policy implications for economic recovery.