Ethiopia: Impacts of COVID-19 on Production, Poverty and Food Systems

Ethiopia
Impacts of COVID-19 on Production,
Poverty & Food Systems
Disclaimer: The analysis presented in this slide deck are the IFPRI teams’ own and do not necessarily reflect the view of IFPRI & IGC
Financial support from
Emerta Aragie1, Alemayehu Seyoum Taffesse1 & Seneshaw Tamiru2
1. International Food Policy Research Institute 2. International Growth Center
Last updated: 8 December 2020
Contact: Emerta Aragie (e.aragie@cgiar.org)

Updated: Sep 11, 2020
Overview
Two parts to the analysis:
1. Measure impacts of government restrictions that last 7 weeks
• Domestic restrictions (e.g., transport) & global shocks (e.g., exports)
• Multiplier analysis tracks direct & indirect impacts across supply chains
• Outcome: Large shocks concentrated over short-period of time
2. Consider possible recovery scenarios for rest of the 2019/20
fiscal year and two quarters of 2020/21
• Impacts spread over two fiscal years – Q3 (Jan-Mar) and Q4 (April-June) of
2019/20 and Q1 (July-Sept) and Q2 (Nov-Dec) of 2020/21
• Highly stylized, but broadly consistent with government’s plan to sequence
easing of restrictions (e.g., maintaining limits on social gatherings)
• Outcome: Shocks spread over longer time period & offset by recovery

Restrictions Impose Economic Costs
• National GDP is estimated to fall by
14% during past 7-week period of
COVID-related restrictions & shocks
(US$1.6 bil. in lost GDP)
• Food system is adversely affected by
falling consumer & export demand
(11% agri-food GDP decline, despite exemptions)
• National poverty rate increases by
9%-points during the lockdown
(10 million more people temporarily living below
the US$1.90-a-day poverty line)
Source: Ethiopia SAM Multiplier Results
Economic impacts over 7-week
period (mid-Mar to early May)
14.3
11.1
8.8
Percentage decline
in national GDP
Percentage decline
in agri-food system
GDP
Percentage point
increase in national
poverty rate
1.6
10.1
Decline in national
GDP in US$ billions
Increase in number
of poor people in
millions

Costs Likely to Persist Throughout 2020
• Economy should recover as
restrictions are lifted & global
shocks subside
• But economic losses remain,
even with a faster recovery
(GDP may be 3.8% lower at the end of
2019/20 and 2.4-2.9% lower at the end of
2020/21 compared to a no-COVID
scenario)
• Average GDP & poverty rates
show sharp deteriorations in
April-June (i.e., Q4).
(some businesses & people may require
government support to cope & recover)
Change in
quarterly
GDP
Change in
national
poverty rate
(US$1.90-a-day
poverty line)
Quarterly impacts under faster or slower
easing of restrictions & recovery
(changes are relative to a no-COVID scenario)
-2.4%
-13.6%
-6.9%
-2.7%
-7.6%
-3.9%
Q3 Q4 Q1 Q2
2019/20 2020/21
Faster recovery Slower recovery
1.2%
8.5%
3.9%
1.5%
4.3%
2.1%
Q3 Q4 Q1 Q2
2019/20 2020/21

COVID-19 Outbreak, Restrictions
& Policy Responses1

0
100
200
300
400
500
600
700
800
900
1,000
13-Mar
15-Mar
17-Mar
19-Mar
21-Mar
23-Mar
25-Mar
27-Mar
29-Mar
31-Mar
2-Apr
4-Apr
6-Apr
8-Apr
10-Apr
12-Apr
14-Apr
16-Apr
18-Apr
20-Apr
22-Apr
24-Apr
26-Apr
28-Apr
30-Apr
2-May
4-May
6-May
8-May
10-May
12-May
14-May
16-May
18-May
20-May
22-May
24-May
26-May
28-May
30-May
1-Jun
3-Jun
5-Jun
7-Jun
9-Jun
11-Jun
13-Jun
15-Jun
17-Jun
19-Jun
21-Jun
23-Jun
25-Jun
27-Jun
29-Jun
1-Jul
3-Jul
5-Jul
7-Jul
9-Jul
11-Jul
13-Jul
15-Jul
17-Jul
19-Jul
21-Jul
23-Jul
25-Jul
27-Jul
29-Jul
31-Jul
Confirmednewcases
COVID-19 Cases & Policy Timeline
- Land borders closed
- 14-day quarantine for travelers from abroad
- US$150 mil. aid package announced
First confirmed
case in Ethiopia
Schools closed & sporting
events/public gatherings banned
State carrier
suspends flights
National Bank
plans to inject
US$450 mil. into
private banks
Regions ban public
transportation
Election
postponed
World Bank
approves
US$83 bil.
Government announces
US$1.6 bil. Multisectoral
Preparedness & Response Plan
S5-month state of emergency declared
US$55 mil. loan from Africa Center for
Disease Control &Prevention
Authorities announce
door-to-door screening
IMF approves
$411 mil. in aid
Ethiopia has so far avoided
lockdown policies, but has
implemented economic &
social restrictions on
certain sectors
The gov’t issues tax relief of Br.
78 billion

Sectors Affected by Restrictions (1)
Sector Government restrictions Direct effects
Agriculture • None specified Minimal
Mining & crude oil • None specified Minimal
Manufacturing • None specified, but social distancing rules may hamper operations Minimal
Utilities • None specified Minimal
Construction • None specified, but social distancing rules may hamper operations Minimal
Wholesale & retail
trade services
• None specified, but social distancing rules may hamper operations Minimal
Transportation,
storage & cargo
• Air & inter-state transport closed
• Land passenger transport reduced
Some
Hotels & food
services
• Hotels, restaurant & bars closed apart from take-away foods High

Sectors Affected by Restrictions (2)
Sector Government restrictions Direct effects
Banking, finance &
insurance
Professional &
business services
Public admin &
law enforcement
Education services • All public schools closed without much scope for online delivery High
Health services • None specified Minimal
Sports &
entertainment
• Sports & entertainment activities banned High
Other services • Religious & other large gatherings banned Some

Global & Other Nationwide Shocks
Sector Global shocks Direct effects
Export demand
• Reduced international tourism & air travel
• Lower export demand for goods exports
High
Remittances • Decline in value of remittances sent by nationals working abroad Some
See detailed sector-level assumptions about production &
demand shocks in Annex at the end of slide deck

Measuring Economic Impacts
of COVID-19 Restrictions2

Economywide Multiplier Analysis
• Restrictions & global shocks have direct impacts on the operation
of certain sectors
(e.g., limiting travel, closing schools/hotels, falling export demand)
• But it also generates indirect impacts on other sectors involved in
supply chains
(i.e., input suppliers & downstream users)
• Multiplier analysis uses sector input-output data to measure
direct & indirect impacts throughout & across supply chains
(incl. impacts on GDP, jobs & household incomes)
• Ethiopia model based on 2017 SAM
(results scaled to 2018 GDP & employment levels)

Economywide
Impacts
GDP | jobs
Incomes | poverty
Direct
impacts
Framework for Analyzing COVID-19
GlobalImpact Channels
(Due to partial or full lockdowns in other countries)
Indirect
impacts
DomesticImpact Channels
(Due to partial or full lockdowns in own country)
• Export demand
• Remittances & migration
• Foreign direct investments
• Agriculture
• Mining & crude oil
• Manufacturing
• Utilities (energy, water)
• Construction
• Whole & retail trade services
• Transportation, storage & cargo
• Hotels & food services
• Banking, finance & insurance
• Professional & business services
• Public administration & law enforcement
• Education services
• Health & social services
• Sports & entertainment
• Community & other services

Impact Channels & Shocks
• Restrictions are simulated using a
range of impact channels
• Shocks to each channel are imposed on
the model & impacts are simultaneously
traced across all supply chains
• Most channels are not used in Ethiopia
• Multiplier model separates entire
Ethiopian economy into 86 sectors
(shocks are calculated bottom-up using
detailed trade & production data)
• Size of shocks is estimated by IFPRI
& IGC staff & collaborators
(see Annex)
Potential impact channels
1 Direct restrictions on farming
2 Limiting mining operations
3 Restrictions on manufacturing operations
4 Disruptions to energy & water supply
5 Restrictions on construction activities
6 Restrictions on wholesale/retail trade
7 Transport/travel restrictions
8 Closing hotels, bars & restaurants
9 Restrictions on business services
10 Civil service work-from-home orders
11 Closing schools
12 Disruptions to hospitals and clinics
13 Limiting sports & other entertainment
14 Restrictions on religious & social gatherings
15 Reduced export demand
16 Falling foreign remittances
17 Falling government revenues

Scenarios
1. Impacts for the current period of restrictions
• In Ethiopia this is 7 weeks running March 14 to May 5
2. Impacts for rest of 2019/20 and two quarters of 2020/21 as
restrictions are eased each quarter
• Compare a faster vs. slower easing of restrictions for the Oct – Dec period.
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Q3
2019/20
Q4
2019/20
Q1
2020/21
Q2
2020/21
Current
period of
restrictions
Easing
some
restrictions
during rest
of Q2
Further
easing of
restrictions in
Q3
Final easing by
end of Q4
(possibly incomplete
recovery)
1
2

Economic Impacts During the Last 7-
Week Period of Restrictions & Shocks3

GDP Losses Under Current Restrictions
National GDP falls 14% during the last 7-week period
(most economic losses occur in the services sector)
GDP losses accumulate as restriction period is extended
(could increase further if tighter restrictions are imposed on more sectors)
Change in total GDP over 7-week
period of restrictions & shocks (%)
Change in total GDP by duration
of restrictions (US$ bil.)
-14.3%
-4.7%
-14.0%
-21.9%
Total Agriculture Industry Services
-1.6
-2.3
-2.7
-3.2
7 weeks 10 weeks 12 weeks 14 weeks

28.2%
22.0%
12.1%
7.9%
7.9%
7.7%
4.9%
3.7%
2.8%
1.7%
0.6%
0.3%
Closing hotels, bars & restaurants
Reduced export demand
Restrictions on construction activities
Transport/travel restrictions
Falling foreign remittances
Restrictions on wholesale/retail trade
Closing schools
Falling government revenues
Restrictions on manufacturing operations
Limiting sports & other entertainment
Restrictions on religious & social gatherings
Restrictions on business services
Sources of GDP Losses
Restricting food services & falling exports generate half of GDP losses
Contribution of restrictions & shocks to loss in
total GDP over 7-week period (sums to 100%)
(most sectors face quite modest disruptions from limited access to consumers)
Declining tourism & other exports has large
direct impact on a range of sectors
Effect of restrictions on business services
(+ construction & manufacturing) arises from
social distancing & reduced travel of customers
Falling remittances reduce household incomes
& consumption
Sports & entertainment are banned, but are
only a small part of the economy
Closing of hotels, restaurants & bars generates
largest losses, despite being a relatively small
economic sector
Reduced availability of land & air passenger
transport (cargo/freight continues)

-11.1%
-5.2%
-14.0%
-10.1%
-83.6%
Agri-food system
Agriculture
Agro-processing
Food trade and transport
Food services
Impacts on the Agri-Food System
Food supply is not directly affected by most restrictions, but it is
still indirectly affected by falling consumer demand & global shocks
Change in agri-food GDP over
7-week period (%)
Change in agri-food GDP over
7-week period (US$ mil.)
(food services is directly affected by the closing of hotels, restaurants & bars,
but this is a small component of the overall agri-food system)
Share of
total GDP in
2017 (%)
-$557
-$179
-$45
-$93
-$240
Agri-food system (45.2%)
Agriculture (31.4%)
Agro-processing (2.9%)
Food trade and transport (8.3%)
Food services (2.6%)

Sources of Agri-Food System GDP Losses
Food system mainly affected by declining food services & exports
Contribution of restrictions & shocks to loss in
agri-food GDP over 7-week period (sums to 100%)
(note that tourism generates demand for local hotels, bars & restaurants)
Closing local food service providers is by far the
most important restriction for the food system
Tourism has a large indirect effect on food
demand, but most losses come from declines in
agricultural exports (e.g., pulses, coffee)
Falling remittances reduce household food
consumption levels
63.2%
18.8%
12.7%
2.4%
1.0%
0.8%
0.4%
0.3%
0.2%
0.1%
0.0%
0.0%
Closing hotels, bars & restaurants
Reduced export demand
Falling foreign remittances
Transport/travel restrictions
Restrictions on construction activities
Restrictions on manufacturing operations
Restrictions on wholesale/retail trade
Falling government revenues
Closing schools
Limiting sports & other entertainment
Restrictions on business services
Restrictions on religious & social gatherings

Unpacking Agricultural GDP Impacts
Change in GDP over
7-week period (%)
Modest impacts on food crops
e.g., Many crops are produced by farmers for
their own consumption (less affected by market
& other disruptions)
Share of
agric. GDP in
2017 (%)
(32.8%)
(11.2%)
(6.7%)
(5.5%)
(0.2%)
(2.0%)
(2.8%)
(12.9%)
(15.2%)
(10.3%)
(0.2%)
Larger declines in export crop sectors
Hurt by falling export demand caused
by lockdowns & restrictions
implemented by other countries
-4.7%
-5.6%
-3.9%
-8.4%
-1.1%
-3.3%
-17.9%
-34.7%
-7.4%
-3.5%
-4.1%
-3.1%
-2.7%
-1.5%
Agriculture
Crops
Cereals
Pulses & oilseeds
Root crops
Fruits & vegetables
Sugarcane
Beverage crops
Traditional export crops
Livestock
Meat & eggs
Dairy
Forestry
Fishing

Unpacking Food Processing GDP Impacts
Beverages hurt by declining demand from
hotels, bars & restaurants
Larger impacts on food processing than on
primary crops & livestock
Processed foods more intensively consumed by
higher-income households, who are worst-affected
by restrictions & global shocks (see next slide)
Note: Agri-food processing is a subsector within manufacturing
Processed meat/dairy hit harder than livestock
Animal products often processed within the household,
whereas processed animal products are used intensively
in the now-closed hotels & restaurants sector
Share of food,
beverages &
tobacco GDP in
2017 (%)
(75.0%)
(2.1%)
(0.01%)
(4.7%)
(0.6%)
(6.1%)
(7.3%)
(16.8%)
(12.7%)
(24.8%)
(25.0%)
Change in GDP over
7-week period (%)
-11.6%
-55.4%
-49.9%
-19.7%
-10.2%
-1.6%
-2.8%
-23.6%
-1.3%
-8.5%
-21.0%
Food procesing
Meat
Fish
Dairy
Fruits & vegetables
Fats & oils
Cereal milling
Sugar refining
Coffee, tea, etc.
Other foods
Beverages & tobacco

Impacts on Household Incomes
All households experience large income losses
Larger income losses for higher-income households
(smaller losses in rural areas because farming only indirectly affected by restrictions)
(but we do not consider how these households have savings &
assets that can help smooth income shocks)
Change in household incomes over 7-week period (%)
-14.6%
-9.8%
-15.7%
-12.6%
-11.8%
-17.7%
-19.0%
All households Quintiles 1-2 Quintiles 3-5 Rural Rural Farm Rural Nonfarm Urban

Poverty Impacts During the Lockdown
National poverty rate increases by 9%-points over 7 weeks of
restrictions & global shocks (≈ 10 mil. more poor Ethiopians)
Increase in the share of the national
population living in poverty (%-pt)
Increase in number of poor people
over the 7-week period (mil.)
(poverty rate is the share of the population with consumption
spending below the US$1.90-a-day poverty line)
8.8%
7.9%
12.5%
National Rural Urban
10.1 mil.
7.3 mil.
2.7 mil.
National Rural Urban

4
Economic Impacts Under Fast & Slow
Easing of Restrictions & Recovery

Easing of Restrictions & Recovery
Predicting future developments over few quarters is challenging
(By now, we have a better idea of what happened over Q1 of 2020/21)
Consider two stylized scenarios:
Faster easing: Economy rebounds strongly & largely returns to normal by Dec 2020
Slower easing: Modest rebound with productivity in Dec still below “normal”
Faster recovery Slower recovery Global shocks
2019/20
Q3
Jan
No shocks in pre-COVID-19 period
Feb
Mar
Full lockdown period starts late March & last 7 weeks
Decline in remittances & export
demand
2019/20
Q4
Apr
May
Direct shocks eased by 20% Direct shocks eased by 20%
Jun
2020/21
Q1
Jul Direct shocks eased by 60%
(transport, hotels/bars & sports by
40%)
Direct shocks eased by 60%
(transport, hotels/bars & sports by
40%) Shocks reduced by 30%Aug
Sep Direct shocks eased by 80% Direct shocks eased by 65%
2020/21
Q2
Oct Direct shocks eased by 90% Direct shocks eased by 75% Shocks reduced by 60%
Nov
Direct shocks eased by 100% (some
services - 90%)
Direct shocks eased by 90% (some
services by 80%)
Shocks reduced by 75%
Dec

GDP Impacts with Recovery Scenarios
Change in quarterly & annual national GDP with fast or slow easing of restrictions
(changes are relative to a no-COVID growth scenario)
National GDP is 4% lower over 2019/20 as a result of COVID-19 and
expected to have a -2.4-2.9%-point effect on 2020/21 growth.
-8.1%
-4.5%
-3.3%
-2.4% -2.4%
-13.6%
-4.0%
-6.9%
-2.7% -2.4%
-6.5%
-4.8%
-3.4%
-7.6%
-3.9%
-2.9%
Jul-Aug Sept Oct Nov-Dec Q3 Q4 Annual Q1 Q2 Annual
2020/21 Q1 2020/21 Q2 2019/20 2020/21

Cumulative Quarterly GDP Losses
Ethiopia expected to end 2019/20 with higher GDP than at start of
2018/19, but below what was expected before COVID
(Economic losses over the four quarters are estimated at $0.4 billion compared to projected normal)
Cumulative changes in GDP from end of 2018/19
(pre-COVID expected growth rate for 2019/20 was 7.2% according to IMF’s 2019 Economic Outlook)
$3.0
$5.8
$9.0
$3.3
$2.4 $2.9
0.0
2.0
4.0
6.0
8.0
10.0
2018/19
Q1
Q2
Q3
Q4
Q1
Q2
End of 2019/20 2020/21
Pre-COVID expected growth
COVID + Faster recovery
COVID + Slower recovery
US$billions

Agri-food System Impacts with Recovery
Scenarios
Change in quarterly & annual national agri-food GDP under two recovery scenarios
Agri-food system GDP at the end of 2019/20 and 2020/20 will be
3.0% and up to 2.4% lower than that without COVID.
-6.7%
-3.8% -3.1%
-1.6% -1.8%
-10.4%
-3.0%
-5.7%
-2.7%
-2.1%
-5.3%
-4.0%
-2.0%
-6.2%
-3.4%
-2.4%
Jul-Aug Sept Oct Nov-Dec Q3 Q4 Annual Q1 Q2 Annual
2020/21 Q1 2020/21 Q2 2019/20 2020/21

Poverty Impacts with Recovery Scenarios
Change in national poverty rate with fast or slow easing of restrictions
Stronger effect on poverty at the end of 2019/20; but gradually
stabilizes by end of 2020 as people return to work, incomes recover &
consumer demand resumes
Many households living close to the poverty line may require government or other support to
cope
3.1%
0.8% 0.6%
1.5% 1.2%
8.5%
3.9%
1.5%1.1% 0.8%
2.1%
4.3%
2.1%
Jul-Aug Sept Oct Nov-Dec Q3 Q4 Q1 Q2
2020/21 Q1 2020/21 Q2 2019/20 2020/21

A
Detailed Assumptions About
Production & Demand Shocks

Channels, Shocks & Affected Sectors (1)
Type of restriction or
global shock
Major sectors
affected2
Geography
affected1
Size of
shock
Detailed subsectors affected by shock2
Direct restrictions on
farming
Agriculture
(A)
0% Crop/animal production, hunting, related service activities (D01); forestry, logging (D02);
fishing, aquaculture (D03)
Limiting mining
operations
Mining, quarrying
(B)
0% Coal, lignite (D5); crude petroleum, natural gas (D06); metal ores (D07); quarrying (D08);
mining support service activities (D09)
Closing non-essential
manufacturing
operations
Manufacturing
(C)
0% Food products (D10); beverages, tobacco (D11-12); vehicles, transport equipment (D29-30)
National -10% Textiles, clothing, leather (D13-15); wood, paper, printing (D16-18); coke, refined
petroleum (D19); chemicals, rubber, plastics (D20); pharmaceuticals, medicinal chemicals
(D21); non-metallic minerals (D23); metals (D24-25); equipment, machinery (D26-28);
furniture (D31), other manufactures (D33)
Disruptions to energy
and water supply
Electricity, gas (D);
water supply (E)
0% Electricity, gas, steam supply (D35); water collection, treatment, supply (D36); sewerage,
waste collection/remediation (D37-39)
Limiting construction
activities
Construction
(F)
National -5% Construction of buildings (D41); civil engineering (D42); specialized construction activities
(D43)
trading activities
Wholesale/retail
trade (G)
National -10% Agricultural raw materials, live animals (G462); agricultural machinery, equipment, supplies
(C4653); food, beverages, tobacco, incl. stalls & markets (G463 G471-472 C4781); motor
vehicle trade/repair (D45); wholesale trade (D46 excl. G462-463 C4653 C4663); retail trade
(D47 excl. G471-472 G47 C4781); construction materials, hardware, plumbing, heating
equipment (C4663); automotive fuels (G473)
Transport/travel
restrictions
Transportation,
storage (H)
National -30% Postal/courier activities (D53); Freight rail/road/air transport (C4912 C4923 G512);
transport via pipeline (G493); transport support (G522); warehousing/storage (G521);
Sea/coastal/inland water transport (C5011-5012 C5022); Urban/suburban passenger/other
land transport (C4911 C4921-4922); Passenger air transport (G511)
Government work-from-
home orders
Public
administration,
defense (O)
0% Public administration, defense, compulsory social security (D84)
Closing hotels, bars and
restaurants
Accommodation,
food services (I)
National -50% Accommodation (D55)
National -80% Food/beverage service activities (D56)

Channels, Shocks & Affected Sectors (2)
Type of restriction or
global shock
Major sectors
affected2
Geography
affected1
Size of
shock
Detailed subsectors affected by shock2
business services
Information,
communication (J);
finance, insurance
(K); real estate (L);
professional/
scientific/technical
activities (M);
administrative/
support services
(N)
National -10% Publishing activities (D58); programming/broadcasting activities (D60);
telecommunications (D61); computer programming/consultancy activities (D62);
information service activities (D63); financial services, insurance, pension funding, auxiliary
services (D64-66); real estate activities (D68); security and investigation activities (D80);
accounting, bookkeeping, auditing, tax consultancy (G692); head offices, management
consultancy (D70); scientific research/development (D72); advertising, market research
(D73); other professional/scientific/technical activities (D74); legal activities (G692);
architectural/engineering activities (D71); veterinary activities (D75); motion
picture/video/television program production, etc. (D59); renting/leasing activities (D77);
employment activities (D78); travel agencies, tour operators (D79); building services,
landscape activities (D81); office administrative, office support, other business support
activities (D82)
Closing schools Education (P) National -80% Pre-primary and primary education (G851); secondary education (G852); higher education
(G853); other education (G854); educational support activities (G855)
Disruptions to hospitals
and clinics
Human health,
social work (Q)
0% Human health activities (D86); residential care activities (D87); social work activities
without accommodation (D88)
Banning sports & other
entertainment
Arts, recreation,
entertainment (R)
National -80% Creative/arts/entertainment activities (D90); libraries, archives, museums, other cultural
activities (D91); gambling, betting activities (D92); sports, amusement/recreation activities
(D93)
Domestic workers &
other services
Other service
activities (S);
households as
employers (T);
extraterritorial
organizations (U)
National -10% Membership organizations (D94); repairing computers & personal/household goods (D95);
other personal services (D96); domestic workers/personnel (D97); other production
activities of private households for own use (D98); extraterritorial organizations/bodies
(D99)
Note: (1) Channels, shocks, and affected sector in Ethiopia are nationwide unless indicated otherwise; (2) numbers in parentheses are International
Standard Industrial Classification (ISIC Revision 4) codes (by major section with detailed subsectors, D is division, G is group and C is class).

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