This Report describes the initial results of modeling undertaken by IFPRI to assess the short-run impacts of the COVID-19 control measures on the Malawian economy. We also consider the short-run effects of external shocks associated with disruptions in trade, investment, and remittance flows on the Malawian economy, as well as two medium-term paths assuming either faster or slower recovery during the remainder of 2020. This analysis has been undertaken in order to inform the policy response to the COVID-19 pandemic in Malawi and represents a first pass attempt to measure the short-term economic impacts of COVID-19 on the Malawian economic. It should be noted that, unlike NPC (2020) our estimates of the economic impact of the COVID-19 on the Malawian economy do not extend beyond 2020 and do not try to set a value on loss of life or life-years. They do, however, allow for detailed breakdown of the direct and indirect impacts of COVID-19 on different sectors and sub-sectors of the Malawian economy.
This paper has been written for the 2020 ECAMA Lakeshore Conference. It extends and updates the initial results of modeling undertaken by IFPRI to assess the short-run impacts of COVID-19 control measures on the Malawian economy. We also consider the short-run effects of external shocks associated with disruptions in trade and tourism, investment, and remittance flows on the Malawian economy, as well as two medium- erm paths assuming either faster or slower recovery during the remainder of 2020 and 2021. Using a SAM multiplier model, we estimate GDP declines by around 16.5 percent during April/May 2020 due to social distancing measures. This leads to around 1.6 million people, mainly in rural areas, temporarily falling into poverty, although urban households suffer the largest income losses.
This working paper builds on a report which was prepared for the 2020 ECAMA Lakeshore Conference in November 2020. It extends and updates the initial results of modeling undertaken by the International Food Policy Research Institute to assess the short-run impacts of COVID-19 control measures on the Malawian economy. We also consider the short-run effects of external shocks associated with disruptions in trade and tourism, investment, and remittance flows on the Malawian economy, as well as two medium-term paths assuming either faster or slower recovery during the remainder of 2020 and 2021. Using a Social Accounting Matrix multiplier model, we estimate GDP declines by around 16.5 percent during April/May 2020 due to social distancing measures. This leads to around 1.6 million people, mainly in rural areas, temporarily falling into poverty, although urban households suffer the largest income losses. We also model the impact of a faster and a slower lifting of restrictions and external shocks during the remainder of 2020 and 2021. With faster easing of restrictions, cumulative GDP gains turn positive by the third quarter of 2021 under the fast recovery scenario and exceed their pre-COVID-19 levels by US$178 million before the end of 2021. However, under the slow recovery scenario, Malawi’s GDP continues to decline until the end of 2020 before recovering during quarters 1 and 4 of 2021. However, this is not sufficient to wipe out the losses in quarters 2 to 4 of 2020, resulting in cumulative losses under the slow recovery scenario of US$332 million over the two years. Relative to the without COVID-19 scenario, US$937 million of GDP is lost under the fast recovery scenario and US$1,447 million under the slow recovery one. As both the development of the COVID-19 pandemic and the economic situation in Malawi are highly uncertain at the present time, the results reported in this paper should be regarded as interim estimates, which are subject to revision as the underlying health and economic data change.
This note summarizes perceptions of COVID-19 impacts and risks from a panel phone survey of rural households in eight districts in rural Malawi. While the results from the first round conducted in August 2020 were reported in a previous brief, this note will focus on the evolution of indicators from round 1 to round 2, conducted in November 2020. The sample comprises 833 households interviewed in both survey rounds. Two additional follow-up survey rounds are planned for 2021. The survey was originally designed to measure the seasonality of labor activities but was adjusted to assess COVID-19 impacts and perceptions in rural Malawi. Though initial concern of the impact of COVID-19 on Malawi was high at the start of the global pandemic, case numbers stayed relatively low through the end of 2020. Seven-day averages of 50-100 cases during the first survey round had dropped to under 5 in the fourth quarter of the year. Our analysis will examine how people’s perceptions evolved during this period of low infections.
Malawi reported its first case of COVID-19 in April and declared a national emergency. Schools, bars and restaurants were closed, international flights suspended, and the economy faced considerable disruptions: quarterly growth projections from July were cut by more than 60% (Saldarriaga Noel et al. 2020). While still concerning, compared to other countries and other parts of the world, the spread of this disease in Malawi has been relatively modest with 5,951 confirmed cases and 184 COVID-19 linked deaths as of November 8, 2020. After accelerating rates of infection in June and July, the rates have decreased over the last two months.1 In response, there has been a partial return to normalcy, marked by easing COVID-19 restrictions and the reopening of schools at the beginning of September, even while the future trajectory of the disease remains unknown.
In this paper, we analyze the economic impacts of response measures adopted in Ethiopia to curtail the spread of the COVID-19 pandemic. We carry out simulations using an economywide multiplier model based on a 2017 Social Accounting Matrix (SAM) for the country that properly depicts interactions between economic agents. The pandemic’s impact on the global economy combined with disruptions it causes in Ethiopia represents a large, unprecedented shock to the country’s economy. In such situations, a SAM-based multiplier model provides an ideal tool for measuring the short-term direct and indirect impacts of a shock on an economic system since there is limited room for proper adjustment of economic decisions. We model the seven-week partial lockdown policy implemented in Ethiopia from mid-March to early May 2020. We also consider two possible economic recovery scenarios that may emerge as the COVID-19 control policies are relaxed during the latter part of 2020 in order to generate insights on the potential continuing impact of the virus at the end of 2020. Although the country took early swift measures, our assessment of the partial lockdown measures suggests that they were not as strict as those observed in other Africa countries. Accordingly, our estimates of the economic costs of COVID-19 on Ethiopia are significantly lower than those reported for other countries on the continent. We estimate that during the lockdown period Ethiopia’s GDP suffered a 14 percent loss (43.5 billion Birr or 1.9 billion USD) compared to a no-COVID case over the same period. Nearly two-thirds of the losses were in the services sector. Although no direct restrictions were imposed on the agriculture sector, which serves as the primary means of livelihood for most Ethiopians, the sector faced a 4.7 percent loss in output due to its linkages with the rest of the economy. Poor export performance due to a slowdown in global trade and restrictions on the transport sector also partly explain the decline in agricultural output. The broader agri-food system also was affected considerably because of its linkages with the rest of the economy. In terms of the welfare of Ethiopians, we estimate that the economic impacts during the lockdown caused 10.1 million additional people to fall below the poverty line. These findings have implications for better understanding the direct and indirect impacts of COVID-19 and for policy design during the recovery period to return Ethiopia’s economy to a normal growth trajectory and to protect the livelihoods of the most vulnerable in the process.
The COVID-19 crisis may lead to a 1.1 percent decline in Egypt’s GDP during the 4th quarter (April to June) of the 2019/20 fiscal year, compared to the same quarter in 2018/19. Without the Government of Egypt’s COVID-19 emergency response package, GDP in Q4 may have declined by 8.7 percent. Tak-ing the emergency response pack-age into account, we estimate an annual growth rate of 3.8 percent for FY 2019/20. Without the emer-gency response package, annual growth for FY 2019/20 may have been as low as 1.9 percent. The services sector is hit hardest, falling by 10.9 percent, followed by industry at -8.3 percent. Agriculture is the most resilient sector. However, these losses are lower than those expected in comparable countries, especially those that resorted to extended periods of full lockdowns. Impacts on Egypt’s agri-food system are less severe than elsewhere in the economy. Most damage will occur in nonfarm components of the agri-food system due to falling consumer demand. Although higher-income households face the largest income losses, lower-income households also will see their incomes decline significantly. The level of social protection required to fully offset the income losses of poor households is likely to be prohibitive, especially given falling revenues from reduced economic activity. Continuing to gradually open the economy again will be critical for avoiding permanent job losses and increases in poverty for the coming year. The process of re-opening the economy may also provide opportunities for fostering more private sector-driven and sustainable economic transformation.
Understanding how the Papua New Guinea (PNG) agricultural economy and associated household consumption is affected by climate, market and other shocks requires attention to linkages and substitution effects across various products and the markets in which they are traded. In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG. In this study, we use a multi-market simulation model of the PNG food economy that explicitly includes production, consumption, external trade and prices of key agricultural commodities to quantify the likely impacts of a set of potential shocks on household welfare and food security in PNG. We have built the model to be flexible in order to explore different potential scenarios and then identify where and how households are most affected by an unexpected shock. The model is designed using region and country-level data sources that inform the structure of the PNG food economy, allowing for a data-driven evaluation of potential impacts on agricultural production, food prices, and food consumption. Thus, as PNG confronts different unexpected challenges within its agricultural economy, the model presented in this paper can be adapted to evaluate the potential impact and necessary response by geographic region of an unexpected economic shock on the food economy of the country. We present ten simulations modeling the effects of various shocks on PNG’s economy. The first group of scenarios consider the effects of shocks to production of specific agricultural commodities including: 1) a decrease on maize and sorghum output due to Fall Armyworm; 2) reduction in pig production due to a potential outbreak of African Swine Fever; 3) decline in sweet potato production similar to the 2015/16 El Niño Southern Oscillation (ENSO) climate shock; and 4) a decline in poultry production due to COVID-19 restrictions on domestic mobility and trade. A synopsis of this report, which focuses on the COVID-19 related shocks on the PNG economy is also available online (Diao et al., 2020).1 The second group of simulations focus on COVID-19-related changes in international prices, increased marketing costs in international and domestic trade, and reductions in urban incomes. We simulate a 1) 30 percent increase in the price of imported rice, 2) a 30 percent decrease in world prices for major PNG agricultural exports, 3) higher trade transaction costs due to restrictions on the movement of people (traders) and goods given social distancing measures of COVID-19, and 4) potential economic recession causing urban household income to fall by 10 percent. Finally, the last simulation considers the combined effect of all COVID-19 related shocks combining the above scenarios into a single simulation. A key result of the analysis is that urban households, especially the urban poor, are particularly vulnerable to shocks related to the Covid-19 pandemic. Lower economic activity in urban areas (assumed to reduce urban non-agricultural incomes by 10 percent), increases in marketing costs due to domestic trade disruptions, and 30 percent higher imported rice prices combine to lower urban incomes by almost 15 percent for both poor and non-poor urban households. Urban poor households, however, suffer the largest drop in calorie consumption - 19.8 percent, compared to a 15.8 percent decline for urban non-poor households. Rural households are much less affected by the Covid-19 related shocks modeled in these simulations. Rural household incomes, affected mainly by reduced urban demand and market disruptions, fall by only about four percent. Nonetheless, calorie consumption for the rural poor and non-poor falls by 5.5 and 4.2 percent, respectively.
