MaSSP Report
Short-term Impacts of COVID-19 on the Malawian Economy: Initial Results
Authors: Bob Baulch, Rosemary Botha, and Karl Pauw, June 2020.
COVID-19 and the policies imposed to control the spread of the coronavirus are unexpected shocks to Malawi’s economy. Airports and schools have been closed since late March, and many business activities have slowed down considerably due to social distancing measures and external shocks. Many of the consequences of COVID-19 are still unfolding, so the magnitude of the economic damage to the Malawian economy is still unknown. Simulation models, such as Social Accounting Matrix (SAM) multiplier models, can help to estimate the short-term economic impacts of COVID-19.
This report describes the initial results of a modeling study undertaken by IFPRI. The study considered two scenarios: (a) two months of social distancing plus external shocks over the second quarter; and (b) a hypothetical urban 21-day lockdown plus social distancing and external shocks, each followed by either fast or slow lifting of restrictions during the rest of 2020. A SAM multiplier model was used to simulate the impact of these two scenarios on GDP and sector growth, the agri-food system, poverty, and government revenues on both a quarterly and an annual basis.
The authors estimate GDP declines by around 11.6% during two months of social distancing and between 4 and 5.2% over the 2020 calendar year. This leads to around 1.1 million people, the majority in rural areas, temporarily falling into poverty, although it is urban households who suffer the largest income losses. These economic losses are not as heavy as the impacts simulated for a 21-day urban lockdown, which results in a 22.3% decline in GDP during the lockdown, a 6 to 9.1% decline in annual GDP, with around 2.2 million people falling temporarily into poverty.
The economic impacts of COVID-19 restrictions must be set against their public health benefits and costs. Nonetheless minimizing the economic impact of COVID-19 requires: a) maintaining open markets and borders with appropriate hygiene/social distancing measures; b) social protection measures to protect the most vulnerable, especially informal services and small retailers in urban areas; and c) re-opening schools once it is safe to do so. Looking forward, monitoring the economic impact of COVID-19 on the Malawian economy should pay special attention to the urban informal services , the wider agri-food system, hotels and restaurants, as well as tourism, exports, and remittances—as these are the subsectors that the analysis shows to be most impacted by COVID-19 in Malawi.
Click here to download and read the report. (PDF 304 KB)
Authors: Bob Baulch1, Rosemary Botha1, and Karl Pauw2, June 2020.
1 IFPRI-Malawi, 2 IFPRI-Ghana
