The implications of the Russia-Ukraine war for African economies: A CGE analysis for Ethiopia

Abstract

The Russia-Ukraine war is disrupting the global supply chains contributing to soaring world market prices of many commodities whose repercussions are sought to be severe for many African countries. This study examines the implications of the 2022 world market price increases for wheat, fuels, and fertilizers on Ethiopia’s economy. Using a computable general equilibrium (CGE) model, the study shows that GDP, wage rates, and households’ consumption in the country decline. The effects of fertilizer and petroleum price changes are particularly notable and unequal across production sectors. Crop growing activities tend to substitute inorganic fertilizers by animal manure. The overall effects on urban households are relatively severe compared to the effects on rural households. Increasing fertilizer prices tighten the competition for the use of animal manure as fertilizer (in crop cultivation) and as fuel (by households). Promoting biogas digesters among rural households would encourage the optimal use of animal manure.