Implications of Russia’s war against Ukraine for African economies: A CGE analysis for Ethiopia

The ongoing Russia’s war of aggression against Ukraine is disrupting the global supply chains of essential commodities resulting in a cascading effects on the global economy. This study examines the implications of Russia’s military aggression for Ethiopian. It assesses the consequences of world market price increases for wheat, fertilizer, and petroleum on Ethiopia’s macro economy, production, and households’ consumption. The study employs a computable general equilibrium (CGE) model calibrated to the 2015/2016 social accounting matrix (SAM) of Ethiopia, updated to 2022 using the recursive dynamic features of the model. The impacts of the world price increases are presented as percentage changes to a counterfactual Ethiopian economy in 2022, without accounting for actual and anticipated repercussions from the war. The study finds that GDP, labour wage rates, and households’ consumption decline. The impacts of fertilizer and petroleum price changes are notable and unevenly distributed. Crop growing activities substitute animal manure for inorganic fertilizers. The effect on urban households’ consumption more severe than on rural households. Rising petroleum prices increase the demand for ethanol providing motives to expand sugar manufacturing. Increasing inorganic fertilizer prices tighten the competition for the use of animal manure between cropping activities and households. Promotion of biogas digesters among rural households could encourage the optimal use of animal manure.