The macroeconomic implications of disease pandemics in developing countries: An application of Covid-19 in Uganda.

Abstract

This study examines the economy-wide implications of infectious diseases, taking the case of the Covid-19 pandemic in Uganda. Covid-19 containment measures generated social and economic consequences. We employ a recursive dynamic computable general equilibrium model to evaluate the implications on the economy. We design scenarios to mimic the containment policies via labour supply, labour productivity, government healthcare spending and remittance inflows. Results indicate that growth in sector output declines when compared to the no-Covid-19 baseline. However, export growth rates are predicted to be higher. Increased government healthcare spending induces expansion in the healthcare output, but the sectors that produce the intermediate inputs for healthcare production do not grow in tandem. Household welfare declines, and the loss is largest among the top quintile households in both rural and urban areas. Policymakers should revisit Uganda's industrial policy towards domestic production of intermediate inputs to critical domestic sectors such as healthcare. Also, accelerate rural infrastructure development particularly the road network, to facilitate an integrated rural economy induced by the shift in labour and enterprise towards rural areas.