Navigating Multiple Storms: The Longer-Term Impact of the COVID-19 Crisis and Policies to Mitigate the Impact

This chapter analyzes the long-term economic and distributional effects of COVID-19 in Sierra Leone, amidst a backdrop of various severe shocks over the past two decades that have significantly impacted the country’s development trajectory. After a period of recovery and growth following the civil war, Sierra Leone faced a series of setbacks including the Ebola crisis and plummeting commodity prices, with the COVID-19 pandemic further complicating its development path. Using a dynamic multi-sector heterogeneous agent general equilibrium model, this chapter analyzes the medium- to long-term ramifications of the pandemic, focusing on its impact on human capital and total factor productivity across different sectors. The results suggest that the pandemic has led to a significant decrease in long-term GDP and an increase in income inequality, primarily through its adverse effects on education and sectoral productivity. The chapter also explores a range of policy interventions to mitigate these impacts, including boosting social safety nets, enhancing agricultural productivity, and investing in human capital. The simulations indicate that these policies, particularly those aimed at building human capital, have the potential to not only offset the negative effects but also raise potential GDP above the pre-pandemic trajectory.