impacts on poverty and inequality.<sup>5</sup> To simulate price shocks as a result of COVID-19, we use the published consumer price index (by INS) by product categories. We then apply new prices on household consumption and simulate the decline in real disposable income/ consumption. We also assume that this trend of change in prices will continue during the rest of the year.<sup>6</sup> Note that we account for heterogeneity of consumption patterns across households, in particular between poor and non-poor households, by using information on consumption of products collected in the household survey.

These impacts are assessed under two scenarios: (1) _The first (optimistic)_ uses World Bank recent estimates with -8.8% real GDP growth, at constant factor prices.<sup>7</sup> (2) _The second (pessimistic)_ simulates a growth of -11.9%, i.e. the economy achieves the same growth as that achieved during the first half of the year. Below we provide a detailed methodology of how these impacts are estimated.

_Estimation of loss of income_ Suppose that the economy is partitioned into sectors ( , the level of activity is observed before the pandemic period 0 and after the pandemic period 1. SS ss= 1, ... SS) Let be the sectoral growth rate during the pandemic period, and the growth rate of the economy. Let be the total employment in the economy and the employment in sector . ss gg gg The growth elasticity of employment is given by . ss EE EE ss _We first estimate the sectoral growth of the economy._ ss Our starting point is the sectoral projection of εε _We first estimate the sectoral growth of the economy._ Our starting point is the sectoral projection of growth ( carried out by the WB projections according to several scenarios of the evolution of the pandemic. ss gg ss= 1, ... SS) This is followed by _estimating the loss of employment at the level of each sector:_ The loss of employment at the level of each sector is given by . _Identification of individuals who will lose their jobs:_ ss ss ss in this step a logit model is estimated to predict the LL = EE × gg _Identification of individuals who will lose their jobs:_ in this step a logit model is estimated to predict the probability that each worker in the household loses his/ her job depending on four variables (education, age, gender, region of residence). Individuals with the lowest predicted probabilities<sup>8</sup> are assumed to leave the labor market. At this level, several hypotheses are adopted: each household has a certain amount of savings or employment insurance (even informal) that allows it to smooth its consumption. Some households can liquidate certain assets to finance current consumption. Thus, in each sector of activity we find two types of individuals: those who have managed to preserve their jobs and those who have lost them. For the first group, the impact of the pandemic on the household of an individual _i_ who continues to work in sector _s_ is given by , where and stand for pre-crisis and post-crisis ss<sup>ii</sup> ss<sup>ii</sup> ss ss<sup>ii</sup> ss<sup>ii</sup> II = CC × gg CC II

> 5 According to INS, the national rate translates to 15.2% using the 2015 data. Given this, we first update the 2015 data to create a new distribution of consumption, and observe a pre-covid 19 (2019) poverty rate. We then use growth projections to identify the distribution of post-pandemic consumption and assess impacts on poverty and inequality.

> 6 We do not observe the evolution of prices over the whole year. Thus, we use the inflation rate observed up to the date of the simulation (September) and we assume that for the rest of 2020 we observe the same trend.

> 7 These are recent World Bank projections estimated by the Macro, Trade and Investment team at the World Bank Group using the MFMod model and information from government and other sources to inform the forecast.

> 8Consider a sector that will lose 20% of jobs (according to the estimated elasticity). Thus, we assume that 20% of those with the lowest predicted probability will lose their jobs. The imputed level of consumption for those who lost their job will be equal to the average observed consumption of an unemployed person. The calculation is made for workers in the household but adopting the simplifying assumption that they contribute equally to household consumption.

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