Economic Linkages and Multiplier Effects of Ethiopia’s Forest Sector and Wood Processing Industries: A Social Accounting Matrix -Based Analysis

The economic contributions and intersectoral linkages of Ethiopia’s forest sector and its downstream wood processing industries have historically been undervalued in national policy frameworks. Utilizing the 2010 Social Accounting Matrix (SAM) as a structural baseline framework, complemented by a mixed-methods approach including key informant interviews (KIIs), this study analyzes the structural dependencies and macroeconomic impacts of these interconnected sectors. The baseline analysis indicates that the forest sector accounted for 4.2% of Ethiopia’s GDP in 2010, highlighting a significant yet underutilized economic role. Linkage analyses suggest that the forest sector possesses strong forward and backward connections alongside a high reliance on domestic inputs, which aligns with its strategic potential to support inclusive development and circular economic transitions. Conversely, the downstream wood processing industry accounted for a minor share (0.04%) of GDP and exhibited a high dependency on imported inputs, which is associated with limitations in domestic value addition and circular resource loops. Multiplier simulations suggest that a one-dollar exogenous demand injection into the forest sector is associated with an income expansion of $1.94 within the sector itself and $0.93 in the downstream wood processing industry. Furthermore, the sectoral structure demonstrates a strong capacity for broad socio-economic distribution, particularly by supporting employment and income for unskilled labour, youth, women, and small urban households. These findings underscore the importance of prioritizing integrated forestry and wood-processing policies to leverage their structural potential for circular resource use and equitable growth.