Global Advocacy for African Affairs
Business/Economy

Africa is set to tip into its first recession for 25 years due to the Covid-19 outbreak

By Yinka Adegoke

The Sub-Saharan Africa region will see economic growth reverse and plunge to between -2.1% to as low as -5.1% this year due to the Covid-19 global crisis. The region will fall into its first recession for 25 years, compared with 2.4% growth last year, according to the World Bank’s Africa’s Pulse, its twice-yearly economic update for the region

The economic shrinkage will cost Sub-Saharan Africa between $37 billion to $79 billion in lost output this year due to a sharp decline in output growth with key trading partners including China and Europe as well a steep fall in commodity prices, led by oil. Many countries will also experience reduced tourism activity as well as the domestic measures to contain the coronavirus global pandemic.

The negative economic growth rate forecast looks even more stark when compared with a Sub-Saharan Africa population growth projection of 2.7%. The region, which had been expected to grow around 3.6% this year, has been home to some of the world’s fastest-growing economies over the last decade.

The spread of the pandemic in Africa itself has been relatively slow with around 11,000 cases and 500 plus deaths relative to the continent’s 1.2 billion population. But the World Bank says it’s worried the relatively low number of cases might reflect under-testing.

There are also concerns among global health bodies and NGOs that a widespread pandemic on the continent could have disproportionately bad outcomes due to the fragile health systems of many countries particularly in Sub-Saharan Africa. To that end several countries have effectively shut down large portions of their economies to prevent people moving around and spreading the virus easily.

The full or partial lockdown of major cities including Lagos, Johannesburg, Nairobi, Harare and Accra among others across Africa has also highlighted the harsh reality of how the majority of urban Africans live off the cash-driven informal sector which dominates most of the region’s economies.

Even without a major outbreak Africa was never going to be able to avoid a severe economic hit from the fallout with the Covid-19 crisis. For better or worse, the continent is fully integrated into the global economy both as a supplier of raw materials and as importer of finished goods.

Sub-Saharan Africa’s three largest economies, Nigeria, South Africa, and Angola had already all been struggling with weak growth and investment as well declining oil and industrial metals prices (oil is down 50%, metals down 11% between December and March). Growth is set to fall up to 7 percentage points for oil exporters and by 8 percentage points for metals exporters, when compared with the World Bank’s no-Covid base case.

World Bank seems a small sliver of light in the the non-resource intensive economies of West and East Africa, both economic areas will slow but are expected to remain positive even though they  will both be impacted by weak external demand, disruptions to supply chains and a downturn in tourism.

The sheer human cost of the economic and health crisis being wrought on the region is why much of the bank’s concern focuses on trying to avoid disruption of food supply chains and warns that Covid-19 outbreak has the potential to spark a food security crisis in the region.

The bank is now calling for a pause in debt for countries in the region. Hafez Ghanem, World Bank vice president for Africa, says the bank is “calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with Covid-19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security.”

World Bank is deploying up to $160 billion in financial support for developing countries over the next 15 months to help protect the poor and support businesses. On Wednesday the African Development Bank said it will be provide up to $10 billion to African governments and the private sector under a new Covid-19 Response Facility.

Related posts

Top 10 Biggest Economies in Africa

admin

Nelson Mandela’s 1974 prison letter up for auction

admin

Africa Transforming: Stories of Innovation and Inspiration

admin