Sub-Saharan Africa will see its economy contract between 2.1 to as low as 5.1 percent this year due to the COVID-19 global crisis, the World Bank has said in its latest Africa’s Pulse report, a twice-yearly economic update for the region. The projected recession for 2020, which follows a 2.4 percent growth last year, will be the SSA’s first in 25 years.
The rapidly-spreading coronavirus outbreak will cost the region between $37 billion to $79 billion in lost output this year due to a sharp decline in output growth with key trading partners China and Europe as well the oil-led plunge in commodity prices. Many countries will also experience reduced tourism activity as governments suspend non-essential international passenger travel amid other domestic measures to contain virus outbreak, said the report released Thursday.
“The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said Hafez Ghanem, the bank’s Vice President for Africa. The spread of the pandemic in the region itself has been relatively slow – there are at least 10,956 confirmed cases and 562 deaths in a continent of 1.2 billion population. But the World Bank has expressed worries the low number of cases might be due to under-testing.
The virus was slow to reach many African countries but is now growing exponentially, the World Health Organization says. Several African governments have reacted by imposing lockdowns or curfews even as the World Bank and International Monetary Fund race to provide emergency funds to affected countries.
Real gross domestic product growth is projected to fall sharply particularly in sub-Saharan Africa’s three largest economies – Nigeria, Angola, and South Africa. They had already all been struggling with weak growth and investment, compounded by declining oil and industrial metals prices. Growth is expected to fall 7 percentage points for oil exporters and by 8 percentage points for metals exporters, when compared with the World Bank’s no-COVID projections.
For the non-resource intensive economies in the West African Economic and Monetary Union, and the East African Community, however, the bank expects weakened but positive growth even though they will be impacted by weak external demand, disruptions to supply chains and domestic production.
The World Bank added that the spread of the virus could also lead to a food security crisis in Africa, with agricultural production projected to contract 2.6 percent and 7 percent in the event of trade blockages. “Food imports would decline substantially (as much as 25 percent or as little as 13 percent) due to a combination of higher transaction costs and reduced domestic demand,” a statement alongside the report reads.
The bank and Fund have also called on China, the United States, and other bilateral creditors to temporarily suspend debt payments by the poorest countries so they can use the money to halt the spread of the disease and mitigate its financial impact. “There will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight COVID-19 and to help manage or maintain macroeconomic stability in the region,” said Cesar Calderon, lead economist and lead author of the report.
African policymakers meanwhile should focus on saving lives and protecting livelihoods by spending money to strengthen health systems and taking quick actions to minimize disruptions in food supply chains, the World Bank said, while also recommending social protection programmes – cash transfers, food distribution, and fee waivers – to support citizens.