COVID-19 hits sub-Saharan Africa, with first recession in 25 years and economic growth declines

The sub-Saharan Africa region will experience recession for the first time in 25 years as a result of the impact of the coronavirus disease (COVID-19), according to the World Bank Africa Pulse.

The latest edition of the Africa Pulse, a report by the World Bank that assesses Africa’s economies, and released yesterday April 8, 2020 looks at the economic impact of COVID-19 on the continent and what the policy responses are.

The report notes that even though the virus arrived late in the region, it has spread fast in recent weeks. As of April 7, some 5,425 cases of COVID-19 have been confirmed in 45 of the 48 countries in the region.

The report notes that the insufficient testing capacity in many countries in the region suggests that these figures most likely understate the true number of infections.

“We project that economic growth in sub-Saharan Africa will decline from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020, the first recession in the region in 25 years. It will cost the region between $37 billion and $79 billion in terms of output losses for 2020,” the Bank said, adding, “the downward growth revision in 2020 reflects macroeconomic risks arising from the sharp decline in output growth among the region’s key trading partners, including China and the euro area, the fall in commodity prices, reduced tourism activity in several countries, as well as the effects of measures to contain the COVID-19 global pandemic.”

The analysis shows that COVID-19 will cost the region output losses for 2020 due to a combination of effects. They include trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation; reduced foreign financing flows from remittances, tourism, foreign direct investment, foreign aid, combined with capital flight; and through direct impacts on health systems, and disruptions caused by containment measures and the public response.

It indicates that the COVID-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6 per cent in an optimistic scenario and up to seven per cent if there are trade blockages. Food imports would decline substantially (as much as 25 per cent or as little as 13 per cent) due to a combination of higher transaction costs and reduced domestic demand.

The Report further indicates that the World Bank Group and the International Monetary Fund have called for a”bilateral debt standstill,” which should be an important part of the global response to soften the impact of COVID-19 on Africa’s poor.

The World Bank Vice President for Africa, Hafez Ghanem was quoted as saying; “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.

“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including 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,” he added.

Authors of the Report also recommend that African policymakers focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains.

Additoinally, they recommend implementing social protection programmes, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector.

By Emmanuel K. Dogbevi

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