COVID-19 pushes Africa to first recession in 25 years ― World Bank

The World Bank has said that the COVID-19 pandemic is pushing Africa into its first recession in 25 years, adding that the continent’s largest economies, Nigeria, South Africa and Angola would be the worst hit.

This was contained in the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for Africa released on Thursday.

According to the publication, “Growth in Sub-Saharan Africa has been significantly impacted by the ongoing coronavirus outbreak and is forecast to fall sharply from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020, the first recession in the region over the past 25 years.”

The publication stated that “While most countries in the region have been affected to different degrees by the pandemic, real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment.”

It added that oil exporting-countries would also be hard-hit “while growth is also expected to weaken substantially in the two fastest-growing areas—the West African Economic and Monetary Union and the East African Community—due to weak external demand, disruptions to supply chains and domestic production.”

According to the World Bank publication, “COVID-19 will cost the region between $37 billion and $79 billion in 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.”

World Bank stated further 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 7 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.”

While noting that several African countries have reacted quickly and decisively to curb the potential influx and spread of the coronavirus, very much in line with international guidelines, the report added the magnitude of the impact would depend on the public’s reaction within respective countries, the spread of the disease, and the policy response.

“These factors together could lead to reduced labour market participation, capital underutilization, lower human capital accumulation, and long-term productivity effects,” Africa’s Pulse noted.

 

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