THUR, APRIL 09 2020-theG&BJournal- The World Bank Group forecasts growth of Sub-Saharan economies will decline to -2.1 to -5.1 percent in 2020 into the first recession in the region in 25 years, from 2.4% in 2019.
Nigeria, South Africa, and Angola will bear the biggest brunt of the damage -‘’in a context of persistently weak growth and investment and declining commodity prices,’’ says the World Bank in their April analysis of issues shaping Africa’s economic future released today.
Major disruption to economic activity across the world brought on by the COVID-19 virus rapid spread across the region in recent weeks, sealed the disappointing news.
The cost to the region will be between US$37 billion and US$79 billion in terms of output losses for 2020.
‘’ 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 World Bank said.
More generally, countries like Nigeria that depends on oil exports and mining would be hit the hardest.
”Growth could fall by up to 7 percentage points in oil-exporting countries and by more than 8 percentage points in metals exporters compared with the no-COVID base case,” the World Bank said.
So far, the prices of crude oil and industrial metals have fallen sharply (by 50 and 11 percent, respectively, between December 2019 and March 2020).
The World Bank reckons also that the negative impact of the COVID-19 crisis on household welfare would be equally dramatic.
‘’In the baseline and downside scenarios, growth will fall well below the regional average population growth rate of 2.7 percent, indicating that, in the absence of appropriate measures to mitigate its effects, the COVID-19 outbreak will severely impact the welfare of large numbers of individuals in the region.’’
Another sad projection in the report; The COVID-19 crisis has the potential to create a severe food security crisis in Africa. Agricultural production is likely to contract between 2.6 percent in the optimistic scenario and 7 percent in the scenario with trade blockages. Food imports will also decline substantially (from 13 to 25 percent) due to a combination of higher transaction costs and reduced domestic demand.
Most if not all borders are currently shut as part of the policy response to the COVID-19 spread. Border closings would disproportionally affect the poor, particularly agricultural workers and unskilled workers in the informal sector.
‘’In this context, African countries need to take this opportunity to strengthen regional value chains in the context of the African Continental Free Trade Area.’’
Fiscal deficits are also projected to widen amid falling government revenues. The deterioration of fiscal balances is expected to be greater in commodity exporting countries and those that are dependent on tourism revenues.
Oil abundant countries are currently revising their 2020 national budgets as their price assumptions are higher than the average crude oil price. Nigerian government Wednesday revised downward the oil price benchmark for the budget to $30 per barrel from $57 per barrel to align with current oil price.
Report by Audrey Lotechukwu-theG&BJournal
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