Africa to lose $173.1b if Covid-19 persists - AfDB

Wednesday July 15 2020

According to AfDB, Africa is expected to

According to AfDB, Africa is expected to register huge losses in the value of goods and services. PHOTO | EDGAR R. BATTE  

By MARTIN LUTHER OKETCH

The African Development Bank (AfDB) is worried that Africa could lose a combined value of goods and services ranging between $173.1b and $236.7b in the 2020/21 financial year if Covid-19 goes beyond the first half of 2020.

In its regional economic outlook, AfDB said: “With the projected contraction of growth, Africa could suffer goods and services losses of $145.5b and $189.7b in the worst case, from the pre-Covid-19-estimated gross domestic product of $2.59 trillion.”

The losses, the report noted, will be carried over to 2021 and the projected recovery would be partial, pointing out that for 2021, the projected GDP losses could be from $27.6b up to $47b in the worst case scenario.

AfDB also raised concern of Africa’s weak economic prospects, saying the continent’s real GDP is projected to contract by 1.7 per cent in 2020, which indicates a drop of 5.6 percentage points from the January 2020 pre-Covid–19 projection.

The bank said Covid-19 has a substantial impact of short duration, however, it will continues beyond the first half of 2020.

As result, the report noted, there would be a deeper GDP contraction in 2020 of 3.4 per cent, down by 7.3 percentage points from the growth projected before the outbreak of Covid–19.

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Earlier, AfDB had said in 2019 that economic growth in Africa would stabilise at 3.4 per cent in 2019 and would pick up to 3.9 per cent in 2020 and 4.1 per cent in 2021.

The outlook also noted that economies with poor healthcare systems, especially those that rely heavily on tourism, international trade, commodity exports, and those with a high debt burden, will suffer much more due to prolonged effects of Covid-19.

“The overall impact of the pandemic on socioeconomic outcomes remains uncertain, however, the extent of its impacts on demand and supply, effectiveness of public policy responses, and persistence of behavioural changes [is likely to be prolonged,” the report reads in part and warns that Covid-19 has already triggered an increase in inflation, in some cases by more than 5 per cent in the first quarter of 2020.

The spike in inflation is mainly attributed to disruptions in the supply of food and energy, the bulk of which are imported, but for many other countries, the drastic fall in aggregate demand due to the lockdown and other containment measures have eased inflationary pressures, especially among non-resource-intensive economies.

Fiscal deficits
According to AfDB, an increase in government spending (or expansionary fiscal spending) could double the already high fiscal deficits.
The report notes, in 2020, deficits are projected to increase two-fold, to 8 per cent of GDP, in the baseline scenario, and will go as high as 9 per cent in the worst-case scenario.
The worsening fiscal position, the report says, would be the result of above-the-line increases in budgetary outlays on Covid-19 related health spending, unemployment benefits, targeted wage subsidies, direct transfers, tax cuts and deferrals.

moketch@ug.nationmedia.com

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