IMF forecasts drastic economic slumps across EAC due to Covid-19
Saturday April 18 2020
All five East African Community countries should brace for drastic drops in their economic growth rates this year as a direct result of the global coronavirus crisis.
The International Monetary Fund’s latest World Economic Outlook projections for 2020 pegs Kenya and Tanzania’s respective GDP growth rates at one per cent and two per cent respectively in 2020, down from 5.6 and 6.3 per cent respectively in 2019. Uganda will maintain a 3.5 growth rate this year, compared with 4.9 per cent in 2019.
Rwanda’s predicted decline from 10 per cent in 2019 to 3.5 per cent this year is the steepest drop in the region, comparable only with Ethiopia’s new 3.2 per cent projection from nine per cent in 2019.
But the outlook for 2021 is slightly better for Uganda, Kenya and Tanzania, with Nairobi’s growth rate expected to shoot back up to 6.1 per cent (higher than 2019) while Tanzania and Uganda also recover to 4.6 and 4.3 per cent respectively.
The IMF said the Covid-19 pandemic will cause a three per cent contraction in the global economy in 2020, much worse than during the 2008-2009 global financial crisis.
“In a baseline scenario, which assumes that the pandemic fades in the second half of 2020 and containment efforts can be gradually unwound, the global economy is projected to grow by 5.8 per cent in 2021 as economic activity normalises. The risks for even more severe outcomes, however, are substantial,” it added.
For Tanzania, the new IMF projection represents a sharp change from early last month—after completing its latest mission to the country—when it reported that the economy had rebounded to an estimated annual growth rate of six per cent in 2020, up from four per cent projected in early 2019.
That projection was still below the seven per cent growth rate quoted by the government, a contradiction that caused some friction between Tanzania and the IMF last year.
The IMF said in March that increased activity in the country’s construction and mining sectors had helped to boost real GDP growth.
It also predicted that Tanzania’s inflation would remain under five per cent, exchange rate stable, and the public debt manageable at below 40 per cent of GDP.
Analysts say the coronavirus pandemic has sparked the steepest downturn in the global economy since the 1930s, and could become far more severe in developing economies, which have not had the kinds of lockdowns already implemented in China, the United States and some European nations.
Several EAC countries are implementing full or partial lockdown measures while others, including Tanzania, have restricted social movements in a bid to fend off the full brunt of the pandemic as experienced elsewhere outside the continent.
“It is very likely that this year the global economy will experience its worst recession since the Great Depression,” said the IMF.