At mid-year, African economies, already battered by the Covid-19 pandemic are now facing a total GDP loss of at least $145.5 billion.
With many countries recording an unprecedented surge in the number of infections, and the continent’s total cases surpassing the half million mark as per World Health Organisation data, Africa is forecast to suffer GDP losses of between $145.5 billion and $189.7 billion from the pre-Covid-19 estimated GDP of $2.59 trillion.
In its latest African Economic Outlook 2020 Supplement report, the African Development Bank (AfDB) says that despite countries embarking on a cautious reopening of economies to stem further damage, the impact of the pandemic is bound to be severe.
Losses are expected to be carried over to 2021 because the projected recovery will only be partial with losses ranging from $27.6 billion (baseline) up to $47 billion (worst case) from the potential GDP of $2.76 trillion without the pandemic.
Cumulatively, the pandemic could lead to GDP losses in 2020–21 of between $173.1 billion and $236.7 billion in current value terms.
Under the baseline scenario, real GDP growth is projected to fall by 1.7 per cent in 2020, corresponding to a GDP drop of 5.6 percentage points from the January 2020 pre-pandemic projections. If the pandemic continues beyond the first half of 2020, GDPgrowth would drop to 3.4 per cent from the rate of 3.9 per cent projected before the onset of Covid–19.
“The most affected economies are those with poor healthcare systems, those that rely heavily on tourism, international trade and commodity exports, and those with high debt burdens and high dependence on volatile international financial flows,” says the report released on Tuesday.
Regionally, East Africa is projected to have the most resilient performance amid the pandemic after entering the crisis with strong growth of 5.2 per cent in 2019.
The region is projected to post growth of 1.2 per cent in the best case scenario and 0.2 per cent in the worst-case scenario.
“The region is better shielded by its wider diversification and its lower reliance on primary commodities,” notes the report.
Although the situation remains risky, countries in the region have started gradual re-opening of economies.
“To reopen economies, policymakers need to follow a phased and incremental approach that carefully evaluates the tradeoffs between restarting economic activity too quickly and safe-guarding the health of the population,” said the report.
An estimated 25 to 30 million jobs risk being lost due to the pandemic. About 773.4 million people were in employment in Africa in 2019.
An additional 49.2 million people on the continent could be pushed into extreme poverty, raising the number of people living on under a dollar a day to 453.4 million in the baseline scenario, and 462.7 million in the worst-case scenario.
The continent is also projected to witness a widening of fiscal deficits, while debt levels could increase by an additional 10 percentage points of GDP creating an additional public sector financing gap of $122 billion.
Deficits are projected to increase twofold to eight per cent of GDP in the baseline scenario and to go as high as nine per cent in the worst case scenario.
The continent’s average current account deficit that was estimated at 4.3 per cent of GDP last year is also expected to worsen to 6.8 per cent under the baseline scenario and to 8.1 per cent under the worst case scenario before moderating to 5.6 per cent in 2021.