The global coronavirus pandemic is going to send Africa into its first recession in 25 years, as economies get battered by lockdowns.
According to the World Bank Africa’s Pulse report, the continent’s economic growth will also drop from 2.4 per cent in 2019 to between -2.1 to -5.1 per cent in 2020, impacted by the virus outbreak.
The report says that Covid-19 pandemic will cost Africa up to $79 billion in output losses for 2020 due to a combination of effects, including trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation.
There will also be 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.
Albert Zeufack, Chief Economist for Africa at the World Bank said that in addition to containment measures, countries are now opting for a combination of emergency fiscal and monetary policy actions.
Many central banks are taking important actions like cutting interest rates and providing extraordinary liquidity assistance.
“However, it is important to ensure that fiscal policy builds in space for social protection interventions, especially targeting workers in the informal sector, and sows the seed for future resilience of our economies,” Mr Zeufack said.
“The immediate measures are important but there is no doubt there will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight Covid-19 and to help manage or maintain macroeconomic stability in the region,” said Cesar Calderon, lead economist and lead author of the report.
The report says that Africa on its own will not contain the disease and its impacts, mostly “due to fiscal pressures and heightened public debt,” which now denies sub-Saharan Africa room to wiggle in deploying fiscal policy to address this crisis.
Hafez Ghanem, World Bank Vice President for Africa said that the Covid-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard.
“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term—including calling for a standstill on official bilateral debt service payments, which would free up funds for strengthening health systems to deal with Covid-19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security,” Mr Ghanem said.
The World Bank is now asking African policymakers to focus on saving lives and protecting livelihoods by concentrating on strengthening health systems and taking quick actions to minimise disruptions in food supply chains.
It also recommends implementing social protection programmes, including cash transfers, food distribution and fee waivers, to support citizens, especially those in the informal sector.