African economies are expected to be among the most affected in the world by COVID-19.
According to the World Bank, the continent’s economy is expected to enter recession for the first time in 25 years, registering an evolution that could range between -2.1 and -5.1%.
This forecast is based on factors such as:
- Weakness of tax systems;
- Dependence on commodity exports;
- Economic informality;
On the other hand, the IMF predicts a recession of 1.6% in 2020, and a possible recovery of 4% in 2021, if the pandemic disappears in the second half of this year.
In mid-April, the continent had 18,020 diagnosed cases, in 52 countries, and 942 deaths. The measures have been praised by the international scientific community but they have heavy economic consequences for the continent, where the majority of the economic sector is informal and where the population survives on what they sell daily.
Additionally, governments do not have the liquidity to guarantee universal social assistance.
The most affected countries will be oil producers and those that depend on tourism: Seychelles (-10.8%), Zimbabwe (-7.4%), Mauritius (- 6.8%), São Tomé and Príncipe (- 6 %) and South Africa (-5.8%).
On the other hand, growth forecasts for South Sudan (+ 4.9%), Benin (+ 4.5%), Rwanda (+ 3.5%), Uganda (+ 3.5%) and Ethiopia (+ 3.2%) remain relatively unchanged.
With the predicted recession for the continent, the need for recourse to loans by African States will increase, and the weight of debt in relation to Sub-Saharan Africa’s GDP, which was expected to fall from 58% in 2019 to 56% in 2020, is expected to increase to 64%.
The World Bank analysis estimates that the pandemic could cost the region between US$37 billion and US$79 billion. COVID-19 could also create a serious food crisis on the continent, with agricultural production potentially decreasing by between 2.6% and 7%, in a scenario of trade blockades, according to the World Bank. The Fund recommends that African countries prioritize health, dedicating more of their budgets to this sector.
However, the IMF recommends that African countries create mechanisms to support the economic sectors most affected by the pandemic, such as tourism and aviation.
The IMF also recommends that central banks review their monetary policies, so that they can guarantee greater liquidity for private banks, so that they can meet the credit demand of SMEs.