COVID-19 drives Sub-Saharan Africa towards first recession in 25 years

Sub Saharan Africa is expected to record its first recession in 25 years, the World Bank has revealed.

According to the Breton Wood institution’s latest Africa’s Pulse, growth in Sub-Saharan Africa has been significantly impacted by the ongoing coronavirus outbreak and is forecast to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020.

The Africa’s Pulse is a bi-annual economic update for the Sub Saharan African region conducted by the World Bank.

The analysis shows that COVID-19 will cost the region between US$37 billion and US$79 billion in output losses for 2020 due to a combination of effects.

They include trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation; 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.

While most countries in the region have been affected to different degrees by the pandemic, real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment, the report emphasised.

In general, oil exporting-countries will also be hard-hit; while growth is also expected to weaken substantially in the two fastest growing areas—the West African Economic and Monetary Union and the East African Community—due to weak external demand, disruptions to supply chains and domestic production. 

The region’s tourism sector is expected to contract sharply due to severe disruption to travel.
The COVID-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6% in an optimistic scenario and up to 7% if there are trade blockages. 

Food imports would decline substantially (as much as 25% or as little as 13%) due to a combination of higher transaction costs and reduced domestic demand.

“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,” said Hafez Ghanem, World Bank Vice President for Africa. 

“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”, he explained.

The Pulse authors recommend that African policymakers focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains.

They also recommend implementing social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector.