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Effects of Covid 19 on Africa's GDP growth in 2020

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Effects of Covid 19 on Africa's GDP growth in 2020

Effects of Covid 19 on Africa's GDP growth in 2020

Posted on May 21, 2020 by Caroline Gituma

a)The impact of the global pandemic on African economies.

This includes disruption in global supply chains exposed to inputs from Asia, Europe and the Middle East, as well as lower demand in global markets for a wide range of African exports. Moreover, Africa is likely to experience delayed or reduced foreign direct investment (FDI) as partners from other continents redirect capital locally.

The economic impact of the spread of the virus within Africa, and of the measures that governments are taking to stem the pandemic.

Travel bans and lockdowns are not only limiting the movement of people across borders and within countries, but also disrupting ways of working for many individuals, businesses and government agencies. This has greatly affected the tourism sector, transport and energy sector and trade.

The collapse of the oil price, driven by geopolitics as well as reduced demand in light of the pandemic.

In the month of March 2020, oil prices fell by approximately 50 percent. For net oil-exporting countries, this will result in increased liquidity issues, lost tax revenues, and currency pressure. (We should note, however, that lower oil prices will potentially have a positive economic impact for oilimporting countries and consumers.)

For Africa’s economies, the implications of these challenges are far-reaching. A slowdown in overall economic growth is already being felt, and this is acute in hard-hit sectors such as tourism. Many businesses, particularly SMEs,are under significant cost pressure and face potential closure and bankruptcy. That is likely to lead to widespread job losses. At the same time, the pandemic will impact productivity across many sectors. Closures of schools and universities could create longer-term human capital issues for African economies—and could disproportionately affect girls, many of whom may not return to school. Not least, the crisis is likely to reduce household expenditure and consumption significantly. The knock-on effects for the African public sector could be severe, in terms of reduced tax revenues and limitations on access to hard currency. African governments will face rising deficits and increased pressure on currencies. In the absence of significant fiscal stimulus packages, the combined impact of these economic, fiscal, and monetary challenges could greatly reduce Africa’s GDP growth in 2020. 

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