ADDIS ABABA – The World Bank says that sub-Saharan Africa will go into recession for the first time in a quarter a century due to COVID-19 pandemic impact on economies.
The outbreak has spread to 52 countries on the continent that have surpassed 10,000 mark confirmed cases this week and reported 492 deaths.
World Bank’s economic update, Africa’s Pulse, forecast for the economic growth in the region to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020, the first recession in the region over the past 25 years.
“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.
The World Bank and the International Monetary Fund are calling for a ‘debt standstill’ from creditors to free up money to go into saving lives and protecting livelihoods.
Authors of the report said African policymakers should to focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains.
Implementing social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector are also needed, they said.
The analysis shows that COVID-19 will cost the region between $37 billion and $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, among others.
World Bank also said the pandemic 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, according to the report.
Several African countries have reacted quickly and decisively to curb the potential influx and spread of the coronavirus, very much in line with international guidelines.
Countries are opting for a combination of emergency fiscal and monetary policy actions with many central banks in the region taking important actions like cutting interest rates and providing 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,” said Albert Zeufack, Chief Economist for Africa at the World Bank.