According to AfDB, Africa is expected to register huge losses in the value of goods and services. PHOTO | EDGAR R. BATTE
The
African Development Bank (AfDB) is worried that Africa could lose a
combined value of
goods and services ranging between $173.1b and $236.7b in the 2020/21 financial year if Covid-19 goes beyond the first half of 2020.
goods and services ranging between $173.1b and $236.7b in the 2020/21 financial year if Covid-19 goes beyond the first half of 2020.
In its regional economic outlook, AfDB said:
“With the projected contraction of growth, Africa could suffer goods and
services losses of $145.5b and $189.7b in the worst case, from the
pre-Covid-19-estimated gross domestic product of $2.59 trillion.”
The
losses, the report noted, will be carried over to 2021 and the
projected recovery would be partial, pointing out that for 2021, the
projected GDP losses could be from $27.6b up to $47b in the worst case
scenario.
AfDB also raised concern of Africa’s weak
economic prospects, saying the continent’s real GDP is projected to
contract by 1.7 per cent in 2020, which indicates a drop of 5.6
percentage points from the January 2020 pre-Covid–19 projection.
The bank said Covid-19 has a substantial impact of short duration, however, it will continues beyond the first half of 2020.
As
result, the report noted, there would be a deeper GDP contraction in
2020 of 3.4 per cent, down by 7.3 percentage points from the growth
projected before the outbreak of Covid–19.
Earlier, AfDB had said in 2019 that economic growth in Africa
would stabilise at 3.4 per cent in 2019 and would pick up to 3.9 per
cent in 2020 and 4.1 per cent in 2021.
The outlook
also noted that economies with poor healthcare systems, especially those
that rely heavily on tourism, international trade, commodity exports,
and those with a high debt burden, will suffer much more due to
prolonged effects of Covid-19.
“The overall impact of
the pandemic on socioeconomic outcomes remains uncertain, however, the
extent of its impacts on demand and supply, effectiveness of public
policy responses, and persistence of behavioural changes [is likely to
be prolonged,” the report reads in part and warns that Covid-19 has
already triggered an increase in inflation, in some cases by more than 5
per cent in the first quarter of 2020.
The spike in
inflation is mainly attributed to disruptions in the supply of food and
energy, the bulk of which are imported, but for many other countries,
the drastic fall in aggregate demand due to the lockdown and other
containment measures have eased inflationary pressures, especially among
non-resource-intensive economies.
Fiscal deficits
According to AfDB, an increase in government spending (or expansionary fiscal spending) could double the already high fiscal deficits.
The report notes, in 2020, deficits are projected to increase two-fold, to 8 per cent of GDP, in the baseline scenario, and will go as high as 9 per cent in the worst-case scenario.
The worsening fiscal position, the report says, would be the result of above-the-line increases in budgetary outlays on Covid-19 related health spending, unemployment benefits, targeted wage subsidies, direct transfers, tax cuts and deferrals.
According to AfDB, an increase in government spending (or expansionary fiscal spending) could double the already high fiscal deficits.
The report notes, in 2020, deficits are projected to increase two-fold, to 8 per cent of GDP, in the baseline scenario, and will go as high as 9 per cent in the worst-case scenario.
The worsening fiscal position, the report says, would be the result of above-the-line increases in budgetary outlays on Covid-19 related health spending, unemployment benefits, targeted wage subsidies, direct transfers, tax cuts and deferrals.
moketch@ug.nationmedia.com
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