The African Development Bank on Tuesday painted a gloomy future for Africa as the onslaught of the novel coronavirus continues to wreak havoc on the global economy.
An additional 49 million Africans face extreme poverty with West and Central Africa likely to be hit the hardest. The bank also projected that Africa could lose between $145.5 billion of GDP in 2020.
It is based on this impetus that AFDB has called for a more coordinated and strategic action by African governments and development partners to cushion the impact of the pandemic on the continent.
The AFBD forecast contained in the latest economic outlook update for Africa said COVID-19 has reversed Africa’s Strong Growth trajectory.
The United Nations Trade and Development Agency (UNCTAD) reported that aside from the tragic human consequences of the COVID-19 virus, the economic uncertainty it has sparked will likely cost the global economy $1 trillion in 2020.
“We envisage a slowdown in the global economy to under two percent for this year, and that will probably cost in the order of $1 trillion, compared with what people were forecasting back in September,” said
Richard KozulWright, Director, Division on Globalization and Development Strategies at UNCTAD.
ALTHOUGH COVID-19 ARRIVED IN AFRICA RELATIVELY LATE, ALL 54 COUNTRIES ARE NOW AFFECTED
According to the latest report of the Bank of Ghana on the global economic outlook, the pandemic led to a deterioration in financial market risk sentiments, with the February and March 2020 being characterized by large swings in the stock market, reversal of capital flows to Emerging Market and Developing Economies (EMDEs) and a widening of EMDE sovereign bond spreads.
According to Hanan Morsy, Director of the Macroeconomic Policy, Forecasting and Research Department at the African Development Bank,
“ The African Economic Outlook 2020 Supplement shows that for the first time in the last half-century, Africa would be facing an economic recession as a fallout of the COVID-19 pandemic. This would affect the gains achieved in poverty reduction as an estimated 49 million Africans could be pushed into poverty, with about 30 million jobs on the verge of disappearing. Policymakers need to act fast to alleviate the impact of the crisis on vulnerable groups through well-targeted social safety net measures.”
The report called for urgent policy interventions to mitigate the impact of the pandemic:
Across Africa, the response must be well sequenced , involving a public health response to contain the spread of the virus and minimize fatalities, a monetary policy response to ease liquidity constraints and solvency risks, and a fiscal response to cushion the economic impacts of the pandemic on livelihoods and to assist businesses,” the report said.
Other recommendations include labor market policies to protect workers and their jobs and structural policies to enable African economies to rebuild and enhance their resilience to future shocks. Tourism , transportation, and entertainment sectors will take a longer period to recover.
What policies will avert the threat of an economic recession
While it is too early to access the full economic impact of the COVID-19 on the global economy, many experts have warned that a global economic recession seems inevitable if the virus is not curbed as soon as possible.
MAIN POLICY RECOMMENDATIONS BY A
Public health responses:
- • Develop effective information sharing and communication strategies. • Allocate sufficient resources to the health sector and develop emergency plans.
Fiscal policy responses:
- • Support vulnerable households with targeted cash transfers and social safety net programs.
- • Help businesses stay afloat by providing targeted subsidies and tax reliefs.
Monetary policy responses:
- • Ease financial conditions by injecting liquidity.
- • Use unconventional policy tools to support affected sectors.
Labor market and informal sector responses:
- • Assist vulnerable groups, especially women and youth in informality.
- • Use active labour market policies to protect workers and their jobs.
- The African Development Bank
