- Sub-Saharan Africa to Contract by 5.1% in 2020 Says World Bank
The coronavirus pandemic could plunge Sub-Saharan Africa into its first economic recession in 25 years, according to the World Bank Group.
In the latest Africa’s Pulse report by the bank, the region’s economy would contract by 5.1 percent in 2020, down from the modest 2.4 percent growth recorded in 2019.
Experts have said the region little to zero fiscal buffer amid rising debt obligations would hurt its ability to mitigate risk associated with COVID-19 pandemic without a solid stimulus package.
“Due to deteriorating fiscal positions and increased public debt, governments in the region do not have much room for wiggle in deploying fiscal policy to address the COVID-19 crisis,” said Albert Zeufack, Chief Economist for Africa at the World Bank.
“Africa alone will not be able to contain the disease and its impacts on its own; there is urgent need for temporary official bilateral debt relief to help combat the pandemic while preserving macroeconomic stability in the region.”
The Sub-Saharan Africa region spent $35.8 billion or 2.1 percent of the region’s Gross Domestic Product on debt servicing in 2018, according to the World Bank. While another $9.4 billion or 0.7 percent of regional GDP was paid to bilateral creditors during the same year. Suggesting that the region spent a total sum of $45.2 billion.
However, with African finance ministers projecting that the region needs at least $100 billion stimulus package to cushion the effect of COVID-19 on the continent, suspension of interest on debts and repayment of debt will provide almost half of the $100 billion the region needs to mitigate the impact of the deadly virus.
“Short-term fiscal policy should aim at redirecting government expenditure to increase the capacity of the health system to protect and equip the already scarce the medical personnel, and to provide adequate and affordable medical attention to the people affected by COVID-19 pandemic,” said Cesar Calderon, World Bank Lead Economist and lead author of the report.
“But at this time it is also important to consider that most workers in the region are engaged in the large informal sector where they lack benefits such as health insurance, unemployment insurance, and paid leave. They usually need to work every day to earn their living and pay for their basic household necessities. A prolonged lockdown would put their basic survival at great risk.”
The bank estimated that agricultural production would contract between 2.6 percent to 7 percent in 2020 while food imports would drop by 25 percent because of the rising foreign exchange rates and the drop in local demand.