World Bank warns of 1st recession in 25 years for Sub-Saharan Africa due to COVID-19

Xinhua News Agency | Apr 9, 2020 at 1:04 PM

NAIROBI, April 9 (Xinhua) -- Growth in Sub-Saharan Africa is projected to fall sharply from 2.4 percent in 2019 to minus 2.1 to minus 5.1 percent in 2020, the first recession in the region over the past 25 years, the World Bank warned in a report released on Thursday.

According to Africa's Pulse, World Bank's bi-annual analysis of the state of African economies, COVID-19 outbreak will cost the region between 37 billion U.S. dollars to 79 billion dollars 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, foreign aid, combined with capital flight; and through direct impacts on health systems, and disruptions caused by containment measures and the public response," said the Pulse.

The report recommends that African policymakers focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains.

It also calls for the implementation of social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sectors.

The findings indicate that while most countries in the region have been affected to different degrees by the pandemic, real gross domestic product (GDP) growth is projected to fall sharply particularly in the region's three largest economies - Nigeria, Angola, and South Africa - as a result of persistently weak growth and investment.

"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," Hafez Ghanem, vice president for Africa World Bank said.

The World Bank report indicates that the COVID-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6 percent in an optimistic scenario and 7 percent if there are trade blockages.

"Food imports would decline substantially due to a combination of higher transaction costs and reduced domestic demand," said the analysis.

Several African countries have reacted quickly and decisively to curb the potential influx and spread of the novel coronavirus, very much in line with international guidelines.

However, the report points out several factors that pose challenges to the containment and mitigation measures, in particular the large and densely populated urban informal settlements, which have poor access to safe water and sanitation facilities, and fragile health systems.

"In addition to containment measures, we have seen that in responding to COVID-19, 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 extraordinary liquidity assistance," Albert Zeufack, chief economist for Africa at World Bank said.

"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 the future resilience of our economies."