AfDB Report: African Economic Outlook 2020 – Supplement Amid COVID–19

AfDB Report: African Economic Outlook 2020 – Supplement Amid COVID–19

7 July 2020.  Real GDP in Africa is projected to contract by 1.7 percent in 2020, dropping by 5.6 percentage points from the January 2020 pre-COVID–19 projection, if the virus has a substantial impact but of short duration. If it continues beyond the first half of 2020, there would be a deeper GDP contraction in 2020 of 3.4 percent, down by 7.3 percentage points from the growth projected before the outbreak of COVID–19.

The curve of the pandemic in Africa is flattening gradually
The number of confirmed cases of COVID–19 in 54 African countries was 04,642 with 8,087 reported deaths as of 22 June 2020. The reported figures are likely to be understated because of the limited testing capabilities in most countries. Countries in North Africa and Southern Africa appear to be the most affected to date, while the number of cases reported in East, Central, and West Africa have been lower. Still, the differences could be due to lags in testing or differences in mitigation approaches. 

By disrupting domestic and international distribution channels of inputs and outputs and stimulating consumer hoarding, the COVID–19 shock has provoked an increase in the prices of agricultural and other commodities, thereby reducing household purchasing power. This could threaten the food security for poor households, especially if prices of essential goods remain high and therefore unaffordable for an extended period. (page 30)

Policy option 
Given the global scale of the COVID–19 pandemic and its repercussions, governments and development partners must respond in a coordinated, targeted, and rapid manner to be effective in limiting its impacts. 

In Lesotho, the Private Sector Fund will expand credit guarantee facilities to the Lesotho National Development Corporation and the Ministry of Small Business. It will target tourism and food sectors, among other small enterprises. (page 80)

In Tanzania inflation is expected to increase as the disruption in imported food supply chains due to travel restrictions and the depreciation of the shilling on account of lower export and tourism receipts offset lower domestic demand. Reduced export earnings and FDI inflows are expected to further depreciate the shilling and contribute to a buildup in inflation. (page 103)
Across Africa, the response must be well-sequenced and multipronged, 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, a fiscal response to cushion the economic impacts of the pandemic on livelihoods and to assist businesses, 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. 

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