How the Coronavirus Pandemic is Affecting African Economies

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The lockdown in Africa continues to pick pace as more cases are increasingly being reported across the continent. The pandemic, spreading fast, has already started to peel into African economies.

According to a United Nations report on the economic impact on Covid-19 on Africa, the economic growth on the continent is expected to drop from 3.2% to 1.8%.

SEE ALSOGlobal Demand for the US Dollar, the World’s Reserve Currency, Surges Amid the Coronavirus Pandemic

To put that in another perspective, the effects of Covid-19 will cost the continent USD $29 billion as of March 2020.

 

Some of the African countries expected to be hardest hit include:

  • South Africa – due to precious metals and pharmaceutical exports
  • Nigeria – due to oil exports (10.7% of GDP)
  • Egypt – due to tourism industry
  • Algeria – due to oil exports (20% of GDP)
  • Angola – due to oil exports (29.4% of GDP)
  • Kenya – due to tourism and European exports
  • Ethiopia – due to tourism industry

 

According to some analysts, Africa may lose half of its gross domestic product as a result.

The report also warns that it could get worse in the coming months as more countries report coronavirus infections within their borders.

Africa is increasingly interconnected with the rest of the world in the following ways:

Trade:

  • Directly through trade links with China and Europe
  • Indirectly through trade links between China, Europe and the rest of the world
  • Trade links with rest of the world
  • Remittances and Tourism

Investments:

  • Decline in FDI flows
  • Capital flight
  • Domestic financial market tightening

The effects are shown below:

  • Disruption of global supply chains – drop in value creation
  • Demand side shocks: Oil, tourism, remittances
  • Slow down in investment hence job losses
  • For oil exporters, revenue losses of up to USD 65 billion
  • Inflationary pressures due to supply side shortages (Food and Pharma)
  • Unanticipated increases in Health Spending of up to USD 10.6 billion
  • Revenue losses could lead to unsustainable debt

Below is a breakdown of key exports and imports expected to see immediate and significant impact.

 

 

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