BUUMBA CHIMBULU writes
@SunZambian
WHILE preliminary assessment of COVID-19 indicate that the Zambian economy will shrink to two percent this year, the pandemic is sending the entire sub-Saharan Africa’s progress towards first recession in 25 years.
Due to the pandemic, the Zambian economy will shrink to two percent from the projected 3.2 percent while the Sub-Saharan region’s growth is expected to fall sharply to -2.1 percent.
The World Bank has indicated that growth in the region has been significantly impacted by the ongoing coronavirus outbreak and is forecast to fall sharply from 2.4 percent in 2019 to -2.1 to -5.1 percent in 2020.
It will cost the region between US$37 billion and US$79 billion in terms of output losses for 2020.
The downward growth revision in 2020 reflects macroeconomic risks arising from the sharp decline in output growth among the region’s key trading partners.
These partners includes China and the euro area, the fall in commodity prices, reduced tourism activity in several countries, as well as the effects of measures to contain the COVID-19 global pandemic.
The World Bank’s twice-yearly economic update for the region released this week therefore emphasised the need for a customised policy response to reflect the structure of African economies.
The COVID-19 shock is hitting the region’s three largest economies – Nigeria, South Africa, and Angola in a context of persistently weak growth and investment, and declining commodity prices.
The prices of crude oil and industrial metals have fallen sharply (by 50 and 11 percent, respectively, between December 2019 and March 2020).
Model simulations suggest that, compared with a no-COVID base case, average real Gross Domestic Product (GDP) growth in these countries could be reduced by up to 6.9 percentage points in 2020 in the baseline scenario, and by up to eight percentage points in the downside scenario.
South Africa has the largest number of confirmed cases in the region, and strict measures to contain and mitigate the spread of the virus are weighing on the economy
The World Bank therefore emphasised the need for peculiar constraints policymakers currently faced, particularly the deteriorating fiscal positions and heightened public debt vulnerabilities, and the overall low operational capacity to respond.
The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries were likely to be hit particularly hard, said Hafez Ghanem, World Bank Vice President for Africa.
Dr Ghanem said the Bank was rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term.
He said this included including calling for a standstill on official bilateral debt service payments which would free up funds for strengthening health systems to deal with COVID 19 and save lives.
“This also included social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security,” Dr Ghanem said.
Growth will weaken substantially in the two fastest growing areas: the West African Economic and Monetary Union where outbreaks are spreading rapidly and the East African Community – due to weak external demand and disruptions to supply chains and domestic production.
Activity in tourist dependent countries is expected to contract sharply in response to severe disruption to travel and tourism activities. In the baseline and downside scenarios, growth will fall well below the regional average population growth rate of 2.7 percent, indicating that, in the absence of appropriate measures to mitigate its effects, the COVID-19 outbreak will severely impact the welfare of large numbers of individuals in the region.
