The COVID-19 crisis which has brought economic activities around the world to a standstill will wipe out almost 10 years of development in sub-Saharan Africa, the International Monetary Fund (IMF) has reported.
The fund believes that real per capita GDP in the region is projected to contract by 5.4 percent in 2020, which will bring the per capita GDP almost back to its level in 2010.
“COVID-19 is set to increase extreme global poverty for the first time in decades, with 26-39 million people thrust into extreme poverty in sub-Saharan Africa alone, it noted in a recent report on the impact of COVID-19 on sub-Saharan Africa.
It further reported that economic activity this year would be significantly lower than projected in the April 2020 Regional Economic Outlook for sub-Saharan Africa, with real GDP now forecasted to contract by 3.2 percent in sub-Saharan Africa, double the contraction envisaged in April 2020.
“The downward revision to the growth projections reflects the impact of domestic measures to contain the COVID-19 outbreak, as well as a weaker external environment, the IMF says in its latest Regional Economic Outlook Update: Sub-Saharan Africa.
The regional economy is projected to contract by 3.2 percent in 2020, which is 1.6 percentage points deeper than projected in April. Growth was revised down for 37 countries out of 45.
Tourism-dependent economies, oil-exporting countries, and other commodity exporters have seen larger downward revisions. Growth in SSA is projected to recover only gradually assuming that the pandemic abates and lockdowns ease in the second half of 2020.
In 2021, regional growth is projected at 3.4 percent in 2021, which is 0.6 percentage points below the April 2020 projection.
On average, per capita incomes across the region will fall by 5½ percent in 2020, back to levels last seen nearly a decade ago.
This will likely lead to more poverty and widen income inequality as lockdowns disproportionally affect informal sector workers and small- and medium-sized companies in the services sectors.
The Director of the IMF’s African Department, Abebe Aemro Selassie, said regional policies should, therefore, remain focused on safeguarding public health, supporting people and businesses hardest hit by the crisis and facilitating the recovery.
Less favorable environment
The fund also noted that the external environment had been less favorable to sub-Saharan Africa.
“Since April, global growth for 2020 has been revised down by 1.9 percentage points to –4.9 percent; global travel has collapsed and tourism flows have grounded to a halt; remittances are expected to fall by about 20 percent; external financing conditions remain tight despite some easing in recent weeks, and commodity prices remain low,” it noted.
Fiscal support is crucial
The fund pointed out that timely fiscal support was crucial but many countries in the region were constrained.
“The preservation of health and lives remains the priority. Most country authorities have allocated more resources to health care and virus containment measures and to support vulnerable households.
“However, many authorities are constrained in their ability to increase spending to mitigate the impact of the crisis.
International support urgently required
International financial institutions, including the IMF, have provided much-needed assistance to sub-Saharan Africa.
On April 15, the G20 announced the Debt Service Suspension Initiative (DSSI), which allows the world’s poorest countries — most of them in Africa — to suspend up to US$14 billion of debt service payments due in 2020.
Despite this, the IMF believes countries across Africa still face financing needs amounting to over US$110 billion in 2020, with US$44 billion still having to be financed.