The World Bank forecasts the sub-Saharan Africa region’s economic growth will contract by 2.1 per cent to 5.1 per cent from a growth of 2.4 per cent last year on the back of the COVID19 pandemic.
“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,” World Bank Vice President for Africa Hafez Ghanem said.
The bank’s Africa’s Pulse report analysis shows that COVID-19 will cost the region between $37 billion and $79 billion 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.
“Short-term fiscal policy should aim at redirecting government expenditure to increase the capacity of the health system to provided adequate and affordable medical attention to the people affected by the COVID-19 pandemic,” the report advises.
In Kenya, the National Treasury has appropriated an additional KSh 10 billion to support the elderly, orphans, and other vulnerable people with cash transfers. The government approved fee waivers on person-to-person mobile money transactions on mobile money transactions, and it is planning to implement a 100 percent tax relief for people earning less than KSh 24,000.
As of April 7, 5,425 cases of COVID-19 have been confirmed in 45 of the 48 countries in Sub-Saharan Africa.
According to the authors of the report, combating COVID-19 in Sub-Saharan Africa would require international assistance.
“Financing relief and recovery measures will require assistance from multilateral organizations and bilateral official creditors in a region that is already facing public debt vulnerabilities. Conducting effective policies while preserving macroeconomic stability in Sub-Saharan Africa may require a suspension of sovereign debt payments or debt relief.”
Exit strategy from COVID-19
The report also calls for African policymakers to think ahead about the exit strategy from COVID-19 geared toward ‘building future resilience’.
“African economies still need to design policy pathways to achieve sustainable growth, economic diversification, and inclusion. The economic sustainability of African economies depends on their ability to transform their depleting stock of natural wealth into other reproducible capital assets such as physical capital, infrastructure, and human capital.”
The United Nations Economic Commission for Africa (UNECA) in its World Economic Situation and Prospects for 2020, also revised the Sub-Saharan Africa (SSA) GDP growth to 1.8 per cent from the earlier projected 3.2 per cent in January 2020.