Updated: March 5, 2021
The African Development Bank on Tuesday projected that an additional 49 million Africans could be pushed into extreme poverty as the economy shrinks amid COVID-19 pandemic, with West and Central Africa likely to be worst hit regions on the continent. The bank also projected that Africa could lose between $145.5 billion and $189.7 billion of GDP in 2020.
AfDB called on African governments and development partners to respond in a more “coordinated, targeted, and rapid manner to be effective in limiting impacts” of the virus.
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The development bank said real GDP is expected to shrink by 1.7 percent under the baseline scenario and 3.4 percent in the worst-case scenario.
The AfDB forecast, contained in its latest economic outlook update for Africa, said a partial recovery of 3 percent is expected in 2021, provided that governments manage the COVID-19 infection rate well.
More specifically, AfDB said the projected growth in 2021 and beyond would depend largely on African governments’ effectiveness in flattening the curve of the outbreak and policies to reopen economies.
Just last January before the lockdowns and shutdowns triggered by COVID-19, Africa’s growth was forecast at 3.9% in 2020 and 4.1% in 2021.
The International Monetary Fund (IMF) recently projected a contraction of 3.2 percent for Sub-saharan Africa in 2020 and a rebound of about 3.4 percent in 2021. That projection was also far worse than what the IMF forecast about two months ago in April.
“To reopen economies, policymakers needed to follow a phased and incremental approach that carefully evaluates the trade-offs between restarting economic activity too quickly and safeguarding the health of the population,” said Charles Leyeka Lufumpa, Acting Chief Economist and Vice President for Economic Governance and Knowledge Management, at the African Development Bank. “Economic activities can be restarted incrementally on the basis of the transmission risks of different sectors”
The new economic outlook noted that only 21 out of 54 African countries were clinically prepared to deal with epidemics.
Executive Director of the African Economic Research Consortium and Former Governor of the Central Bank of Kenya, Njuguna Ndung’u described the African Economic Outlook 2020 supplement as “a very important and useful policy tool for African countries who actually need it at this time.”
“It will be useful now and in the future. It gives us important short, medium- and long-term strategies,” he said, adding that the current COVID-19 crisis, in a way, presents a good opportunity for innovative reforms in countries.
According to Hanan Morsy, Director of the Macroeconomic Policy, Forecasting and Research Department at the African Development Bank, “The African Economic Outlook 2020 Supplement shows that for the first time in the last half-century, Africa would be facing an economic recession as a fallout of the COVID-19 pandemic. This would affect the gains achieved in poverty reduction as an estimated 49 million Africans could be pushed into poverty, with about 30 million jobs at the verge of disappearing. Policymakers need to act fast to alleviate the impact of the crisis on vulnerable groups through well targeted social safety net measures.”
The report called for urgent policy interventions to mitigate the impact of the pandemic: “Across Africa, the response must be well-sequenced and multipronged, involving a public health response to contain the spread of the virus and minimise fatalities, a monetary policy response to ease liquidity constraints and solvency risks, and a fiscal response to cushion the economic impacts of the pandemic on livelihoods and to assist businesses,” the report said.
Other proposed interventions included labour market policies to protect workers and their jobs, and structural policies to enable African economies to rebuild and enhance their resilience to future shocks.
The supplement warned that the tourism, transportation, and entertainment sectors may take longer to recover.
Between 2017 and 2018, African travel and tourism grew by 5.6%, compared with the global average of 3.9%.
According to Morsy, the supplement projected that, in the worst-case scenario, an additional 49 million Africans could be pushed into extreme poverty by the pandemic and its aftermath. The number of people in extreme poverty in Africa (using the $1.90 international poverty line) could reach 453.4 million in 2020 as a result of the pandemic compared to 425.2 million under the no-outbreak scenario.