Economic recovery trends of African developed and developing countries post-Covid 19

Up to now, according to WHO, Africa has recorded nearly 2,000,000 cases with more than 40,000 deaths. Countries with the highest number of infected people are mainly in developed and developing countries (South Africa, Egypt, Algeria, Morocco, Nigeria, Ghana, etc.)

Photo: Internet

The United Nations Conference on Trade and Development (UNCTAD) predicts that the global economic crisis caused by the Covid-19 pandemic will severely affect and devastate the African economy. And the United Nations Economic Commission on Africa (ECA) on May 10 estimated that African countries' application of a blockade to prevent the spread of the COVID-19 pandemic is causing the continent to lose 2,5% of the gross domestic product (GDP) per month, equivalent to US$65.7 billion. It is forecasted that Africa's GDP will decrease from 3.2% in 2019 to 1.8% in 2020.

African oil-producing economies weaken due to falling oil prices and the effects of Covid-19

The world economy collapsed due to the rupture of global value chains, the decline in prices of basic products, taxes and social restrictions, and tourism in many African countries are the main causes of this negative growth.

Trade is one of the sectors most affected. According to forecasts, exports and imports of African countries will decrease by at least 35% compared to 2019, in which the total export turnover of African goods is forecast to decrease by more than 100 billion USD this year. Thus, the total loss of African foreign trade is estimated at 270 billion USD.

The pandemic had a strong impact on 5 major African economies including Nigéria, South Africa, Egypt, Algeria and Morocco (accounting for over 60% of continental GDP).

Africa is considered as one of the largest crude oil exporters in which the export prices are fluctuating strongly. Estimated financial loss of the crude oil exporting countries is about 65 billion USD, of which Nigeria accounts for 19 billion USD.

In the past 7 months, the price of African crude oil has dropped 56%. In addition, from January 2020, the price of non-oil materials also decreased by 30%: Aluminum decreased by 0.49%, copper was 0.47% and lead was 1.64%; cocoa prices fell 21% just in April.

Only 15 countries out of 54 African countries export food. Currently, this commodity group's trade is stopped. If the crisis persists, Africa will face the problem of importing essential products. The first is the food group, such as rice and wheat. Currently, the selling prices of these goods have increased, negatively impacting the black continent economy. In terms of medicine, Africa has to buy 94% of its demand for traditional medicines (US$16 billion) of which 75% comes from Europe, India and China.

The tourism and transportation sectors play an important role in the African economy that also suffered great losses from the crisis. 95% of Africa flights are currently not operating.

The amount of remittances transferred to Africa also fell sharply, from 20-30% depending on the country. In 2019, an estimated US$70 billion was returned to the country by the African community around the world, contributing up to 10% of GDP in some countries.

Africa's major stock markets such as South Africa, Nigeria, Casablanca and Egypt also fell by over 20%. FDI into the continent also plummeted and there was a pause or withdrawal of investors.

The COVID-19 global economic crisis could "evaporate" tens of millions of jobs across Africa. More than 50% of 54 African countries from Uganda to South Africa have issued blockade, quarantine, travel restrictions and other measures to prevent the spread of COVID-19. The United Nations African Economic Commission has called for action to protect 30 million jobs on the continent, especially in the tourism and aviation sectors.

Solutions to recover the African economy

Photo: Internet

• Apply for urgent help and debt relief

In the context of Africa approaching "red alarm", some African countries are having to apply for debt rescheduling or debt relief to save the economy from falling into recession. President Macky Sall (Senegal) asked the bilateral and multilateral partners of Africa to support the ability to recover the African economy by writing off debt.

Accordingly, many governments have called for the economic stimulus package. Ethiopian Prime Minister Abiy Ahmed mentioned the "threat of presence" to the African economy when asking G20 countries for $ 150 billion in support. African finance ministers meanwhile agreed that the continent needs an economic stimulus package of up to 100 billion USD.

The International Monetary Fund (IMF) said on 25/3 it had received urgent financial assistance requests from 20 African countries. The IMF confirmed that it has approved the credit overdraft for Guinea and Senegal that are facing economic difficulties caused by COVID-19.

• Gradually reopening essential economic activities

The United Nations Economic Commission for Africa (ECA) emphasizes that this is one of the issues that need special priority in the economic context of many African countries, which are facing many difficulties before the pandemic.

Moreover, the United Nations agency also said that, for countries that apply blockades but have not yet effectively repelled the COVID-19 epidemic, reopening economic activities is really necessary to regenerate and maintain resources for a long war on the plague.

• Early implementation of FTA across Africa

Wankele Mene, Secretary General in charge of the implementation of the FTA, proposed that it is expected to come into effect on 1 July 2020, but the implementation of the Africa Free Trade Agreement has been postponed. The implementation of this FTA will help Africa increase intra-regional exports from $36 billion to $43 billion.

• The recovery of trading partners

Certainly the economic recovery of China (Africa's largest trading partner) and any other country will contribute to boost the continent's foreign trade, help to stabilize the prices of imported goods, meet most of the domestic demand, especially in food and medicine, and increase African exports to these markets.

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References

Merwe, M. (2020). South Africa: The Impact of Covid-19 on Key African sectors. Retrieved from URL:

https://globalcompliancenews.com/south-africa-the-impact-of-covid-19-on-key-africian-sectors/

OECD, (2020). Covid-19 and Africa: Socio-economic implications and policy responses. Retrieved from URL:

https://www.oecd.org/coronavirus/policy-responses/covid-19-and-africa-socio-economic-implications-and-policy-responses-96e1b282/

Phuong Dung