African economies to lose Ksh.6.3 trillion from coronavirus hit: World Bank
Economies in Sub-Saharan Africa are set to slide into recession for the first time in 25 years as the region takes a hit from the coronavirus crisis.
The World Bank Group estimates losses from the pandemic to come in at between Ksh.3.9 trillion ($37 billion) and Ksh.8.4 trillion ($79 billion) or an equivalent 94.4 per cent of Kenya’s nominal Gross Domestic Product (GDP) across 2018.
As such, the multilateral lender has revised the region’s annual growth outlook for 2020 to negative five percent to mark the first recession in Sub-Sahara Africa in more than two decades.
“The downward growth revision in 2020 reflects macroeconomic risks arising from the sharp decline in output growth among the region’s key trading partners, including China and the euro area, the fall in commodity prices, reduced tourism activity in several countries, as well as the effect of measures to contain the Covid-19 global pandemic,” the World Bank noted in Thursday’s bi-annual regional economic update.
The compelling crisis is expected to disproportionally hit region’s largest economies including Nigeria, Angola and South Africa from the resulting weak growth and investments.
Moreover, growth in the fastest growing areas in the West and East African Monetary Union and Community is expected to shrink significantly due to weak demand and disruptions to supply chains and domestic production.
The region’s tourism sector is meanwhile expected to contract sharply due to severe disruption to travel.
The World Bank warns the crisis has the potential to create a food security crisis with production seen declining by 2.6 per cent and seven percent in a worst case scenario as food imports similarly decline.
“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,” said Hafez Ghanem, World Bank Vice President for Africa.
The report contains proposes the setting up of fiscal policy led social protection programs to preserve the livelihoods of the majority as additions to the Covid-19 containment measures.
“It is important to ensure that fiscal policy builds in space for social protection interventions, especially targeting workers in the informal sector, and sows the seed for future resilience of our economies,” said World Bank Chief Economist for Africa Albert Zeufack.
The bank however warns of risks to deteriorating fiscal positions and debt distresses on governments with low headroom to adjust to the crises.
World Bank lead economist Cesar Calderon backs debt relief from Sub-Saharan creditors to ease the pressure on regional economies.
““The immediate measures are important but there is no doubt there will be need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight COVID-19 and to help manage or maintain macroeconomic stability in the region,” he said.
The National Treasury and the Central Bank of Kenya (CBK) have already revised their growth outlook for the country to a near three percent in the interim as the Covid-19 crisis takes a hit at both Forex earnings and revenue mobilization efforts.
According to the latest data from the Kenya National Bureau of Statistics (KNBS), the domestic economy was already on a contraction prior to the coronavirus hit with output having eased to a low 5.1 percent in the third quarter of 2019.
The government has already applied for support in excess of Ksh.120 billion ($1.1 billion) from both the World Bank and the IMF to soften the blow on the local economy.
The World Bank Group has created a new Ksh.1.5 trillion ($14 billion) fast-track facility and has availed Ksh.17 trillion ($160 billion) in overall resources to respond to the crisis in the next 15 months.
A first wave of 25 projects providing grants, credit and loans in excess of Ksh.212 billion was approved by the end of March, 10 of which fall in the region.
Both the World Bank and IMF have called for debt standstill to salvage regional economies.
“Such an initiative should be an important part of the global response to soften the impact of Covid-19 on Africa’s poor,” added the report
The World Bank is expected to give its domestic revised growth outlook for Kenya by the end of the month,
Kenya’s economy expanded by 6.3 per cent in 2018 while early revisions indicate output could slowdown to its lowest rate since the 2009 financial crisis.
The country’s last negative growth dates back to 1992 when output plunged to a negative 0.8 percent. Kenya’s only other negative growth rate was registered in 1970 when output fell to negative 4.7 per cent.