Oliver Kazunga, Senior Business Reporter
THE Common Market for Eastern and Southern Africa (Comesa) regional economy is projected to decline further by a 0,6 percent this year largely due to shocks induced by the Covid-19 pandemic.
Last year, the regional economy decreased by 0,8 percentage points to 5,2 percent. In a statement, Comesa said a report from the Fifth Trade and Trade Facilitation Sub-Committee meeting of Comesa, which was held virtually, has indicated that the region’s average growth slowed down in 2019 to 5,2 percent from six in 2018 and is projected to decrease to 0,6 percent in 2020.
The Comesa region comprises 21-member States including Zimbabwe, Lesotho, Swaziland, Zambia, Malawi, Madagascar, Seychelles, Kenya, Rwanda, Ethiopia, Egypt, Tunisia, Burundi and Djibouti.
“The slowdown in growth was experienced in most Comesa member countries except Egypt, Ethiopia, Malawi, Rwanda and Seychelles that registered improved economic growth in 2019 compared to 2018,” it said.
“The impressive growth of above five percent in both years in these countries, reflected among others, improving growth fundamentals, with a gradual shift from private consumption toward investment and exports.”
The trading bloc said the region experienced a slowdown in growth last year as compared to 2018.
This was largely attributed to lower commodity prices over the period under review.
“The region is currently going through an unprecedented economic and health crisis following the spread of Covid-19 pandemic to the region since the beginning of 2020.
“The contraction is attributed to among others: the impact of containment measures that includes quarantine, lockdowns, travel restrictions and border closures, among others,” said Comesa.
On monetary policy and exchange rate developments, the Comesa report indicates that monetary policy stance varied depending on the extent to which countries are exposed to domestic and external shocks.
“Generally, central banks in the region pursued an accommodative monetary policy stance, for economies where inflation pressures were muted.
“However, in 2020 the banks face new challenges posed by Covid-19 pandemic including a shift of priority to crisis management objectives instead of strictly price stability.”
In order to overcome the above challenges, Comesa said a number of central banks in the region have already instituted measures in response to the pandemic, with most of them loosening monetary policy, allowing the exchange rate to depreciate and at times conducting foreign exchange interventions to smoothen exchange rate fluctuations. At the same time, economic disruptions brought about by Covid-19 have resulted in tightening of global financing conditions, unprecedented capital outflow and sharp decline in remittances and tourism receipts.
The report further states that although fiscal policy is key in addressing the prevailing challenges posed by the Covid-19 pandemic, monetary and exchange rate policy can also play an important role in dampening the economic shock.
Comesa also recommended that member countries should use macro-economic policies to speed up recovery that include fiscal, monetary and more flexible exchange rates that would permit exchange rate depreciation.
“Fiscal stimulus in the short run should target public health, crisis response and income support to the most vulnerable,” said Comesa.
In the medium-term, the meeting recommended for structural transformation and economic diversification of individual economies in the region because Covid-19 has clearly demonstrated that with disrupted trade channels, local manufacturers have been able to rise to the occasion.
“There is, therefore, needed to sustain emerging pharmaceutical and medical supply industries in a post Covid-19 era,” it said.