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Business Editor

GROWTH in Sub-Saharan Africa has been significantly impacted by the ongoing Covid-19 (Coronavirus) outbreak and is forecast to fall sharply from 2.4 percent in 2019 to -2.1 to -5.1 percent this year, marking the first recession in the region over the past 25 years, the World Bank Group has said.

“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.

“We are rallying all possible resources to help countries meet people’s immediate health and survival needs while also safeguarding livelihoods and jobs in the longer term – including calling for a standstill on official bilateral debt service payments, which would free up funds for strengthening health systems to deal with Covid -19 and save lives, social safety nets to save livelihoods and help workers who lose jobs, support to small and medium enterprises, and food security.”

According to the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for the region, African policy makers should focus on saving lives and protecting livelihoods by focusing on strengthening health systems and taking quick actions to minimize disruptions in food supply chains.

The Bank has also recommended implementing social protection programs, including cash transfers, food distribution and fee waivers, to support citizens, especially those working in the informal sector.

In its analysis, Covid-19 will cost the region between $37 billion and $79 billion in output losses for 2020 due to a combination of effects.

These 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.

While most countries in the region have been affected to different degrees by the pandemic, real gross domestic product growth is projected to fall sharply particularly in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment. In general, oil exporting-countries will also be hard-hit; while growth is also expected to weaken substantially in the two fastest growing areas—the West African Economic and Monetary Union and the East African Community—due to weak external demand, disruptions to supply chains and domestic production. The region’s tourism sector is expected to contract sharply due to severe disruption to travel.

The Bank said the Covid-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6 percent in an optimistic scenario and up to seven percent if there are trade blockages.

Food imports are also expected to decline substantially (as much as 25 percent or as little as 13 percent) due to a combination of higher transaction costs and reduced domestic demand. Several African countries have reacted quickly and decisively to curb the potential influx and spread of the coronavirus, very much in line with international guidelines.

However, the report points out several factors that pose challenges to the containment and mitigation measures, in particular the large and densely populated urban informal settlements, poor access to safe water and sanitation facilities, and fragile health systems.

The World Bank has emphasized the need for a customized policy response to reflect the structure of African economies (especially the large informal sector) and the peculiar constraints policymakers currently face, particularly the deteriorating fiscal positions and heightened public debt vulnerabilities, and the overall low operational capacity to respond.

“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 macro-economic stability in the region,” said Cesar Calderon, lead economist and lead author of the report.

The World Bank Group said it was taking broad, fast action to help developing countries strengthen their pandemic responses by deploying up to $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses, and bolster economic recovery.