COVID-19 Outbreak: How is Africa faring?

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Friday, March 20, 2020 / 2:42 PM / United Capital Research / Header Image Credit: Up News Info

 

COVID-19 is rattling the healthcare, financial and economic systems around the world. Although, the impact on Africa countries initially seemed to be limited to the external account and financial markets, which are considered secondary due to net foreign capital reversals. However, with an increasing number of cases in the continent, monetary and fiscal authorities are forced to double down on their efforts to curb the spread of the virus, as the primary impact of the outbreak is set to add an extra layer of domestic challenge to the growing problem. 

 

The impact has been divergent across the region. In South Africa, largesize foreign capital outflows across the financial market have resulted in a 9.6% depreciation in the rand in the month of March alone (or -19.2% YTD). For the crude oil-exporting countries in the region such as Nigeria, Angola, Libya, Gabon and Algeria, the collapse of crude oil prices driven by weaker demand has dampened the growth outlook for these countries.  For other raw commodity-dependent countries, the shutdown in economic activities in the developed market is set to impair demand and the possibility of a widespread domestic outbreak is set to affect local supply, negatively. Also, countries dependent on tourism are on track for one of their worst years amid global lockdowns/ shutdowns.

 

Accordingly, amid the negative impacts the outbreak is likely to have on economic activities across the region, monetary authorities are opting for more accommodative policy actions to bolster economic activities. Notably, monetary responses have ranged from, interest rate cut to targeted liquidity injections, while fiscal responses have been in the form of travel bans, tax break and budget estimate revisions. While we laud the effort by both monetary and fiscal authorities across the region, the big concern is the capacity of the health sector to contain a largescale outbreak if the virus becomes widespread. 

 

Looking Forward

 

Angola

Feb-2020 Inflation Rate - March 22nd

Feb-2020 Net Reserves - March 22nd

 

Egypt

Q4-2019 GDP Report - March 31st

 

Ghana 

Policy rate meeting - March 23rd Feb-2020 Gross Reserves - March 28th

 

Kenya

Benchmark interest rate - March 23rd

 

Morocco

Feb-2020 Inflation Rate - March 20th

Feb 2020 - Money supply YoY - March 30th

 

Nigeria

Policy rate meeting - March 24th

 

South Africa

Feb-2020 Money Supply YoY - March 30th

Feb-2020 Trade Balance - March 31st

 

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