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Friday, April 17, 2020 / 2:00 PM / United Capital
Research / Header Image Credit: Ecographics
According to the IMF's
recently published Regional Economic Outlook for SSA, growth in 2020 is
projected to decline by -1.6%. This will be the lowest level in more than 20
years, as the coronavirus outbreak threatens to break the region's 2 straight
decades of positive growth. No doubt, a number of reasons point to the expected
sharp slowdown in growth.
In SSA, several economies
rely heavily on commodity exports (Oil, Agriculture, Solid minerals etc) as
well as tourism for revenue and forex earnings. With the plunge in commodity
prices and the lockdown/ restriction of movement affecting economic activities,
government and corporate revenues are expected to tumble. Also, the major
trading partners to SSA economies - China, Europe, and America - are the
hardest hit in terms of the outbreak, which will weaken demand for exports.
Furthermore, in terms of capital outflows the IMF estimated that investors have
pulled out over $90.0 bn from emerging markets since the beginning of the
crisis, to the detriment of SSA financial and currency markets. Finally, a
major challenge is the combination of weak local healthcare systems and lack of
substantial fiscal buffers that can mitigate the economic impact of lockdowns
on the livelihoods of numerous vulnerable Africans. Bearing the above in mind,
the need for SSA countries to increase healthcare expenditure and roll out
fiscal policy palliatives is necessary. Also, the increased possibility of
financing from multilateral organizations, as well as the IMF approving debt
relief for 19 SSA economies could not have come at a better time. Furthermore,
monetary policy can be an effective tool in ensuring financial system stability
by injecting liquidity to support businesses while limiting the impact of the
shutdown on economic activities.
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Looking
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Mar-2020
Private Sector Credit YoY - April 30th
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