Thursday,
April 16, 2020 / 09:22 AM / by IMF / Header Image Credit: IMF
The April 2020 Sub-Saharan Africa Regional Economic
Outlook at a Glance
- The COVID-19 pandemic threatens to exact a heavy
human toll, and the economic crisis it has triggered can upend recent
development progress.
- Growth in sub-Saharan Africa in 2020 is projected at -1.6%, the lowest level on record.
- The policy priority is to ramp up health capacity
and spending to save lives and contain the virus outbreak.
- Support from all development partners is essential
to address the sizable financing needs, including debt relief for the most
vulnerable countries.
- Fiscal, monetary, and financial policies should be
used to protect vulnerable groups, mitigate economic losses, and support the
recovery. Once the crisis subsides, fiscal positions should return to
sustainable paths.

Sub-Saharan Africa is facing an unprecedented health
and economic crisis. One that threatens to throw the region off its stride,
reversing the development progress of recent years. Furthermore, by exacting a
heavy human toll, upending livelihoods, and damaging business and government
balance sheets, the crisis could retard the region's growth prospects in the
years to come. No country will be spared.
The rapid spread of the virus, if left unchecked, is
threatening to overwhelm weak healthcare systems. The number of confirmed cases
of COVID-19 in sub-Saharan Africa is growing rapidly. As of April 9, more
than 6,200 cases have been confirmed across 43 countries in the region, with
South Africa, Cameroon, and Burkina Faso being the most affected.
As in the rest of the world, the health crisis has
precipitated an economic crisis in the region reflecting three large shocks to
economic activity:
- The strong containment and mitigation measures that
countries have had to adopt to limit the spread of the COVID-19 outbreak will
disrupt production and reduce demand sharply;
- Plummeting global economic growth together with
tighter global financial conditions are having large spillovers to the region;
and
- The sharp decline in commodity prices, especially
oil, is set to compound these effects, by exacerbating challenges in some of
the region's largest resource-intensive economies.

As a result, the region-s economy is projected to
contract by -1.6% this year-the worst reading on record, a downward
revision of 5.2 percentage points from our October 2019 forecast. Across
countries, the less diversified economies will be hit the hardest, reflecting
the impact of lower commodity prices and containment efforts. Among the
non-resource-intensive countries, those that depend on tourism are expected to
witness a severe contraction because of extensive travel restrictions, while
emerging market and frontier economies will face the consequences of large
capital outflows and tightening financial conditions.
The large adverse shocks will exacerbate social
conditions and aggravate existing economic vulnerabilities. The measures that
countries have had to adopt to enforce social distancing are certain to imperil
the livelihoods of innumerable vulnerable people. Given the limited social
safety net available, people will suffer. Moreover, the pandemic is reaching
the shores of the continent at a time when budgetary space to absorb such
shocks is limited in most countries, thus complicating the appropriate policy
response.
In this context, decisive measures are urgently needed
to limit humanitarian and economic losses and protect the most vulnerable
societies in the world:
- People first. The immediate priority is for
countries to do whatever it takes to ramp up public health expenditures to contain
the virus outbreak, regardless of fiscal space and debt positions.
- Fiscal policy. Sizable, timely and temporary
fiscal support is crucial to protect the most affected people and firms,
including those in the informal sector. Policies could include cash or in-kind
transfers to help people under strain (including through digital technologies)
and targeted and temporary support to hard-hit sectors. Once the crisis has
subsided, countries should revert fiscal positions to paths that ensure debt
sustainability.
- International solidarity. The ability of
countries to mount the required fiscal response is highly contingent on ample
external financing, on grant and concessional terms, being made available from
the international financial community. This is all the more critical given the
highly disrupted state of global capital markets. The absence of adequate
external financing risks turning temporary liquidity issues into solvency
problems, resulting in the effects of the COVID-19 crisis becoming long-lived.
- Monetary policy. A more supportive monetary
stance and injection of liquidity can also play an important role in sustaining
firms and jobs by supporting demand. Financial sector supervision should aim to
maintain the balance between preserving financial stability and sustaining economic
activity. For countries with floating regimes, exchange rate flexibility can
help cushion the external shocks, while some drawdown of reserves to smooth
disorderly adjustment may mitigate potential financial implications from
foreign exchange mismatches. For countries facing sizable and disorderly
capital outflows, temporary capital flow management measures could be
considered as part of a wider policy package.
Economic forecasts at this juncture are subject to
higher-than-usual degrees of uncertainty. Subject to the decisive actions laid
out above, growth in the region is projected to recover in 2021 to about the 4
percent mark. However, the depth of the slowdown in 2020 and the speed of
recovery will depend on several factors, including how the pandemic interacts
with weak local health systems, the effectiveness of national containment
efforts, and the strength of support from the international community.
Download Here - SSA
Regional Economic Outlook April 2020

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