The African economic landscape is set to take a battering this year as the Covid-19 pandemic spreads across the world. The continent is expected to be one of the hardest hit, and in all probability will take the longest to recover as a result of countries’ lack of fiscal space to respond swiftly to the crisis. Nonetheless, some of the fast-growing economies are expected to be more resilient and claw back economic losses faster.
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Minimising social costs is the top priority, but the economic costs related to lockdowns cannot be ignored. The collapse of financial support structures could push an already impoverished society into destitution. In estimating the impact of a lockdown on consumer spending we account for the structure of an economy (agrarian vs services-based), the available monetary stimulus, the likely fiscal stimulus, and the economic importance of both tourism and remittances. Lockdowns are necessary, but the economic costs highlight the importance of making them as effective and as short as possible.
The enforcement of curfews and partial or complete lockdowns to flatten the Covid-19 infection curve will contribute to the African economy’s inevitable contraction this year. The debt burden will worsen to risk a wave of forced debt restructuring unless agreements can be reached on debt holidays and waivers. There are also growing concerns that a mere freeze in debt servicing will not be adequate, as several sovereign credit principal repayments are due over the 2020-22 period, and rolling over such a large amount of credit would be a challenge in a difficult global financial environment.
Research briefing archive
- Africa | Africa’s largest economies under pressure as Covid-19 concerns escalate
- Africa | The impact of Covid-19 on Africa – who will be hardest hit?
- South Africa | Junk status imminent
- Africa | Top calls for 2020
- Africa | Consumption-driven growth in the continent’s top performers
- South Africa | Economic policy in the spotlight