Impact of the Coronavirus (COVID-19) on the African Economy


Impact of the Coronavirus (COVID-19) on the African Economy

Impact of the Coronavirus (COVID-19) on the African Economy
Photo credit: GCIS

The COVID-19 crisis is affecting the entire world economy and that of Africa. Some key sectors of the African economy are already experiencing a slowdown as a result of the pandemic. Tourism, air transport, and the oil sector are visibly impacted. However, invisible impacts of COVID-19 are expected in 2020 regardless of the duration of the pandemic.

After the first infections in China at the end of 2019, the Coronavirus disease (COVID-19) has continued to spread across the world. No continent has been able to escape this virus, which has recorded average mortality of around 2.3% (according to the Chinese Center for Disease Control and Prevention). To date, there have been nearly 54,207 deaths, with more than 1,030,324 people infected and 219,896 recoveries across 204 countries and territories around the world and 2 international conveyances: the Diamond Princess Cruise ship harboured in Yokohama, Japan, and the Holland America’s MS Zaandam cruise ship, worldwide, thus portraying the severity of the virus globally (WHO Situational Report 3 April 2020, 10:00 am GMT).

Declared a pandemic by the World Health Organization (WHO) on 11 March 2020, COVID-19 has become a global emergency, given its impact on the entire world population and the economy. According to scenario simulations of the International Monetary Fund (IMF), global growth could fall by 0.5 for the year 2020. Several other sources are also predicting a fall in global growth due to the direct effects of the COVID-19 outbreak. The global economy may enter a recession at least in the first half of the year 2020, when adding the direct and indirect effects of the crisis (e.g. supply and demand shocks, commodity slump, fall in tourism arrivals, etc.). However, as the pandemic progresses slowly on the African continent, studies by international organizations have less addressed the economic impact on individual African countries. Indeed, Africa is not immunized from COVID-19. As of 3 April, according to COVID-19 Surveillance Update: 3 April 2020 9:00 am of Africa CDC, the spread of the virus has reached 50 African Union Member States: 7,028 cases, 561 recoveries and 284 deaths; and is showing no signs of slowing down.[1] Africa, because of its openness to international trade and migration, is not immune to the harmful effects of COVID-19, which are of two kinds: endogenous and exogenous.

  • The exogenous effects come from direct trade links between affected partner continents such as Asia, Europe and the United States; tourism; the decline in remittances from African Diaspora; Foreign Direct Investment and Official Development Assistance; illicit financing flows and domestic financial market tightening, etc.

  • The endogenous effects occur as a result of the rapid spread of the virus in many African countries. On one hand, they are linked to morbidity and mortality. On the other hand, they lead to a disruption of economic activities. This may cause, a decrease in domestic demand in tax revenue due to the loss of oil and commodity prices coupled with an increase in public expenditure to safeguard human health and support economic activities.

It is important to assess the socio-economic impact of COVID-19, although the pandemic is at a less advanced stage in Africa due to its lesser quantity of international migrants’ arrivals relative to Asia, Europe, and North America, and strong precautionary measures in some African countries. African economies remain informal and very vulnerable to external shocks. In this study, three scenarios are constructed based on the description of specific key economic indicators in order to evaluate the potential impact of the pandemic on various dimensions of African economies. The impact on the African economy for each of the scenarios is presented, with a discussion of some of the key measures being taken by selected African Union Member States to mitigate the negative effects.

Due to the difficulty of quantifying the real impact as a result of the uncertainty, the rapidly evolving nature of the pandemic, and scarcity of the data, the CDC’s work focuses on understanding the possible socio-economic repercussions in order to propose policy recommendations to respond to the crisis. The lessons learnt from the study will give more enlightenment on the way forward, as the continent is in a critical phase of the implementation of the African Continental Free Trade Area (AfCFTA).

[1] For the latest updates, see the African Union COVID-19 webpage.