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tralac’s Daily News selection

tralac’s Daily News selection
Photo credit: World Bank

How much will poverty rise in Sub-Saharan Africa in 2020? (World Bank)

The ongoing coronavirus pandemic is expected to drastically slow 2020 GDP per capita growth in Sub-Saharan Africa by about 5 percentage points compared to pre-pandemic forecasts. This note presents results from an analysis of a comprehensive database of surveys from 45 of 48 SSA countries to examine the effects of the project fall in growth on poverty in the region. An additional 26 million people in SSA, and as much as 58 million, may fall into extreme poverty defined by the international poverty line of 1.90 US Dollars per day in 2011 PPP. The poverty rate for SSA will likely increase more than two percentage points, setting back poverty reduction in the region by about 5 years. Extract: Figure 3 presents the increase in poverty rates for all countries in the region. Half of the new poor will live in five countries: DRC, Ethiopia, Kenya, Nigeria, South Africa – with Nigeria contributing the most with 6.9 million new poor. Sao Tome and Principe, Zimbabwe, Niger, Republic of Congo, Sierra Leone, and Botswana are expected to see the largest poverty rate increase.


Africa’s finance ministers and Private Sector Group seek to rapidly resolve commercial debt service obligations

The ECA on Monday convened a meeting between African Finance Ministers, the Africa Private Sector Working Group and the AU Special Envoy on COVID-19 as the search continues for solutions to ensure African economies enjoy continued market access and meet their private sector debt service obligations. Discussions focused on ways in which the interests of both African governments and commercial creditors could be aligned to deal with the double crisis of a health pandemic and an economic recession. During the meeting, the Finance Ministers agreed on the importance of maintaining Eurobond coupon payments so as to maintain post-pandemic access to international debt markets for development finance and on having an ongoing coordinated dialogue with creditors.

African regional responses to COVID-19 (ECDPM)

This note summarises and reflects on the different roles played by the African Union and a sample of the continent’s regional organisations in shaping collective, coordinated regional responses. It finds that the AU has played an effective role in communicating about and shaping African responses, with technical legitimacy provided through the Africa CDC. The AU has also been able to inspire collective action in a unified call for international solidarity. At the regional level, responses reflect a spectrum of cooperation and complexity – rising from information sharing; to ‘nudging’ and guiding; to active coordination of state responses, to collective action. Different RECs are managing to operate at different levels, depending on their regional and institutional histories, structural features such as the size and coherence of the REC, as well as the political economy dynamics of the countries in its region. Existing regional response capabilities also partially reflect a problem-driven response to the past West African Ebola crisis. One can expect that the COVID-19 crisis will have a similar effect on regional health cooperation, yet its long term impact on African integration more broadly remains to be seen. [The authors: Alfonso Medinilla, Bruce Byiers, Philomena Apiko]


The impact of COVID-19 on SADC economy (SADC)

This report presents the impact of the COVID-19 Pandemic and implications for SADC Region as monitored by the SADC Macroeconomic Subcommittee, supported by the SADC Secretariat. It provides policy recommendations to Member States.

Extract: Resultantly, SADC regional 2020 economic growth initially forecasted at 3.3% in October 2019, has been revised downwards to a contraction of about 3%. Disruptions of economic activity and the elevated expenditures by Governments coupled with economic packages in response to the pandemic is expected to affect the fiscal positions for SADC member states. Consequently, fiscal deficit is forecasted to widen to 5.7% of GDP in 2020 compared to the previous estimate of 3.0% of GDP. Additionally, debt levels are forecasted to increase beyond the regional threshold of 60% of GDP to 69.8% of GDP in 2020. The estimated regional and global economic contraction coupled with weak demand in commodities are expected to result in a deterioration of the SADC external position with current account defi­cit forecasted to widen to about 9% of GDP in 2020 from an initial estimate of 4.2% of GDP. The deterioration of the external position together with the increased importation of medication and medical equipment will put pressure on foreign reserves and exchange rates of SADC Member States, which can result in signi­ficant exchange rates depreciation across the region in 2020. The longevity of the pandemic will determine the severity of the economic impact.


COVID-19 economic and health impacts on regional food and nutrition security (WFP Regional Bureau for Southern Africa)

National economies in Southern Africa, such as Zimbabwe, Lesotho, Mozambique and Malawi, receive high levels of remittances that are critical for both the monetary system and household consumption. Increased unemployment will reduce the inflows of hard currencies and the ability of households to purchase essential commodities. Many of the countries in the southern Africa region have a high dependence on commodity exports to China, relatively weak sovereign balance sheets, high debt burdens and volatile currencies, and exposure to a number of economic externalities (pdf). Chinese demand underpins the economies of various resource-rich countries on the continent, with a slowdown in China as a result of COVID 19 having a disproportionate impact on trading partners such as Angola, Zambia, Congo Brazzaville and the DRC. Data visualizations of trade flows by country can be found here. Recessionary trends at the global level and the potential for a prolonged reduction of economic growth in China will have direct impacts on commodity exports in the region ranging from copper in Zambia, precious metals in Tanzania, coltan in DRC and petroleum in Angola and the Republic of Congo.

Monitoring COVID-19 impacts on firms in Ethiopia: results from a high-frequency phone survey of firms (World Bank)

This note summarizes the results of the first round of the HFPS-F, implemented between 15 April and 5 May in Addis Ababa. The information presented here is based on a sample of 645 firms in the industry and services sector based on a list of registered firms provided by the Ministry of Trade and Industry. On average, firms are young and small. Approximately 13% of firms are new firms (did not exist one year ago), 30% are between 1 and 2 years, and 19% between 3 and 4 years. Only 16% of firms are 10 years or more (Figure 1). The youthfulness of firms in the sample closely matches the data on the population of firms and is a common pattern in most low-income countries. Extracts (pdf):

In the 14 days preceding the survey (between April 1 and May 4, 2020, depending on when the firm was interviewed), 42% of firms in Addis Ababa completely ceased operations (were operational zero days). On the other end, 29% of firms were operational on a full-time basis (between 10 and 14 days in the past 14 days). While there are little differences between sectors, larger firms were more likely to continue operating than smaller ones: 41% of small, medium, and large (SML) firms were operational full-time between 1 April and 21 April, compared to 29% of micro-firms and 24% of own account firms. Own-account and micro-firms were most affected by business closures (Table 2). Despite not being fully operational, only few firms report to have laid-off workers.

Firms’ revenues significantly declined since the onset of COVID-19. A staggering 37% of firms in Addis Ababa earned no revenue in the last completed month (March or April 2020, depending on the time of interview). Micro-firms were particularly hard-hit, with 41% having zero revenues (Table 4). SML enterprises were most likely to still earn revenues, which is consistent with the earlier finding that they were more likely to have remained operational (Table 2).

As a result of the COVID-19 crisis, firms face significant financial stress. The most significant financial problems firms face are paying rent (41%), paying invoices (28%), paying other expenses (27%), and paying staff wages and social security contributions (19%). There are substantial differences across size, with staff wages and social security contributions as the main financial problem for larger firms and rent as the main financial problem for micro-firms (Table 6). [Download the full suite of reports for this project]

Related World Bank analysis: Costs and trade-offs in the fight against the COVID-19 pandemic - a developing country perspective. The Brief argues that, having more limited resources and capabilities but also younger populations, developing countries face different trade-offs in their fight against COVID-19 than advanced countries do. For developing countries, the trade-off is not just between lives and the economy; rather, the challenge is preserving lives and avoiding crushed livelihoods. Different trade-offs call for context-specific strategies. For countries with older populations and higher incomes, more radical suppression measures may be optimal; while for poorer, younger countries, more moderate measures may be best. Having different trade-offs, however, provides no grounds for complacency for developing countries. The Brief concludes that the goal of saving lives and livelihoods is possible with economic and public health policies tailored to the reality of developing countries.

The World Economic Forum’s COVID-19 Risks Outlook report, A preliminary mapping and its implications, is informed by the views of nearly 350 senior risk professionals, identifies the main emerging concerns and fallouts, and analyses the pandemic’s implications and effects. This goes beyond the immediate crisis response, providing insights on the current and future global risk landscape.

WTO Members discuss trade responses to COVID-19 pandemic

At a meeting of the General Council on 15 May, WTO members exchanged views regarding trade responses to the COVID-19 pandemic. Many members said the unprecedented crisis was best addressed through enhanced cooperation and coordination among the international community, including at the WTO. More than 60 member delegations intervened at the meeting to discuss immediate responses to COVID-19 as well as longer-term strategies for addressing the adverse impact of the crisis on national economic and development prospects, as well as on the global economy as a whole. The meeting was held virtually due to continued restrictions on gatherings at WTO headquarters. David Walker, the New Zealand ambassador chairing the General Council, said in conclusion that addressing the health crisis remains the urgent priority, and that many members taking the floor noted the importance of trade in that context – namely, to keep markets open in order to facilitate the flow of essential medical goods as well as agricultural and food products.

In their interventions many members recognized the unique situation governments were currently facing. While recognizing the need to take measures necessary to ensure the supply of essential medicines and medical equipment, they stressed that any such measures must be temporary, targeted, proportional and transparent. Many developing country members that took the floor underlined the importance of flexibilities in the existing WTO agreements to respond to health emergencies, including under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). They also said access to trade finance was a concern for many developing countries as well as the impact of the current crisis on their micro-, small and medium-sized enterprises.

Joint statement by the Heads of the Organisation of African, Caribbean and Pacific States, the Caribbean Community, and the Pacific Islands Forum Secretariat on the COVID-19 pandemic. ”We recognise that while COVID-19 is the most urgent threat facing humanity today, climate change remains the greatest threat in the longer term. We also call on all countries to ensure that the economic recovery measures to tackle COVID-19 align with the goals of the Paris Agreement. The transboundary nature of this pandemic reinforces the importance of multilateralism to address our common challenges. In light of this ongoing crisis and the disproportionate socio-economic effects on countries in Africa, the Caribbean, and the Pacific, we resolve, on behalf of the organisations listed below, to coordinate our efforts and pool available resources, in order to aid our respective Member States to address the challenges posed by the COVID-19 pandemic.”


In brief: