The Economic Commission for Africa (ECA) has called on African governments to review their budgets to reprioritise spending towards mitigating the expected negative impact from the COVID-19 pandemic on their economies.
As a safety net, the think tank is urging governments to provide incentives for food importers to quickly forward purchases to ensure sufficient food reserves in key basic foods items to cushion the economic effects of the pandemic.
It warned that the unfolding coronavirus crisis could seriously dent Africa’s already stagnant growth with oil exporting nations losing up to US$ $65 billion in revenues as crude oil prices continue to tumble.
In a release copied to the Ghana News Agency, Dr Vera Songwe, Executive Secretary, said having already strongly hit Africa’s major trading partner, China, COVID-19 was inevitably impacting Africa’s trade.
She said although a few COVID-19 cases have been reported in some 26 African countries with 273 case confirmed so far, the crisis was set to deal African economies a severe blow.
“Africa may lose half of its GDP with growth falling from 3.2 per cent to about 2 per cent due to a number of reasons which include the disruption of global supply chains,” said Dr Songwe, adding that the Continent’s interconnectedness to affected economies of the European Union, China and the United States was causing ripple effects.
She said the continent would need up to US$ 10.6 billion in unanticipated increases in health spending to curtail the virus from spreading, while on the other hand revenue losses could lead to unsustainable debt adding COVID-19 could reduce Nigeria’s total exports of crude oil in 2020 by between US$ 14 billion and US$ 19 billion.
The ECA estimates COVID-19 could lead to Africa’s export revenues from fuels falling at around US$ 101 billion in 2020.
For instance, Nigeria is expected to export $42.7 Billion fuel, which constitutes 91.7 per cent of its share of total exports and constitutes 10.7 per cent share of gross domestic product (GDP) with Ghana on the other hand is expected to export $3.1 Billion, which represents 23.3 per cent of its share of total exports and 5.2per cent of share of GDP.
She noted remittances and tourism are also being affected as the virus continues to spread worldwide, resulting in a decline in FDI flows; capital flight; domestic financial market tightening; and a slow-down in investments - hence job losses.
Again, pharmaceuticals, imported largely from Europe and other COVID-19 affected partners from outside the continent, could see their prices increasing and availability reduced for Africans.
With nearly two-thirds of African countries being net importers of basic food, shortages are feared to severely impact food availability and food security.
Furthermore, negative consequences are expected to worsen, if COVID-19 develops into full scale pandemic in Africa.
In addition, a decline in commodity prices could lead to fiscal pressures for Africa’s economic power houses such as South Africa, Nigeria, Algeria, Egypt and Angola.
Mr Stephen Karingi, Director of the ECA’s Regional Integration and Trade Division, however said this presents an opportunity for the Continent to take advantage of as trading within the African Continental Free Trade Area (AfCFTA) is set to commence this July.
“The intra-African market could help mitigate some of the negative effects of COVID-19 through limiting dependence on external partners, especially in the pharmaceuticals sector and basic food,” said Mr Karingi, adding diversifying economies away from fuel-driven was vital beyond COVID-19.
He said there is the need for the continent to urgently implement the AfCFTA and urged African countries who export drugs to prioritize selling them on the African market.
Mr Karingi said fiscal stimulus packages are also crucial if the continent is to weather the COVID-19 storm which has now claimed over 5,000 lives globally and infected over 150,000 people.