CI-NEWS

COVID-19 scare: Central Africa may lose 65 billion dollars

2020-03-23

No: 478

COVID-19 scare: Central Africa may lose 65 billion dollars.

A study conducted by the Central African office of the United Nations Economic Commission for Africa (UNECA), indicates that Sao Tome and Principe will be highest hit by the COVID-19 scare.

Its GDP, says the study, will be witnessing a 34 per cent drop. Congo follows closely with a projected 10.6 per cent drop, while Equatorial Guinea is expected to witness a 7.5 per cent drop in their GDP.

The impact on Cameroon would rather be felt in the food sector as the country imports huge amounts of cereal products.

The Director of the Central African sub-Regional Office, Antonio M.A Pedro, explained that the countries to suffer most from this economic shock are crude oil exporting nations. He said when factories and businesses can’t operate in China, Europe and elsewhere, as a result of the covid-19 outbreak, it will automatically lead to a sharp drop in oil prices. “When people lose jobs in these affected countries, the impact will also be felt, almost immediately on the African Continent”, Antonio Pedro stressed.

The document further indicates that though the virus didn’t originate from Africa, the continent faces a double jeopardy, underpinned by the huge dependency on export of commodities, mainly crude oil. The situation is further worsened by the “very fragile health system”, and the lack of means to respond to the pandemic the way other developed countries have done.

As a way out, the study recommends that African governments could review and revise their budgets to reprioritize spending towards mitigating expected negative impact of Covid-19 on their economies. Practically, governments should provide incentives for food importers to speed up purchase to ensure sufficient food reserves in key basic foods items. They also need to fund virus preparedness, prevention and curative facilities including logistics.

UNECA also recommends that the continent could use the crisis to improve their health systems. The AfCFTA also offers an avenue for countries to do more business within the continental trade.

The Covid-19 outbreak has already brought considerable human suffering and major economic disruption. In China, containment efforts have involved quarantines and widespread restrictions on labour mobility and travel, resulting in unplanned delays in restarting factories after Lunar New Year holiday and sharp cutbacks in many service sector activities. These measures imply a sizeable output contraction whilst the effects of the outbreak persist. As the global economy has become substantially more interconnected, and China plays a far greater role in global output, trade, tourism and commodity markets, the adverse consequences of these developments for other countries including Central African countries are significant. This includes the direct disruption to global supply chains, weaker final demand for imported goods and services, and the wider regional declines in international tourism and business travel.

Source: Cameroon Insider.

“If we don’t address the situation, we are likely to get into a more difficult situation” - Director, Central African Sub-Regional Office, UNECA

The resilience of the Cameroonian economy is not a guarantee that it would be able to resist the shock of the COVID-19 scare. Antonio M.A. Pedro, Director, Central African Sub-Regional Office, UNECA, says if the situation is not addressed, we are likely to get into a more difficult situation. In this interview with Cameroon Insider, he begins by giving an overview of the impact of Covid-19 on the economy of the Central African Region. Excerpts:

The analysis provided a differentiated picture on which oil exporting countries will be the ones that will be more severely impacted, based of course on a scenario that oil prices will continue to be at $30 a barrel for some time.

This is because in this Region we have a couple of countries who strongly depend on the oil sector. We are forecasting a drop on oil exportation revenue of $65 billion. And these will hit some of the major African economies like Nigeria, Angola, Algeria and Libya which are significant oil exporting countries, where the oil sector contributes about 20-30 per cent of the GDP. In some of the countries, oil exportation contributes as high as 90 per cent of the GDP. So we are talking about mono economies. In the central African area, some countries like Congo, Chad, Equatorial Guinea and Gabon fall in that category.

What other sectors stand to be affected as well?

The impact is not only on oil exporting countries, other exporters of timber, cocoa and coffee will be affected because of the fall in demand. This will be as a result of the overall state of the global economy. The drop in demand will lead to a drop of 3.2 to 1.8 per cent growth rate in the Region. If we add the population growth rate to the calculations, then we will be talking about a zero per cent growth rate for the area. In our Region, Sao Tome and Principe depends a lot on tourism and travel bans will seriously affect their GDP and the revenue of course. It is a bleak situation with the interconnection of our countries and some even think we will go into a recession, as the firms are shutting down, businesses closing and demand is certainly going to drop.

Director, can you let us know how the situation looks like for Cameroon?

In Cameroon, the impact might not be that severe because it is the most resilient economy in Central Africa. If we don’t address the situation, we are likely to get into a more difficult situation.

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COVID-19 scare: Central Africa may lose 65 billion dollars