With much of the world expected to plunge into recession as a result of the COVID-19 shutdown, Africa is particularly vulnerable to market shocks.
Economists are already warning of dire consequences.
The World Bank’s Chief Economist for Africa, Albert G. Zeufack, explains what Africa may expect in the coming months, how the international community can help and why the corona crisis could even present opportunities for reform in some African nations.
Albert G. Zeufack: What we are projecting is the worst we’ve seen in 25 years. There are multiple channels through which this is really affecting Africa. It’s going to be bad because we’re actually projecting that from a 2.4% growth in 2019, growth could actually decline to a window of -2% to -5% in 2020.
We will also see a shock on household welfare, which is household consumption and income. We’re projecting that household welfare could decline between 7% and 14%, depending on how long this crisis lasts. This will be the case if African countries do not adopt a cooperative approach to fighting the virus.
Even before COVID-19 hit Africa, our three largest economies were not performing that well. Nigeria, South Africa and Angola together make up 60% of our GDP in sub-Saharan Africa.
Before COVID-19 hit, there was a recession in South Africa, there was a recession in Angola in previous quarters. Nigeria was growing but at a very slow pace and was still timidly recovering from its last commodity price shock in 2016.
In past crises, when these three economies went down, most of the African countries that are not so commodity dependent, especially those that are diversified, would pull their growth up.
Countries like Ethiopia, Rwanda, Ghana and Senegal. … But these countries will also be hit [by this recession]. That is why the recession will be so difficult to avoid.
We’re projecting that growth will remain positive through the rest of Africa but just marginally slow. Not enough to bring the average above zero.
How does the World Bank plan to help Africa address and recover from this crisis?
This crisis is global. Most governments are scrambling to find answers. So the first thing is to make sure we provide the right advice.
The second thing is to really assist countries with fighting off this pandemic. The crisis is leading to a fiscal crunch in most African countries, especially those that depend on commodity prices.
Between December and March, oil lost more than 50% of its price. So countries like Angola, DR Congo and Nigeria who depend on oil are already in a very tight situation. But overall, it’s clear that no African country will have enough room to maneuver to be able to face this crisis alone.
What role can the international community play in all of this and how will the World Bank coordinate this?
The international community really needs to step up and help Africa face this crisis. Discussions are certainly ongoing at the G20 level.
The World Bank and the International Monetary Fund have called for a debt standstill to create space for African countries to fight COVID-19. We’re working with governments across Africa, multilateral groups, donors.
Africa also need coordination within, so the African Union is working clearly with both the IMF and the World Bank to negotiate with all the creditors. It’s important to understand that most of Africa’s debt is owned by the private sector.
We need to engage with the international community to come up with those solutions.
The World Bank has mobilized $160 billion (€146 billion) to help countries around the world to fight this crisis.
We have already approved emergency loans to a number of African countries. We are also working on public health projects to really help countries address this crisis.
The World Bank says Africa alone will need about $80 billion or more to recover from this crisis.
Is that amount of money even available, considering most countries around the world are dealing with their own economic challenges due to COVID-19?
Some estimates go ever further to $100 billion but those resources won’t be easily available, considering that even the donors are facing the same crisis.
But there is goodwill within the international community to actually put some resources on the table for Africa. Those resources may not be enough to close that gap.
I think African countries really need to seize the opportunity presented by this crisis and generate some of their own resources.
This is not about ramping up domestic mobilization. It’s about increasing the efficiency of our spending. It’s important to prioritize what is essential for people’s immediate welfare, like social protection programs.
It could also be an opportunity for African countries to curb illicit flows of funding. The most important thing is to avoid a sudden economic collapse.
This interview was conducted by Eddy Micah Jr. It has been edited and condensed for clarity.
