The African Development Bank (AfDB) has advised African governments to reopen their economies in phases so as to balance trade-offs between restarting economic activities too quickly and safeguarding public health.
The Bank projected that Africa will be hampered in multiple ways if the novel Coronavirus (COVID-19) pandemic is not well-managed.
The continent’s poverty gap is also expected to widen with an additional 49 million extremely poor Africans by 2021
This, as a result of the effects of the COVID-19, will also impact her Gross Domestic Products (GDPs), the Bank said.
These projections are contained in AfDB’s African Economic Outlook (AEO) 2020 Supplement launched on Tuesday in a webinar.
The AEO supplement, a follow-up to the 2020 AEO report released on January 30, contains revised projections taking COVID-19 into account.
The supplement warned that the tourism, transportation, and entertainment sectors may take longer to recover.
Between 2017 and 2018, African travel and tourism grew by 5.6%, compared with the global average of 3.9%, the supplement says.
Speaking during the launch, AfDB’s chief economist, Dr. Charles Lekeya Lufumpa, noted that the projections are the results of the institution’s four-months of study.
The supplement also predicts that Africa’s fiscal deficits will at least double in 2020 while debt-to-GDP ratios will increase further by up to 10 percentage points.
Also, Africa’s growth is projected to contract, losing between $145.5 billion and $189.7 billion of GDP in 2020.
However, the publication says economic growth could bounce back in 2021 provided that governments manage the COVID-19 infection rate well.
It, however, added that the continent’s Covid-19 curve has gradually started to flatten.
Lufumpa, who is also the Acting Vice President for Economic Governance and Knowledge Management, therefore called for the gradual reopening of economies.
“To reopen economies, policymakers needed to follow a phased and incremental approach that carefully evaluates the trade-offs between restarting economic activity too quickly and safeguarding the health of the population.
“Economic activities can be restarted incrementally on the basis of the transmission risks of different sectors,” he said.
On his part, Former Governor of the Central Bank of Kenya, Prof. Njuguna Ndung’u described the supplement as “a very important and useful policy tool for African countries who actually need it at this time.”
“It will be useful now and in the future. It gives us important short, medium and long-term strategies,” he added,
Ndung’u, who is also the Executive Director of the African Economic Research Consortium, noted that crises like COVID-19 present a good opportunity for innovative reforms in countries.
AfDB also canvassed for urgent policy interventions to mitigate the impact of the pandemic.
“Across Africa, the response must be well-sequenced and multipronged, involving a public health response to contain the spread of the virus and minimise fatalities, a monetary policy response to ease liquidity constraints and solvency risks, and a fiscal response to cushion the economic impacts of the pandemic on livelihoods and to assist businesses,” the Bank said in a press statement.
The lender also called for governments to introduce policies to protect the labour market, workers, and their jobs.
It also stressed the need for structural policies to enable African economies to rebuild and enhance their resilience to future shocks.