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COVID-19 drives Sub-Saharan Africa towards first recession in 25 years

Growth in Sub-Saharan Africa has been significantly impacted by the ongoing coronavirus outbreak and the region is likely to fall into its first recession in 25 years, according to the World Bank’s twice-yearly economic update.

From 2.4% growth in 2019, the region is likely to enter a recession of between -2.1% and -5.1% in 2020.

“The COVID-19 pandemic is testing the limits of societies and economies across the world, and African countries are likely to be hit particularly hard,” said Hafez Ghanem, World Bank Vice President for Africa.

The analysis shows that COVID-19 will cost the region between $37bn and $79bn in output losses for 2020 due to a combination of effects.

They include trade and value chain disruption, which impacts commodity exporters and countries with strong value chain participation; reduced foreign financing flows from remittances, tourism, foreign direct investment, foreign aid, combined with capital flight; and through direct impacts on health systems, and disruptions caused by containment measures and the public response.

Growth will be most affected in the region’s three largest economies – Nigeria, Angola, and South Africa— as a result of persistently weak growth and investment.

In general, oil exporting-countries will be hard-hit; while growth is also expected to weaken substantially in the two fastest-growing areas—the West African Economic and Monetary Union and the East African Community—due to weak external demand, disruptions to supply chains and domestic production. The region’s tourism sector is expected to contract sharply due to severe disruption to travel.

The COVID-19 crisis also has the potential to spark a food security crisis in Africa, with agricultural production potentially contracting between 2.6% in an optimistic scenario and up to 7% if there are trade blockages.

Food imports would decline substantially (as much as 25% or as little as 13%) due to a combination of higher transaction costs and reduced domestic demand.

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