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McKinsey models 4 pandemic and economic scenarios for Africa

Global consulting firm, McKinsey& Co. released a report this week on the impact of Covid-19 in Africa, and modelled four possible outcome scenarios, alongside policy suggestions for the private and public sector. The report is a rapid analysis compiled specifically to address the call from business and political leaders for more insights into the economic impact of the pandemic.

McKinsey’s four scenarios for how differing rates of COVID-19 transmission—both globally and within Africa—would affect Africa’s economic growth, show that even in the most optimistic scenario, projected that Africa’s GDP growth would be cut to just 0.4% in 2020. In all other scenarios, it projects that Africa will experience an economic contraction in 2020. The scenarios are as follows:

Scenario 1: Contained global and Africa outbreak. In this least-worst case, Africa’s average GDP growth in 2020 would be cut from 3.9%the forecast prior to the crisis) to 0.4%.

Scenario 2: Resurgent global outbreak, Africa contained. Under this scenario, Africa’s average GDP growth in 2020 would be cut by about 5%, resulting in a negative growth rate of −1.4%.

Scenario 3: Contained global outbreak, Africa widespread. In this scenario, Africa’s average GDP growth in 2020 would be cut by about 6%, resulting in a negative growth rate of −2.1%.

Scenario 4: Resurgent global outbreak, Africa widespread. In this case, Africa’s average GDP growth in 2020 would be cut by about 8%, resulting in a negative growth rate of −3.9 %.

In its analysis, McKinsey highlighted the particular challenges of the pandemic for poor households and for those African countries that are also predominantly oil-exporters.

Against the backdrop of a worrying public-health situation, African countries will have to address some major economic challenges in the coming weeks and months, including disruption in global supply chains; lower demand in global markets for African exports; delayed or reduced foreign direct investment; and the knock on effects of travel bans and lockdowns. This could lower tax revenues and access to hard currency. African governments will also face rising deficits and increased pressure on currencies.

McKinsey advises public and private sector leaders to double down on efforts to safeguard economies and livelihoods and to consider fiscal stimulus measures.

To read the full report by McKinsey click here: https://www.mckinsey.com/featured-insights/middle-east-and-africa/tackling-covid-19-in-africa?cid=soc-app

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