Xinhua News Agency, Nairobi, April 6th Financial observation: New crown epidemic severely impacts African economy
Xinhua News Agency reporter Ding Lei
As the rapid spread of the new coronavirus has brought about an increasingly severe impact on the African economy, many African countries have sharply lowered their economic growth expectations for this year, and major economies have also issued early warnings of economic recession risks. Analysts believe that the African health system is weak, the economic structure is single and lacks resilience, and the epidemic poses a serious challenge to the African economy.
The analysis of the International Monetary Fund pointed out that the impact of the epidemic on the African economy is mainly reflected in three aspects: first, the local epidemic prevention and control measures bring direct economic losses; second, the spread of the global epidemic leads to weak demand, supply chain interruption, and financing environment. Tight, causing a chain blow to the African economy; Third, the continued decline in commodity prices has led to pressure on the export revenue of African crude oil and other commodities.
The United Nations Economic Commission for Africa Executive Secretary Willa Songgui recently said that Africa's economic growth this year may fall from the previously expected 3.2% to about 2%. Song Gui said that the drop in commodity prices caused by the epidemic may bring financial pressure to countries such as South Africa, Nigeria, Algeria, Egypt and Angola. The revenue of African oil exporting countries is expected to decrease by 65 billion U.S. dollars this year.
In addition, African countries have increased additional public spending, and fiscal pressure has increased. Some analysts predict that in response to the outbreak, the African region will incur an additional $ 10.6 billion in medical expenses.
Due to the impact of the epidemic, many African central banks have sharply lowered their economic growth expectations this year. Kenya ’s economic growth rate has dropped significantly from 3.4% previously forecast to 3.4%; South Africa ’s economy is expected to shrink by 0.2%; Ghana ’s economic growth rate has dropped from 6.8% previously forecast to 5%, and further decline to 2.5% is not ruled out.
As one of Africa's largest economies, South Africa's recent economic data is not optimistic. According to data released by IHS Markit recently, the South African Purchasing Managers Index (PMI) fell 3.9% to 44.5 from the previous month, the lowest value since July 2011.
David Irwin, an economist at IHS Market, said that given the March PMI data collection time before the South African government implemented a national "closure", the challenges facing the South African economy may be more serious than the current PMI data show.
The investigation revealed that due to the impact of the epidemic and the negative impact of unstable power supply on production, South Africa ’s private sector activity shrank significantly in March. The new orders index for the month recorded its largest monthly decline since record, and the private sector confidence index fell to its lowest level since September 2018.
Kenyan University of Nairobi international economist Gerichon Ichiara told Xinhua that the epidemic has brought considerable financial pressure to the Kenyan government. It is expected that the government will gradually reduce large-scale infrastructure projects in the future. Ikiara predicted that Kenya's economic growth rate this year may drop to about 2%.
South Africa Standard Bank Kenya branch economist Gipran Qureshi believes that under the new crown epidemic, many countries have introduced travel restrictions, which have caused tourism and other major foreign exchange earning industries in Kenya to be severely hit.
In order to alleviate the economic impact of the epidemic, central banks in Egypt, Ghana, South Africa and Kenya have recently cut interest rates "collectively". At the same time, many countries have introduced a package of economic stimulus measures, including tax cuts and fee reductions, the establishment of special credits, the reduction of some loan interest rates, the extension of repayment periods and the exemption of some mobile payment transaction fees. In addition, the African Development Bank has also innovated financing tools to raise funds in the international capital market.
Nigeria ’s central bank governor Emefele said that if effective monetary and fiscal policies are adopted in a timely manner and the economic diversification is actively promoted, the risk of recession may be mitigated.
The Conference of African Finance Ministers was held online recently. Participants called on international lenders to provide emergency assistance to African countries to reduce the impact of the epidemic on the local economy and society.