This archive report was first published on 8 July 2020.
Published on July 8, 2020, the African Development Bank (AfDB) released a grim outlook for African economies in their African Economic Outlook 2020 Supplement.
According to the bank, Africa's GDP is projected to contract by 3.4% in 2020, a significant drop from the pre-COVID-19 growth projection of 7.3%.
The projected contraction of growth could result in GDP losses of between $145.5 billion (baseline) and $189.7 billion (worst case) in 2020, from the pre-COVID-19 estimated GDP of $2.59 trillion.
AfDB further notes that some losses will be carried over to 2021 as the projected recovery will be partial. For 2021, AfDB projects GDP losses could be from $27.6 billion (baseline) up to $47 billion (worst case) from the potential GDP of $2.76 trillion without the pandemic.
The most affected economies are those with poor healthcare systems, those that rely heavily on tourism, international trade, and commodity exports. Economies with high debt burdens and high dependence on volatile international financial flows will also be severely impacted.
African countries have witnessed a sudden uptick in inflation, with some cases exceeding 5 percent in the first quarter of 2020. AfDB attributes the rise in inflation to disruption in the supply of food and energy, the bulk of which are imported.
The lender warns that expansionary fiscal spending could double the already high fiscal deficits to 8 percent of GDP in the baseline scenario, and to 9 percent in the worst-case scenario.
COVID-19 will add to sovereign debt burdens as many countries in Africa entered the crisis period with high debt-to-GDP ratios, which are projected to increase further by up to 10 percentage points.
