economic impact of the covid-19 on africa...average 2016-18 yearly exports revenues from fuels for...

Addis Ababa, Ethiopia

March 13, 2020

Economic Commission for Africa

Economic Impact of the COVID-19 on Africa

Of 118,000 known cases, less than 50 in Africa

However disproportionate economic impact

Ghana, Kenya and Ethiopia reported first cases on 13 March

15 countries in Africa of 117 countries globally affected

Source: UN WHO, 2020

Africa: Corona Virus new blow to economy

Growth expected to drop from 3.2% to 1.8%

0

1

2

3

4

2017 2018 2019 2020

% c

han

ge

1.4 %age point decline expected from effects of COVID-19 as at March 2020 (USD 29 Billion)

Africa is increasingly interconnected with the

rest of the world – Channels of Transmission:

4

Trade

Investments

1. Directly through trade links with China and Europe

2. Indirectly through trade links between China, Europe and the rest of the world

3. Trade links with rest of the world

4. Remittances and Tourism

1. Decline in FDI flows

2. Capital flight

3. Domestic financial market tightening

Effects of COVID-19 on Africa

• Disruption of global supply chains – drop in value creation

• Demand side shocks: Oil, tourism, remittances• Slow down in investment hence job losses• For oil exporters, revenue losses of up to USD 65

billion• Inflationary pressures due to supply side

shortages (Food and Pharma) • Unanticipated increases in Health Spending of up

to USD 10.6 billion.• Revenue losses could lead to unsustainable debt.

Decline in commodity prices could lead to fiscal

pressures for Africa’s largest economies

Making it impossible to respond to COVID-19 crisis

6

Fiscal Deficit (%

of GDP)

Debt (% of

GDP)

Nigeria -2.6 55.8

South Africa -5.9 55.9

Egypt, Arab Rep. -8.0 84.9

Algeria -7.6 46.1

Angola 0.7 95.0

Ethiopia -2.7 59.1

Kenya -7.2 61.6

Cote d'Ivoire -3.2 52.7

Ghana -5.0 63.8

Zambia -4.6 91.6

Mozambique -6.1 108.8

Central Africa: Differentiated impact of Corona Virus

Central Africa 11

Oil prices -0.5

Tourism -56

Non-oil exports -20

-Challenged through tourism

-Fiscal umbalances expected

- Tight measures required


-Challenged through oil prices






-Challenged through tourism




-Challenged through exports and oil prices



-Challenged through exports



-Tourism and non-oil exports channels higher

-Less challenged




-Fiscal imbalances expected -Oil export channel most critical -Minor impact expected

-10

-8

-6

-4

-2

0

Oil prices Tourism Non-oil exports prices

Central Africa-11

-10

-8

-6

-4

-2

0


Angola

-5.7%-10

-8

-6

-4

-2

0


Burundi

-10

-8

-6

-4

-2

0


Cameroon

-10

-8

-6

-4

-2

0


Central Africa Republic

-10

-8

-6

-4

-2

0


Chad

-10

-8

-6

-4

-2

0


Congo, DR

-10

-8

-6

-4

-2

0


Congo, Rep

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0


Equatorial Guinea

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0


Gabon

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0


Rwanda

-35

-30

-25

-20

-15

-10

-5

0


Sao Tome and Principe

-4.7% -0.4% -3.1%

-0.9% -4.8% -1.9% -10.6%

-7.5% -5.0% -6.3% -34%

In past crisis, Africa’s tourism experienced losses of up

to $US7.2bn

0

1

2

3

4

5

6

7

8

Egypt Ethiopia Kenya Mauritius Morocco Tunisia Africa

USD

Bill

ion

s

2008 Financial Crisis 2014 Commodity price shocks

High Trade Vulnerability to COVID19

Africa’s Top 25 exports and imports of goods – Average (2016-18)

Source: ECA based on UNCTADStat

117.0

27.5

18.4

15.8

11.3

10.4

10.0

8.5

8.4

8.4

7.0

6.0

5.7

5.2

5.0

4.4

4.4

4.0

3.6

3.6

3.5

3.4

2.8

2.8

2.8

0 20 40 60 80 100 120

Petroleum oils, oils from bitumin. materials,…

Gold, non-monetary (excluding gold ores…

Natural gas, whether or not liquefied

Petroleum oils or bituminous minerals > 70…

Copper

Pearls, precious & semi-precious stones

Fruits and nuts (excluding oil nuts), fresh or…

Motor vehicles for the transport of persons

Cocoa

Ores and concentrates of base metals, n.e.s.

Silver, platinum, other metals of the…

Coal, whether or not pulverized, not…

Equipment for distributing electricity, n.e.s.

Fertilizers (other than those of group 272)

Iron ore and concentrates

Liquefied propane and butane

Pig iron & spiegeleisen, sponge iron, powder…

Vegetables

Motor vehic. for transport of goods, special…

Articles of apparel, of textile fabrics, n.e.s.

Aluminium

Inorganic chemical elements, oxides &…

Fish, fresh (live or dead), chilled or frozen

Women's clothing, of textile fabrics

Ships, boats & floating structures

Top 25 Exports (US$ bn)

42.9

16.3

13.6

12.9

12.0

9.9

8.0

7.3

6.7

6.5

6.5

6.1

5.9

5.2

5.1

5.0

4.9

4.8

4.8

4.7

4.6

4.6

4.5

4.5

4.5

0 20 40 60

Petroleum oils or bituminous minerals > 70 % oil

Motor vehicles for the transport of persons

Telecommunication equipment, n.e.s.; &…

Petroleum oils, oils from bitumin. materials,…

Medicaments (incl. veterinary medicaments)

Wheat (including spelt) and meslin, unmilled

Motor vehic. for transport of goods, special…

Civil engineering & contractors' plant &…

Ships, boats & floating structures

Parts & accessories of vehicles of 722, 781,…

Other machinery for particular industries, n.e.s.

Apparatus for electrical circuits; board, panels

Sugar, molasses and honey

Rice

Manufactures of base metal, n.e.s.

Paper and paperboard

Equipment for distributing electricity, n.e.s.

Electrical machinery & apparatus, n.e.s.

Tubes, pipes & hollow profiles, fittings, iron,…

Aircraft & associated equipment; spacecraft,…

Iron & steel bars, rods, angles, shapes &…

Articles, n.e.s., of plastics

Pumps (excluding liquid), gas compressors &…

Automatic data processing machines, n.e.s.

Heating & cooling equipment & parts thereof,…

Top 25 Imports (US$ bn)

Focus on fuels : Largest export - 7.4% of GDP

Fuels account for 7.4% of Africa’s GDP for average period 2016-18; peaked at

20% of GDP in 2008);

Africa is a large net exporter of fuels; exports of fuels tend to fluctuate and

closely follow evolution of crude oil prices:

Evolution of Africa’s total exports vs. imports of fuels (left axis; US$ billion) and crude oil price (right axis; US$/bbl) – 1998-2018


26.7

153.3

10.7

82.1

0

20

40

60

80

100

120

0

50

100

150

200

250

300

19

98

19

99

20

00

20

01

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Exports Imports Crude oil, average

42.7

33.9 33.3

15.59.2

6.0 4.8 4.2 3.2 3.1

0

20

40

60

Nigeria Algeria Angola Libya South Africa Egypt EquatorialGuinea

Congo Gabon Ghana

Focus on fuels: Over US$65bn losses expected

Average 2016-18 yearly exports revenues from fuels for Africa were US$ 166

billion, with WTI average yearly price for the period at US$ 57.6;

Top 10 African exporters of fuels will be hit (based on 2016-18 averages):


Fuel

Exp

ort

s(U

S$ b

n)

Share of Total Exports

Share of GDP

91.7%

10.7%

95.7%

20.0%

97.4%

29.4%

88.4%

62.1%

10.8%

2.7%

22.3%

2.5%

86.8%

38.4%

61.2%

35.3%

55.4%

20.9%

23.3%

5.2%

…fuels: Price declines and demand contraction

Assuming identical volume of barrels of fuels to

be exported in 2020 as in average 2016-18

period, with average 2020 price at US$ 35*,

COVID-19 could lead to Africa’s export revenues

from fuels falling to around US$ 101 billion in

2020 (with countries in above table most

negatively affected);

Observed prices of $61.6 (Jan.), $53.4 (Feb.), $35

(Mar.) and predicted prices of $30 Apr. through

Dec. due in part to OPEC policy differences

Further drops in demand could compound price

drops: (e.g. cancellation of flights, lower use of

cars due to lock downs and quarantine

measures, etc.).

Fuels cont’d: zoom on Nigeria upto $19b loss

COVID-19 could reduce Nigeria’s total exports of crude oil in 2020 by between

US $14 billion and US$ 19 billion (compared to predicted exports without COVID-

19).

33.4

21.4

28.5

38.936.7

19.4

14.2

0

5

10

15

20

25

30

35

40

2016 2017 2018 2019 2020

Predicted before COVID-19

Predicted with COVID-19: average oil price falling to US$35/bbl in 2020

Predicted with COVID-19: average oil price falling to US$35/bbl in 2021 + halved export quantities in 2020

Evolution of crude oil exports from Nigeria – 2016-19 (observed)

and 2020 (predicted under various scenarios) – US$ billion:

Expected Pressure on Naira

Source: ECA based on Central Bank of Nigeria (observed; prices and quantities) and Trading Economics (predicted; quantities) as well as EIA and WTI (predicted prices)Remark: observed export values here are for strictly crude oil when there were based on fuels (i.e. mineral fuels and lubricant as per STIC 3 nomenclature)

Pharmaceuticals: High external dependence $16bn or 94

percent (imported)

All African countries are net importers of medical and pharmaceutical

products;

Top 10 African exporters/importers of medicinal and pharmaceutical products– Average (2016-18)


2,382 2,306

2,065

943

678 614 539 483 418 374

0

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1,000

1,500

2,000

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Eth

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Tun

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238

104 102

5234 27 20 15 14

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100

200

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400

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Sou

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Top 10 African Importers (in US$ mm) Top 10 African Exporters (in US$ mm)

Pharmaceuticals: Europe, India, China 80% of total imports

COVID19 affected countries are Africa’s main exporters

Medical and pharmaceutical products imported from the EU-

27 (51.5% of Africa’s total imports) but also India (19.3%) and

to a lesser extent Switzerland (7.7%), China (5.2%), the US

(4.3%) and the UK (3.3%);

from Africa, South Africa is the largest source of imports

(2.2% of Africa’s total imports);

African exports of medicinal and pharmaceutical products,

although quite limited, are essentially directed to Africa

(56.5% of Africa’s total exports), the EU-27 (16.5%) and to

some extent Saudi Arabia (3.3%), the US (3.0%) and Yemen

(2.6%). Source: ECA based on UNCTADStat

Focus on basic food

Only 15 African countries are net exporters of basic food

Countries do not consume what they export

Net trade balance of basic food – African countries – Average 2016-18 – US$ billion


-10

-8

-6

-4

-2

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2

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Focus on basic food : Net Importers

Top 10 exported basic food items by Africa (average 2016-18):

Top 10 imported basic food items by Africa (average 2016-18):


1.7

1.7

1.8

1.8

2.0

2.2

2.8

4.0

8.4

10.0

0 2 4 6 8 10 12

Fish, prepared, preserved

Tea and mate

Shellfish

Oil seeds


Coffee and substitutes

Fish, fresh, chilled or frozen

Vegetables

Cocoa

Fruits and nuts (excl. oil nuts)

2.9

3.2

3.2

3.4

4.0

4.2

4.3

5.2

5.9

9.9

0 2 4 6 8 10 12

Fixed vegetable fats & oils, fractio.

Animal Feed

Milk and cream(excl. butter, cheese)

Fish, fresh, chilled or frozen

Maize, unmilled

Fixed vegetable fats & oils, fract.

Edible products, n.e.s.

Rice


Wheat and meslin, unmilled

Exports (in US$ bn)

Imports (in US$ bn)

72.4%Top 10 Food

Exports

65.7%Top 10 Food

Imports

20.4%

17.9%

11.9%11.6%

4.9%

Wheat (incl. spelt) and meslin, unmilled

Egypt

Algeria

Morocco

Nigeria

Tunisia

Top 6-10

Others

14.6%

10.8%

9.2%

6.7%

6.5%

Rice

Benin

Côte d'Ivoire

South Africa

Ghana

Senegal

Top 6-10

Others

16.0%

9.1%

8.8%

8.6%

7.8%


Algeria

Egypt

Nigeria

Sudan

Morocco

Top 6-10

Others

12.7%

11.6%

6.2%

6.2%

4.0%

0.162

Edible products and preparations, n.e.s.

Nigeria

Algeria

South Africa

Egypt

Senegal

Top 6-10

Others

14.0%

10.4%

8.6%

8.6%

6.7%

0.222

Fixed vegetable fats & oils, crude, refined, fract.

Egypt

Kenya

South Africa

Ethiopia

Tanzania

Top 6-10

Others

Total Imports:

US$ 9.9 bn

Total Imports:

US$ 5.9 bn

Total Imports:

US$ 5.2 bn

Total Imports:

US$ 4.3 bn

Total Imports:

US$ 4.2 bn

Focus on basic food (cont.)

Largest Importers of Top 5 Imported Foods in Africa (average 2016-18):


Policy Options

Recommendations

African governments could review and revise their budgets to reprioritize spending

towards mitigating expected negative impacts from COVID-19 on their economies,

such as:

As a safety net, provide incentives for food importers to quickly forward purchase to

ensure sufficient food reserves in key basic foods items;

Fund virus preparedness, prevention and curative facilities including logistics.

Use crisis to improve health systems

Prepare fiscal stimulus packages (e.g. guaranteeing wages for those unable to work

due to the crisis, favoring consumption and investment);

Maintain infrastructure investments to protect jobs

Maintain momentum on CFTA as mechanism for building long term continental

resilience and volatility management. For example increase intra African trade on

pharmaceutical and basic food products

THANK YOU!

economic impact of the covid-19 on africa...average 2016-18 yearly exports revenues from fuels for...

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