• ACP says the coronavirus pandemic has triggered an economic crisis that puts over 500 million people at risk of falling into extreme poverty.
• World Bank and IMF estimate sub-Saharan Africa’s economic growth will decline from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020, the first recession in the region in 25 years.
Image: PSCU
The economic implication of Covid-19 will top the ACP agenda as President Uhuru Kenyatta convenes a virtual summit of the African, Caribbean and Pacific Group of States on June 3.
Uhuru is the ACP President-in-Office.
“The theme of the Summit will be, ‘Transcending the Covid-19 Pandemic: Building Resilience through Global Solidarity’,” PSCU said in a statement.
ACP says the coronavirus pandemic has triggered an economic crisis that puts over 500 million people at risk of falling into extreme poverty.
I have called upon all Member States to embrace a collective approach in order to defeat this unprecedented health pandemic, which has potential to roll back some of the gains made by the Group,President Uhuru Kenyatta
The ACP was created in 1975 and is composed of 79 African, Caribbean and Pacific states.
It seeks to attain sustainable development of its members and their gradual integration into the global economy.
“In my message, I have called upon all Member States to embrace a collective approach in order to defeat this unprecedented health pandemic, which has potential to roll back some of the gains made by the Group, including in the implementation of the 2030 Agenda for Sustainable Development,” Uhuru said in a statement on May 7.
“A growing list of economic indicators makes it clear the outbreak is negatively affecting global economic growth on a scale that has not been experienced since the global financial crisis of 2008-2009,” a dispatch released by the Ministry of Foreign Affairs on May 30 noted.
While sub-Saharan Africa has been less relatively hit by the virus, it is hardest hit in terms of increased extreme poverty due to partial and total lockdown, among other Covid-19 measures.
The vulnerabilities are equally high for the Caribbean and Pacific, which mostly depend on single sectors, especially tourism and service sectors.
The meeting also happens at a time when the World Bank and IMF estimate sub-Saharan Africa’s economic growth will decline from 2.4 per cent in 2019 to -2.1 to -5.1 per cent in 2020, the first recession in the region in 25 years.
FOOD INSECURITY
The model predicts that “the Covid-19 crisis has the potential to create a severe food security crisis in Africa”.
This is linked to disruptions to logistics related to food movements, food production and high import costs due to depreciating currencies.
ACP predicts that agricultural production could contract by between 2.6 per cent and seven per cent, if there are trade blockages.
“Food imports would decline substantially as much as 25 per cent due to a combination of higher transaction costs and reduced domestic demand. The Caribbean and Pacific are even more affected as most of these countries are net food importers,” the AP said in the statement.
Global supply chains that link Europe to and ACP will be seriously disturbed as the European Union account for close to 50 per cent of ACP exports due to preferential market access offered by the EUACP
Additionally, the African Union estimates a loss of up to 20 million jobs in formal and informal sectors, and potential GDP loss of up to 4.5 percentage points.
As a result, the pandemic is estimated to cost Africa $37 billion to $79 billion in output losses this year, according to the World Bank.
This is as a result of trade and value chain disruption, reduced foreign financing flows from remittances, tourism, foreign direct investment and foreign aid.
In addition, there are implications of capital flight; direct impacts on health systems, and disruptions caused by containment measures.
African governments could also lose up to 20 to 30 per cent of their fiscal revenue, estimated at $500 billion in 2019, ACP says.
Exports and imports are projected to drop at least 35 per cent from 2019 levels, incurring a loss in the value of trade of around $270 billion.
This at a time when the fight against the virus' spread will lead to an increase in public spending of at least $130 billion, ACP says.
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.
“Global supply chains that link Europe to and ACP will be seriously disturbed as the European Union account for close to 50 per cent of ACP exports due to preferential market access offered by the EU,” the statement said.
Debt stock for ACP countries is also expected to sharply increase. This, despite the negligible ACP countries’ share of global debt stock (public plus private) which amounted to $188 trillion at the end of 2018, according to the IMF’s Global Debt Database.
TOURISM MOST AFFECTED
Tourism is one of the most important industries in Africa and contributed 8.5 per cent (or $194.2 billion) of the continent's gross domestic product in 2018, according to the World Travel and Tourism Council.
Consequently, ACP countries must find between $50 billion and $60 billion this year and even much more in 2021, to meet their international obligations in a context of foreign currency shortages which will reduce their capacity to finance imports, risk of default and lower rating, ACP says.