Africa likely to lose 20 million jobs due to pandemic: AU study

Africa likely to lose 20 million jobs due to pandemic: AU study
Police remove foreign migrants from the Central Methodist Church in Cape Town, Sourth Africa, Thursday, April 2, 2020. (AP)
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Updated 06 April 2020

Africa likely to lose 20 million jobs due to pandemic: AU study

Africa likely to lose 20 million jobs due to pandemic: AU study

JOHANNESBURG: About 20 million jobs are at risk in Africa as the continent’s economies are projected to shrink this year due to the impact of the coronavirus pandemic, according an African Union (AU) study.
So far, Africa accounts for just a fraction of total cases of the disease which has infected more than one million people worldwide, according to a Reuters tally.
But African economies are already facing an impending global economic downturn, plummeting oil and commodity prices and an imploding tourism sector.
Before the onset of the pandemic, continent-wide gross domestic product (GDP) growth had been projected by the African Development Bank to reach 3.4 percent this year.
However, in both scenarios modeled by the AU study — titled “Impact of the coronavirus on the Africa economy” — GDP will now shrink.
Under what the AU researchers deemed their realistic scenario, Africa’s economy will shrink 0.8 percent, while the pessimistic scenario said there would be a 1.1 percent dip.
Up to 15 percent for foreign direct investment could disappear. The impact on employment will be dramatic.
“Nearly 20 million jobs, both in the formal and informal sectors, are threatened with destruction on the continent if the situation continues,” the analysis said.
African governments could lose up to 20 to 30 percent of their fiscal revenue, estimated at 500 billion in 2019, it found.
Exports and imports are meanwhile projected to drop at least 35 percent 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.
Africa’s oil producers, which have seen the value of their crude exports plunge in past weeks, will be among the worst hit.
Sub-Saharan Africa’s biggest oil producers Nigeria and Angola alone could lose $65 billion in income. African oil exporters are expected to see their budget deficits double this year while their economies shrink 3 percent on average.
African tourist destinations will also suffer.

HIGHLIGHTS

• Africa’s economy could shrink up to 1.1 percent this year.

• Trade could fall 35 percent from 2019 levels.

• Oil producers, tourist destinations seen hardest hit by the pandemic.

Africa has in recent years been among the fastest growing regions in the world for tourism. But with borders now closed to prevent the disease’s spread and entire airlines grounded, the sector has been almost entirely shut down.
Countries where tourism constitutes a large part of GDP will see their economies contract by an average of 3.3 percent this year. However, Africa’s major tourism spots Seychelles, Cape Verde, Mauritius and Gambia will shrink at least 7 percent.
“Under the average scenario, the tourism and travel sector in Africa could lose at least $50 billion due to the covid-19 pandemic and at least 2 million direct and indirect jobs,” the AU study said.
Remittances from Africans living abroad — the continent’s largest financial inflow over the past decade — are unlikely to cushion the blow.
“With economic activity in the doldrums in many advanced and emerging market countries, remittances to Africa could experience significant declines,” the analysis found.


IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
Updated 8 min 49 sec ago

IMF chief sees ‘high degree of uncertainty’ in global outlook

IMF chief sees ‘high degree of uncertainty’ in global outlook
  • IMF had rapidly increased concessional financing to emerging market and developing economies
WASHINGTON: The head of the International Monetary Fund on Monday said the global lender needed more resources to help heavily indebted countries, citing a highly uncertain global economic outlook and a growing divergence between rich and poor countries.
IMF Managing Director Kristalina Georgieva, who has long advocated a new allocation of the IMF’s own currency, Special Drawing Rights (SDRs), said doing so now would give more funds to use address both the health and economic crisis, and accelerate moves to a digital and green economy.
Under outgoing President Donald Trump, the United States, the IMF’s largest shareholder, has blocked such a new SDR allocation, a move akin to a central bank printing money, since it would provide more resources to richer countries since the allocation would be proportionate to their shareholding.
Swedish Finance Minister Magdalena Andersson, the new chair of the IMF’s steering committee speaking at an online news conference with Georgieva, said it was clear the need for liquidity remained great, and she would consult with member countries on options for expanding liquidity.
Andersson, the first European to head the International Monetary and Financial Committee in more than 12 years and the first women, started her three-year term in the role on Monday.
Georgieva said the IMF had rapidly increased concessional financing to emerging market and developing economies, including through donations by member countries of some $20 billion in existing SDRs. That would continue to play an important role, but further steps were needed, she said.
“It will continue to be so important, even more important, for us to be able to expand our capacity to support countries that have fallen behind,” Georgieva said.
She said a new SDR allocation had never been taken off the table by IMF members, she said, adding that some members continued to discuss it as a possible move. A possible sale of gold from the IMF’s reserves would have “some opportunity costs” for the IMF, but would be up to members, she said.
She said she expected the Group of 20 major economies to extend the current moratorium in official debt service payments by the poorest countries, now slated to end in June, but much would depend on the pace of vaccinations in coming months.