(PHOTO CREDITS: Advocates Coalition for Development and Environment-CBEG)
It is no longer guess work, on the impact of the COVID19. The global recession is upon us and could get worse owing to the length of spread and containment of it. UN estimates USD 2 trillion shortfall in global income in 2020. The longer, the more protracted, the more likely an economic depression may manifest as households and businesses are expected to run into bankruptcies. At our hands, we have no vaccine in near time (1-2 years) and the confirmed cases growing still. As of 2nd April, the number of confirmed cases is expected to reach of 1 million by end of day, from just 182,000 confirmed cases on the 16th March. The deaths expected to reach nearly 40,000 from as low as 7200 over the corresponding period. Despite, the rapid response mechanisms seen all over, uncertainty on length of time it will take to yield successful control of spread predominates.
The health pandemic is indeed an economic plague. Unlike previous ones affecting one sector e.g. financial sector which had impact on consumer and firm behavior, COVID19 has shut down nearly all sectors and all regions. Unlike the past crisis where developing and emerging world were shielded in short term, the speed of transmission is accelerated this time round. The current lock down measures (in part and wholly across countries and borders) are a supply shock unlike previous crisis that were demand shocks. Even those with money cannot demand what they need. But at the other end, also lies a large share of population and firms risking bankruptcies even in developed economies as already seen in sharp decline in Purchasing Managers Index, Restaurant Indices, tourism sector and travel stagnation as well as other economic indicators. The current downsides of the pandemic will supersede the disease itself and have lasting effects, owing to lag effects on the associated current distortions to the economic flows, demand and supply factors.
As afore mentioned, no continent or country is spared from the economic or health effects of the pandemic. Africa as a continent has seen least confirmed cases of the Virus still less than 6% of global confirmed cases but number has been growing and virus in now nearly 50 of 54 African nations. The pace, is however, still lower than that of Europe in the first 50 days of the virus. On the economic front, external distortions are expected, and main link is with China (the OPEC of industrial intermediate goods), where sizeable production or supply disruptions have also already happened. For the first time, since 1976, China’s growth for the first quarter of 2020 is expected to be negative, largely also reflecting double digit declines (year on year) in January and February in industrial and service production, exports, retail sales, investment in fixed assets1. The recent UN Economic Commission for Africa2 estimated, that 1% reduction in growth in China, translates into 0.3% reduction in Africa’s growth. The direct correlation and impact is corroborated by other empirical studies. The impact, however, is expected to be more in crisis times.
