The rapid spread of coronavirus pandemic which has already taken thousands of human life and disrupted business activity, could retard Africa’s economic growth prospects in the coming years, the International Monetary Fund (IMF) has said.

The IMF said Wednesday as it launched the economic outlook for Sub-Saharan Africa that the crisis is threatening to throw the region off its stride, reversing the development progress of recent years.

This has led the Fund to downgrade its economic growth prospects for the region to -1.6 per cent from the previously forecasted growth of 5.2 per cent in October 2019.

The Sub-Saharan Africa Regional Economic Outlook report indicates that real per capita income – average income earned per person – will fall in 2020 by 3.9 per cent, the lowest since 1970.

Less diversified economies like Nigeria and Angola, which depend heavily on oil exports, will be hit harder.

Oil prices have plunged by about 50 percent, reaching 18-year lows, reflecting a slump in global growth and the breakdown of the Organization of Petroleum Exporting Countries and other major oil producers (OPEC+) agreement regarding production cuts.

Most other commodity prices are also lower – one exception is precious metals, such as gold, which have benefited from the risk-off sentiment.

Countries dependent on tourism such as Capo Verde and Seychelles are expected to witness a severe contraction due to extensive travel restrictions.

Rwanda

The IMF ranks Rwanda in the latest report as a medium vulnerable country on the tourism front. This means Covid-19 could have a relative impact on the country through the tourism sector.

The country is medium vulnerable if tourism contributes between 2 per cent and 5 per cent of GDP, and between 5 per cent and 30 per cent of exports.

Available data from Knoema, one of the world’s reputable data portals, shows that in 2018, contribution of travel and tourism to gross domestic product for Rwanda was 14.9 per cent.

Rwanda is also ranked at a low risk of debt distress, just like Madagascar and Tanzania. All other African countries are high or low vulnerable.

Samba Mbaye, IMF Resident Representative to Rwanda, told The New Times that the outbreak will not just affect tourism but also other sectors like industries.

"We can already see that all sectors are going to suffer from this crisis with services, such as tourism, and wholesale and retail trade, taking the largest hit,” he said.

"Industries are also feeling the brunt of the pandemic due to disruptions in local and international supply chains,” he added.

The Government has taken proactive measures to respond to the crisis, including strategies to support struggling businesses through financial institutions.

"We therefore fully support the fiscal and monetary policy measures that the government has deployed so far and encourage them to monitor their impacts and consider further support if necessary,” Mbaye said.

Africa and the world

Generally, global growth is projected to plummet from 2.9 percent in 2019 to −3.0 percent in 2020, far lower than during the 2008–09 global financial crisis.

The global fallout of Covid-19 spillover to the region, particularly through trade and financial markets.

For instance, a sharp growth slowdown among key trading partners reduces external demand, while disruptions of supply chains lower the availability of imported goods, potentially adding inflation pressure.

At the same time, the sharp tightening of global financial conditions reduces investment flows to the region and hampers its ability to finance spending needs to deal with the health crisis and support growth.

This may result in either a cut in government spending, a buildup in arrears, or an increase in government borrowing in local markets, with consequences on domestic credit and growth.

The latest outlook shows that among the African region’s key trading partners, the euro area is expected to contract (from 1.2 per cent in 2019 to −7.5 per cent in 2020), and growth in China is to slow considerably (from 6.1 per cent to 1.2 percent).

Global financial conditions have tightened sharply in 2020.

The IMF estimates that investors have pulled out over $90 billion from emerging markets since the beginning of the crisis, the largest capital outflow on record.

Financial markets in sub-Saharan Africa have also come under pressure. Sovereign spreads in the region have increased by about 700 basis points since February 2020, reaching all-time highs, with the largest rise seen in oil exporters.

Bond issuances have stopped, and large capital outflows have also been recorded from the region’s frontier and emerging markets.

"These large adverse shocks will interact with existing vulnerabilities to exacerbate social and economic conditions,” Abebe Aemro Selassie, IMF’s Director of the African Department said on Wednesday.

The organization recommends measures such as temporary tax relief, tax and customs exemptions on health products, subsidized loans to companies, as well as facilitating access to existing social programmes.

Public support towards hard-hit sectors such as airlines and hospitality, and encourage them to preserve employment and wages, is seen as critical to enable economies to recover