Sub-Saharan Africa’s biggest oil producers, Nigeria and Angola, alone could lose $65 billion in income this year due to the impact of the COVID-19 pandemic, according to an African Union (AU) study.
The study noted that African oil exporters are expected to see their budget deficits double this year while their economies shrink three per cent on average.
About 20 million jobs are also at risk in Africa as the continent’s economies are projected to shrink this year due to the impact of the pandemic, according to the study.
Reuters reported that African economies are already facing an impending global economic downturn, plummeting oil and commodity prices and an imploding tourism sector.
Before the outbreak of the pandemic, continent-wide gross domestic product (GDP) growth had been projected by the African Development Bank to reach 3.4 per cent this year.
However, in both scenarios modelled by the AU study and entitled “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 per cent, while the pessimistic scenario said there would be a 1.1 per cent dip.
Up to 15 per cent 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 per cent of their fiscal revenue, estimated at $500 billion in 2019, it found.
Exports and imports are meanwhile projected to drop at least 35 per cent from 2019 levels, incurring a loss in the value of trade of around $270 billion.
The report said 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 three per cent on average,” it added.
African tourist destinations will also suffer.
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 per cent this year. However, Africa’s major tourism spots Seychelles, Cape Verde, Mauritius and Gambia will shrink at least seven per cent.
“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 added.