Africa: Real GDP to contract by 1.6% in 2020

LAGOS (Capital Markets in Africa) – The International Monetary Fund projected Sub-Saharan Africa’s (SSA) real GDP to contract by 1.6% in 2020, down from its  growth forecast of 3.6% last October and following an expansion of 3.1% in 2019. It attributed the anticipated contraction to the adverse impact on production and demand of the measures that governments imposed to contain the spread of the coronavirus, to the spillovers from subdued economic activity worldwide, to tighter global financial conditions, and to the sharp decline in commodity prices. Further, it forecast the SSA region’s real GDP to grow by 4.1% in 2021, but it considered that the speed of the recovery would depend on the efforts of the local authorities to contain the virus and on the strength of international support to the region. It projected real GDP in the region’s oil exporters to contract by 2.8% this year, while it anticipated activity in oil-importing economies to shrink by 0.8% in 2020. In addition, it expected economic activity in the West African Economic and Monetary Union to grow by 2.5%, while it forecast real GDP in the Central African Economic and Monetary Community to contract by 1.7% in 2020.

In parallel, the IMF projected the fiscal deficit of the SSA region’s oil exporters to widen from 3.4% of GDP in 2019 to 5.8% of GDP in 2020 amid persistently low global oil prices. It also forecasts the deficit of SSA oil importers to widen from 4.9% of GDP in 2019 to 7.7% of GDP in 2020, due to fiscal easing to support economic growth. In turn, it projected the public debt level of the region’s oil-exporting countries to reach 48.7% of GDP at end-2020 and to stand at 60.2% of GDP at end-2020 in oil-importing economies. In parallel, it expected the aggregate current account deficit of SSA oil exporters to widen from 2.6% of GDP in 2019 to 4.2% of GDP in 2020 due to lower oil export receipts, while it projected the deficit of oil importers to slightly widen from 4.8% of GDP in 2019 to 5% of GDP in 2020. As such, it anticipated foreign currency reserves of SSA oil exporters to decline from 6.5 months of import coverage at end-2019 to 3.9 months of imports at end-2021, while it forecast the reserves of SSA oil importers to regress from 5.5 months of imports at the end- 2019 to 4.4 months of imports at end-2021.