INTO AFRICA March-April 2020 Edition – X-ray on Africa’s Fundamentals

LAGOS (Capital Markets in Africa) – During these difficult times, we wish you and your loved ones health, happiness and brighter days ahead. Welcome to the March/April 2020 edition of INTO AFRICA, a publication written by the professionals, for professionals, investors, policymakers … We Advance and provide fresh insights into Africa’s emerging markets through renowned thought leadership and peer-to-peer knowledge-sharing. This edition is titled: “X-Ray on Africa’s Fundamentals”.

Looking at the economic and market outlook for 2020 just a few months ago, there is no doubt times have changed. The spread of the coronavirus (COVID-19) dealt a severe, unexpected shock that impacted people and markets around the globe.

As efforts to stem the spread of COVID-19 continue, uncertainty remains high across global financial markets. The pandemic-driven selloff, heightened by turmoil in global oil markets, is unprecedented in its speed and severity. Volatility and correlations across asset classes are reminiscent of the global financial crisis, as investors seek to reduce risk exposure as new information is released daily. The purposeful halting of the global economy is jarring in the short term and raises questions about the pace and timing of the eventual recovery. The debate has now moved on from whether there will be a recession in 2020, to how deep and long it will be. As markets have moved to reflect this new reality, the unprecedented global coordinated response by scientists, technologists and engineers, working in parallel on a vaccine and therapeutic treatment will lead us past this crisis.

The coronavirus pandemic continues to take its toll on the African continent. While the continent as a whole still accounts for relatively few deaths from the disease, the numbers are rising. As countries scramble to contain the virus and are affected by the efforts of other countries to do the same—the economic impacts grow. Growth in Sub-Saharan Africa has been significantly impacted and is forecast to fall sharply from 2.4% in 2019 to -2.1 to -5.1% in 2020, the first recession in the region over the past 25 years, according to the latest Africa’s Pulse, the World Bank’s twice-yearly economic update for the region.

Many African countries are opting for a combination of emergency fiscal and monetary policy actions with many central banks in the continent taking important actions like cutting interest rates and providing extraordinary liquidity assistance. However, it is important to ensure that fiscal policy builds in space for social protection interventions, especially targeting workers in the informal sector, and sows the seed for future resilience of the economies. The immediate measures are important but there is no doubt there will be a need for some sort of debt relief from bilateral creditors to secure the resources urgently needed to fight COVID-19 and to help manage or maintain macroeconomic stability in the region.

The World Bank Group is taking broad, fast action to help developing countries strengthen their pandemic response, increase disease surveillance, improve public health interventions, and help the private sector continue to operate and sustain jobs. It is deploying up to $160 billion in financial support over the next 15 months to help countries protect the poor and vulnerable, support businesses and bolster economic recovery.

While clearly the scope and reach of the coronavirus crisis are unprecedented, we should keep in mind, though, that the world has weathered many crises in the past: world wars, widespread famines and deadly viruses. Humanity has emerged from these turbulent periods, not without cost, but often stronger for it. Thus, in the world of finance, rather than allow panic to dictate our path, we should dispassionately ask, what do we do now?

Africa’s investment fundamentals are unshaken. Although the current COVID-19 impacts might paint a dull picture of investment prospects on the continent overall. However, over the long-term, the potential for good returns still looks bright, suggesting an opportunity for counter-cyclical investors.

PLEASE CLICK TO DOWNLOAD – INTO AFRICA PUBLICATION: MARCH-APRIL 2020 EDITION.