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Africa to rebound from pandemic slump in 2021, Europe is headed for deeper recession

by Business News Report

African economies, is expected to partially rebound next year from a pandemic-induced economic slump, but it could still lose nearly a quarter of a trillion dollars in economic output in 2020 and 2021, the African Development Bank (AfDB) said. Africa has so far largely been spared the rampant infections and heavy death tolls seen in Europe and the United States. Its hardest-hit nation, South Africa, has recorded around 200,000 cases of COVID-19 and just over 3,100 deaths.

However, Africa has not been immune to the pandemic’s global shockwaves, with oil exporters such as Algeria, Angola, Libya and Nigeria on track to witness the continent’s sharpest declines in economic output. 

Meanwhile the effects of the coronavirus pandemic on the European Union’s economy will be even more devastating than initially thought, according to the latest forecast from the European Commission. In the 19 euro area countries, gross domestic product (GDP) should contract by 8.7 per cent this year, according to the calculations of EU economic experts, significantly deeper than the 7.7-per-cent decline predicted in May. For the whole 27-country EU, a downturn of 8.3 per cent is expected in 2020. “The summer forecast shows, first of all, that the road to recovery is still paved with uncertainty,” EU Economy Commissioner Paolo Gentiloni said as he presented the sobering figures in Brussels on Tuesday. Moreover, the recovery from the slump will be “slightly less robust” than modelled in the last forecast from early May, according to a statement from the commission. Despite a number of policies taken at the EU and national level, the bloc is only expected to return to growth in 2021. The eurozone can anticipate a return to GDP growth at 6.1 per cent next year, while the whole EU should see a rebound of 5.8. The forecast updates the grim picture of the bloc’s economic health following months of Covid-19 containment measures that saw shops, restaurants and hotels shuttered. Many of these measures have been gradually lifted in EU countries.

According to the EU’s executive arm, “early data for May and June suggest that the worst may have passed.” However, the forecast is predicated on the assumption there is no major second wave of coronavirus infection and is therefore surrounded by “great uncertainty,” Gentiloni stressed.

The 27 EU leaders are currently trying to strike a deal on a huge multibillion-euro stimulus package to mitigate the worst effects of the recession. So far, nothing concrete has been agreed. Gentiloni urged EU leaders on Tuesday to reach a swift agreement on the plan. They are to meet in Brussels for a summit focused on the package next week. The measures taken so far on the EU and national level have helped “cushion the blow” for citizens, but the state of the bloc’s economy is still “a story of increasing divergence, inequality and insecurity,” Gentiloni said in a statement.

France, Italy and Spain are set for sharper downturns, the senior EU official said at the press conference, whereas Germany, the Netherlands and Poland can expect milder contractions.

Under a scenario in which the pandemic continues into the second half of this year, the AfDB forecasts a 3.4 per cent contraction in gross domestic product in 2020 – compared with a pre-pandemic projection by the Abidjan-based bank of growth of 3.9%. The figures were included in a revision of the AfDB’s African Economic Outlook, which was originally published before the pandemic. A partial V-shaped recovery should see growth rebound to between 2.4 and 3% next year, the bank said.

“But the projected recovery of Africa economies in 2021 would not make up for an estimated cumulative loss to Africa’s GDP of $173.1–$236.7 billion for 2020 and 2021 due to the pandemic,” the report said. A rebound is threatened by risks including a potentially worsening pandemic, subdued commodity prices, volatile global financial conditions and even natural disasters such as the locust infestations that have ravaged East Africa this year. International Monetary Fund slashed its 2020 global output forecast last month, projecting the world’s economies will shrink 4.9%, compared to a 3.0% contraction predicted in April. The European Commission forecast on Tuesday that the euro zone economy will drop deeper into recession this year and rebound less steeply in 2021 than previously thought.

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