African Union predicts bleak future for economies due to coronavirus

In a report, "Impact of the Coronavirus on the African Economy", released on Monday, the African Union has predicted that susceptible African economies stand at risk of being devastated by the coronavirus pandemic, with the possibility of up to 20 million job losses and the potential for social unrest.

According to the African Union, the report focuses on understanding possible socio-economic repercussions of the novel coronavirus to propose policy recommendations to respond to the crisis at a time when the pandemic is at a less advanced stage in Africa.

"The coronavirus pandemic has revealed that African countries are extremely exposed to external shocks. A paradigm shift is needed in order to change the trade patterns of African countries within themselves and with the rest of world, particularly with China, Europe, USA and other emerging countries," the report says.

According to the report's findings, imports of basic consumer goods to Africa from China have been reduced since the start of the pandemic drastic. The decline in trade with China has had a severe impact on African nations, as China is the major supplier of machinery for infrastructure and finished goods.

In addition, the African Union notes that tumbling oil prices will disrupt the economies of big oil-producing countries in Africa, notably Algeria, Angola, Cameroon, Chad, Equatorial Guinea, Gabon, Ghana, Nigeria, and Congo Brazzaville. The report singles out Nigeria and Angola, which forecast their budgets on the basis of oil being sold at $67 per barrel, but with prices falling below $30 per barrel, the oil-producing countries are staring at a sharp budget deficit.

"Today, crude oil is facing the biggest demand shock in its history, falling below $30 a barrel, due to the cessation of world trade, which started in China since January. For oil-producing countries in Africa like Nigeria and Angola, which are the continent's largest producers of oil, oil revenues represent more than 90 percent of exports and more than 70 percent of their national budgets, and the fall in prices will likely hit them in a similar proportion," the African Union said.

It also identifies tourism as the other sector that will put Africa's economy under pressure, since it provides more than a million jobs in Ethiopia, Kenya, Nigeria, South Africa and Tanzania. The African Union says tourism will be heavily affected by the coronavirus pandemic due to travel restrictions, closing of borders and social distancing.

"Tourism supports 6.2 million jobs and contributes 2.6 percent of the continent's GDP. So far, the travel restrictions in place have already resulted in the partial unemployment of airlines' staff and equipment. According data from the International Air Travel Association, African airlines have already lost $4.4 billion in revenue by March 11, 2020 due to the coronavirus," the African Union said in the report.

In the findings, it has also become apparent that Africa's economy also is facing gloom due to diminishing external financial inflows, especially from foreign remittances that could suffer significant declines as struggling family and friends abroad find it difficult to send money home.

"Remittances have been the largest source of international financial flows to Africa since 2010, accounting for about a third of total external financial inflows. They represent the most stable source of flows, having nearly consistently increased in volume since 2010," the African Union said.

"However, with economic activity in the doldrums in many advanced and emerging market countries as a result of the coronavirus pandemic, remittances to Africa could experience significant declines," it added.