In recent times, talks around the world have shifted away from the trade war/truce between U.S and China to the spreading impact of the viral disease – Coronavirus (COVID-19) that has swept into at least 114 countries and killed more than 4,000 people. Though no fatal case of COVID-19 has been recorded in Africa, the economies are not immune to its attack.
Notably, the demand for Africa’s raw exports in Asia and Europe (continents most affected by the outbreak and Africa’s biggest export destinations) is reported to be dropping drastically, as countries like China and Italy have shutdown productive activities and port operations. Also, African companies that import food, technology or clothing from China – the country of origin of the COVID-19 virus – are already feeling the effects of the crisis.
Additionally, African financial markets have not been spared by the impact of the outbreak with African currencies in the firing line.
Overall, we believe fiscal and monetary resources will need to be mobilized in order to combat the impact of the outbreak on African economies. In terms of monetary policy, African monetary authorities are yet to join the virus-induced monetary easing bandwagon. Also, in terms of increased expenditure through fiscal policy, where this funding will come from remains a major conundrum – especially since China’s benevolence to Africa is likely to be severely reduced in the current context.