COVID-19 has had a far-reaching impact on the global economy with Africa, not an exception. Using the Gross Domestic Product (GDP) growth rate of the two biggest economies (Nigeria and South Africa) in Africa as a proxy, it won’t be out of place to say that second quarter of 2020 will be known as the pandemic quarter In history considering its effect on GDP growth rate during the period.
The Nigerian economic activities contracted in Q2-2020, as the real GDP declined by 6.1% y/y representing the steepest economic decline in Nigeria in over three decades. Similarly, South Africa’s economy suffered a significant contraction during the period as GDP fell by over 17.1% y/y in Q2-2020, or 51.0% q/q.
Interestingly, the Agric sector proves to be immune to the pandemic by being the only sector with positive growth in South Africa, also one of the few outliers for the Nigeria GDP growth.
For the rest of the year, we believe that the sharp contraction recorded in Q2-2020 is as worst as it can get for the year as governments across the continent continue to phase-out lockdown measures implemented to curb the spread of COVID-19 within their respective country.
However, we expect the economic recovery to varying from country to country, depending heavily on the improvement in the external dynamics and the timeframe required to bring economic activities back to pre-COVID-19 levels.
United Capital Research