Lockdowns initiate broad-based contractions in SSA Economies – Report

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The response of advanced economies to the global pandemic disrupted international supply chains because cities and countries were locked down as cases of COVID-19 were on the rise. In Africa, the Southern African region currently leads with over 700,000 cases, followed by the Northern and Western regions.

South Africa leads the continent with over 600,000 cases. Morocco, Ethiopia and Nigeria lead cases in North, East and West Africa with approximately 105,300, 70,400 and 57,600 coronavirus cases respectively. The lockdown culture has had significant implications for growth outcomes in Sub-Saharan Africa economies.

Lockdowns initiate broad-based contractions in SSA Economies - Report Brandspurng2

Several economies bled in Q2’20 as reactive lockdown measures dragged output in Q2’20 South Africa (- 51.0%) contracted for the fourth consecutive quarter in Q2’20 as mining, manufacturing and construction sectors felt the impact of the country’s stringent lockdown measures. Nigeria (-6.10%) followed suit with its worst contraction in over 30 years.

Ghana (-3.2%) was affected by the slump in both industry and services sectors. Angola is expected to enter its fifth year of the economic downturn as the country is yet to recover from the 2014 oil price crash. Kenya and Ghana are the only countries under our coverage that are expected to deliver positive growth outcome in 2020.

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Recession fears resurface in Nigeria

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The Nigerian economy was affected adversely by the 5-week lockdown which crippled economic activity in Q2’20. Economic activities plunged by -6.10% y/y, as both the oil and non-oil sectors shed weight. Major sectors, including Trade, Manufacturing, Mining, Construction and Real Estate sectors, recorded negative growth outcomes in the review period. The sharp drop in oil receipts necessitated the devaluation of the Naira, which further constrains growth in the real sector.

The country’s fiscal capacity was highly constrained due to low oil prices and high debt servicing costs. As a result, the government was only able to set up a ₦500bn ($1.3bn) COVID-19 crisis intervention fund – which amounted to 0.39% of GDP – to cover health-related expenditures. Budgetary assumptions were reviewed in line with current realities while the energy sector has seen some reforms. The reforms have been driven by the government’s efforts to expunge expensive subsidies from its books.

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