The IMF has projected significant economic contraction this year for Sub-Saharan Africa’s two leading economies, Nigeria and South Africa.
While Nigeria’s GDP is expected to shrink by 3.4% and land into another recession, the outlook for South Africa is worse.
South Africa’s GDP is projected to fall sharply by 5.8% from a 2019 growth of 0.2%.
Africa’s most advanced economy entered a recession in the final quarter of last year as power cuts by Eskom took a toll on the economy.
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Public finances were strained by bailouts to struggling state firms.
The country has imposed some of the toughest restrictions on the continent to contain the coronavirus, including a five-week lockdown to the end of April.
With production and spending curtailed, the economic outlook for the country is set to remain grim.
The gloomy forecast for Nigeria is a dampener of sort for Africa’s largest economy.
Nigeria was hoping to improve on its 2.2% growth last year.
But the coronavirus pandemic and the crash of the oil market upended the expectations.
The IMF also predicts that the economy of Angola will further fall into recession, contracting by 1.4%.
Angola, like Nigeria, runs on oil income.
Just like the World Bank had projected, Sub-Saharan Africa’s gross domestic product is expected to contract 1.6% this year, compared to 3.1% growth last year, as the coronavirus pandemic wrecks the region’s economies.
The predictions were contained in the IMF 2020 World Economic Outlook.
Various African governments have imposed lockdowns and curfews to curb the spread of the coronavirus, but the restrictions are putting pressure on most economies — some of which were already in recession.
The IMF and the World Bank are racing to provide emergency funds to African countries and others to combat the coronavirus and mitigate the impact of sweeping shutdowns aiming at curbing its spread.
IMF also predicted that the global economy will shrink by 3.0% this year, the steepest downturn since the Great Depression of the 1930s.
The IMF, however predicts a partial rebound in 2021, with the world economy growing at a 5.8% rate.
It said its forecasts were marked by “extreme uncertainty” and that outcomes could be far worse, depending on the course of the pandemic.
“This recovery in 2021 is only partial as the level of economic activity is projected to remain below the level we had projected for 2021, before the virus hit,” IMF chief economist Gita Gopinath said in a statement.
Under the Fund’s best-case scenario, the world is likely to lose a cumulative $9 trillion in output over two years – greater than the combined GDP of Germany and Japan, she added.
IMF Managing Director Kristalina Georgieva said last week that some $8 trillion in fiscal stimulus being poured in by governments to stave off collapse was not likely to be enough. She is expected to argue this week for more debt relief for the poorest countries.
The global economy contracted 0.7% in 2009 – previously the worst downturn since the 1930s – according to IMF data.
In January, before the extent of the coronavirus outbreak both inside and outside China was known, the IMF had predicted that the global economy would grow 3.3% in 2020 as U.S.-China trade tensions were starting to ease, with 3.4% growth seen for 2021.
Advanced economies now suffering the worst outbreaks of the virus will bear the brunt of the plunge in activity. The U.S. economy will contract 5.9% in 2020, with a rebound to 4.7% growth in 2021 under the Fund’s best-case scenario.
Euro zone economies will contract by 7.5% in 2020, with hard-hit Italy seeing its GDP fall 9.1% and contractions of 8.0% in Spain, 7.0% in Germany and 7.2% in France, the Fund said. It predicted euro-area economies as a whole would match U.S. growth of 4.7% in 2021.
China, where the coronavirus outbreak peaked in the first quarter and business activity is resuming with the help of large fiscal and monetary stimulus, will maintain positive growth of 1.2% in 2020, a reduction from 6% growth in the IMF’s January forecast. China’s economy is forecast to grow 9.2% in 2021, the IMF said.
India’s 2020 fiscal-year growth also is expected to stay in positive territory, but Latin American economies, which are still experiencing growing coronavirus outbreaks, will see a contraction of 5.2%.
The Fund called for central bank liquidity swap lines to be extended to more emerging market countries, which face a double problem of locked-down activity and tightening financial conditions caused by a massive outflow of funds to save-haven assets such as U.S. Treasuries.
