Vetiva: COVID-19 Has Dampened Economic Outlook of Sub-Sahara Africa

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Goddy Egene

Vetiva Research has said the COVID-19 pandemic has dampened economic outlook of Sub-Sahara African countries in 2020 because of the existing vulnerabilities which existed prior to the pandemic.

Vetiva’s Economist, Mosope Arubayi, in a report, said: “The region’s vulnerabilities stem from its weak public health systems, impact of lockdowns on livelihoods and businesses and the resource-dependent nature of the region.”

According to her, this scenario has resulted in a twin crisis, that is a health and economic crisis, in the region.

“ For a region that is still managing previous viral episodes, infestation, insecurity and climate change, the capacity to deal with a more widespread outbreak is limited,” Arubayi said.

She pointed out that the economic performance of most countries is expected to be worse than last year, reflecting the impact of the COVID-19 pandemic. She added, however, that non resource dependent countries have a more positive outlook than commodity exporters whose economic activities could be adversely impacted by the slump in commodity prices.

“ Ghana will be an exception among the resource-dependent countries because of its favorable economic mix and its investment climate, which is above average from an African perspective,” Arubayi said.

On the back of the downbeat regional economic outlook, she said that a decline in the region’s foreign exchange earnings and foreign capital flows would result in a dollar drought in the region, putting pressure on local currencies.

“The extent of pressure will, however, vary based on the degree of each country’s economic openness, exchange rate regime and investment climate,” she added.

According to her, the currency softness will filter into consumer prices across the region’s countries and the higher inflation expectations should stay the hand of most central banks in the region from easing monetary policy further.