Global auditing firm McKinsey & Company’s is estimating that Africa would lose up to $200 billion in 2020 due to the current coronavirus pandemic.
A paper put together by experts at the auditing firm said the pandemic will led to a cut of 3 to 8 percentage points to Africa’s GDP growth.
Entitled; “Tackling COVID-19 in Africa” the auditing firm released its predictions this week to give an outlook of Africa’s economies amid the pandemic.
The auditing firm predicts that African economies could experience a loss of between $90 billion and $200 billion in 2020.
The experts said in the paper that “We find that the pandemic and the oil-price shock are likely to tip Africa into an economic contraction in 2020, in the absence of major fiscal stimulus.”
The pandemic contributed greatly to the anticipated cut to the growth of economies on the African continent .
Since the outbreak household and business spending and travel bans have reduced, with many local factories not producing goods.
African economies over reliant on foreign goods
Most of the economies in Africa are largely informal and traders in these economies are unable to access goods that usually come from China.
The global pandemic has also turned business on its head impacting demand for Africa’s non-oil exports, and delay or cancellation of investments from Africa’s Foreign Direct Investment (FDI) partners.
The African countries that depend on oil for their revenues and growth to their economies are being hit hard with oil price falling.
According to the auditing firm’s experts, although the COVID-19 pandemic is primarily a health crisis and a human tragedy, its economic ramifications are grave.
There are no guarantees when the pandemic will ease and if it continues for months, the experts say there would be massive disruption to livelihoods of millions of people in Africa.
Impact on people’s sources of income was also highlighted by the report which speaks of the disruption to people’s jobs, businesses, and government agencies.
The auditing firm is proposing that an ‘Africa Recovery Plan’ detailing extensive stimulus package or economic development plan should be put in place.
They also recommended ‘Africa Solidarity Fund’ so businesses and individuals could contribute to a fund earmarked for immediate relief for the most vulnerable households and businesses.
Already many African countries are setting up funds seeking contribution to help handle the economic impact of the pandemic.
The experts are hoping should African countries also set up ‘private-sector liquidity fund’ it would be able to offer grants, loans, or debt for equity swaps to support businesses and limit job losses.
Africa as at April 3, 2020 had recorded over 7,000 cases of coronavirus with over 200 deaths and over 400 recoveries.
The continent is still the least affected by the pandemic but risks being hit hard economically when the crisis is over.