COVID19 pushes North Africa’s economy into contraction, growth not expected until 2021

NORTH AFRICA – The Covid-19 pandemic has adversely affected the North African economy to an extent of plunging it into a contraction, a new African Development Bank Economy forecast has shown.

According to the African Development Bank, the North African region will face an economic contraction forecast between 0.8 and 2.3%.

The economic outlook report by AfDB suggests that the pandemic’s negative impact on global demand and the prices of basic goods is likely to increase fiscal deficits and current account imbalances in the region.

 In the worst-case scenario, AfDB notes the fiscal deficit in 2020 could average 10.9% of regional GDP.

In 2019, the fiscal balance, estimated at ‑5.6% of regional GDP, exceeded the African average of ‑4.7%.

The North Africa Economic outlook report further noted that the tourism and industrial sectors in North Africa are likely to be hardest hit by the COVID-19 pandemic.

The economic report further noted that, faced with an unparalleled crisis, the region’s countries implemented health and budget measures to curb the spread of the virus and protect their populations.

The health measures according to AfDB have disrupted several sectors of the economies resulting in large-scale socioeconomic consequences which will inevitably lead the region into an economic contraction.

African Development Bank further notes that rapidity with which economic and other restrictions are being lifted in North Africa is raising uncertainty and suggests two distinct recovery scenarios.

The first is based on a timeline for emerging from the crisis in July 2020. The second is based on the pandemic lasting through December 2020.

Under the first scenario, regional growth would fall by 5.2 percentage points, resulting in a decline in growth of ‑0.8%.

In the second scenario, growth would fall by 6.7 percentage points, leading to a ‑2.3% decline.

AfDB in its Economic Outlook gives a glimmer of hope to the affected economies noting that North Africa may realise a regional growth of between 3% and 3.3% in 2021.

The economic outlook report also emphasises the non-inclusive nature of growth in North Africa.

Social and regional disparities, already significant, have widened as a result of the pandemic.

 The report recommends tackling them by undertaking structural reforms to increase public-sector efficiency and private-sector competitiveness to create more jobs.

The economic report also calls on North African countries to continue to implement fiscal measures to protect affected households and businesses.

The development of the agro-industrial sector is also recommended to promote local agricultural value chains.

Further, Africa Development Bank encouraged North African countries to toward greater trade openness and integration, in the context of the African Continental Free Trade Area (AfCFTA).

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