World Bank predicts an African recession in 2020, with commodity exporting countries leading the way

The latest edition of the World Bank’s « Africa’s Pulse » report, released April 9, makes it abundantly clear that « the Covid-19 pandemic is leading sub-Saharan Africa into its first recession in 25 years.

The observation, made by Albert Zeufack, the World Bank’s Chief Economist for the Africa region, is valid, whatever the scenario adopted (from -2.1% to -5.1% of the expected drop in GDP). A contraction in economic activity that the financial institution’s teams attribute « essentially to the sharp fall in commodity prices », with many « hydrocarbon-exporting states having built their budgets on a barrel of oil worth 55/60 dollars », the authors of the document point out. These estimates have since become completely outdated: as of 13 April, the price per barrel according to the OPEC basket, the benchmark index for oil-exporting countries, was around $25. Under these conditions, the strongest economic deceleration expected will come from three countries: South Africa, Angola and Nigeria, which are precisely the three main African exporters of raw materials (mining, oil and gas).

According to World Bank projections, these economic heavyweights of the continent could thus experience negative growth of 6.9% in 2020, and up to 8%, according to the most pessimistic scenario. The only countries that are expected to maintain some semblance of growth are those that export little or no mineral resources, such as Côte d’Ivoire, Senegal and Rwanda. A statistical lesson that gives more grain to grind than ever to those who advocate greater economic diversification.

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To cope with this announced shock, the report recommends preserving intra-African trade at all costs, the only channel of exchange capable of pooling each other’s production and stocks. Another priority, according to the World Bank, is to freeze external debt servicing. « Sub-Saharan Africa will not have the means both to finance the fight against the pandemic and to support its most fragile economic actors. It cannot do without international financial assistance », concludes Albert Zeufack, thus preparing minds for a particularly difficult period. However, the worst is never certain: after much negotiation, the member states of the Organization of the Petroleum Exporting Countries (OPEC) announced on 10 April a historic drop in their production of 10 million barrels per day, starting in May. This may (at last) be enough to get the price of black gold back on the rise…

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Comparison of oil price declines between the 2014-2015 crash (blue) and the coronavirus crisis (orange)
Source : FMI/Infographie : Brookings