Africa after the Covid-19 Lockdowns: Economic Impacts and Prospects

Abstract

Because of the Covid-19 lockdowns, South Africa's gross domestic product (GDP) fell by 51 per cent from the first to the second quarter of 2020. A recent World Bank report suggests that an additional 26 to 40 million sub-Saharan Africans could fall into poverty due to the pandemic. At the same time, some African economies are reporting initial signs of economic recovery. Most African governments responded to the pandemic with strict lockdowns, resulting in severe economic consequences. The impacts have been diverse and differ between countries, the informal and formal sectors, industries, and traded products. The sharp decline in South Africa coincides with initial signs of recovery in both West and East Africa. Informal workers across the continent suffered drastic short-term income losses during the lockdowns, as very few were shielded by social protection or other policies. Trade has declined dramatically, but there are important differences between export products. FDI is likely to drop substantially in 2020, including in sectors considered key for an acceleration of Africa's economic development. Economic support by African governments has been far more moderate than elsewhere, although the international community has provided additional means to African economies. A quick recovery could minimise setbacks to economic progress and poverty reduction in Africa. This requires a quick response that differentiates across countries, industries, and affected workers. The "new normal" should put more weight on the economic costs of pandemic-related restrictions. In the medium term, African governments need to increase their economies' and citizens' resilience to (economic) shocks.