The International Monetary Fund (IMF): Africa Cannot Escape Global Crisis This Time

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The International Monetary Fund (IMF) predicts that Africa will also not escape an economic crisis due to the corona pandemic.

 

During the financial crisis of 2008, the continent was still doing relatively well, partly because African countries were less interwoven with the global financial system.

“This time will be different,” said IMF economists Karen Ongley and Abebe Aemro Selassie in a blog. They believe that the virus outbreak in sub-Saharan African countries is causing economic damage in a variety of ways. At the same time, limited funds are available in the area to address problems.

What hits Africans particularly hard is the massive collapse in oil prices. Due to the corona crisis and trade conflict between Russia and Saudi Arabia, prices have fallen by more than 50 percent since the beginning of this year.

The IMF assumes that every 10 percent of oil prices that comes down to about 0.6 percent less economic growth in oil-exporting countries, such as Nigeria, Angola and Gabon. Time and time again, this translates into an increase in government budget deficits by an estimated 0.8 percent.

As in Europe and Asia, measures to contain the virus also disrupt daily life in Africa. Many people temporarily have less work there, resulting in lower-income, lower expenditure and a decline in employment.

Due to the many travel restrictions in the world, less income is expected in the tourism sector in the near future and shipping and trade are under pressure. Ongley and Selassie also foresee difficulties in getting investment or development projects off the ground.

The IMF will only come up with detailed new growth estimates next month. However, IMF CEO Kristalina Georgieva said earlier this week that she fears a “recession at least as bad as during the 2008 global financial crisis or worse”.

The fund has set aside tens of billions of dollars to support countries in easing economic pain. Almost 20 African countries have already submitted requests for help to the fund. The IMF thinks that at least ten other African countries will soon follow suit with an application. The first financial support can probably be paid in early April.

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