Macroeconomic impact of COVID-19 on Africa: evidence from an Africa-wide aggregate macro econometric model

Abstract

Using an Africa-wide macro econometric model, this paper assesses the impact of the coronavirus disease (COVID-19) pandemic on economic growth and fiscal and trade performance in Africa. The findings reveal that gross domestic product (GDP) growth in 2020 will be between 4.8 and 8.4 percentage points lower than the baseline scenario without COVID-19. This translates into an estimated real GDP loss of between $200 billion and $220 billion in 2020. The pandemic has also widened fiscal deficits and raised public debt, while trade deficits have improved slightly. Although GDP growth is forecast to recover by an average of 2 per cent in 2021 and 1.4 per cent in 2022, in real terms, it will still be below pre-COVID-19 levels, despite a strong recovery. The results imply that the pandemic has posed a critical threat to African economies, leading to a further contraction of GDP, exacerbating the consequences of an already limited fiscal space. African countries should therefore act boldly and pursue a coordinated and concerted macroeconomic policy mix to mitigate the impact of the pandemic and stimulate economic activity. Furthermore, governments should embark on policies that could tackle structural issues by addressing constraints to economic growth and improving productive capacities and the business environment in order to attract investment and enhance domestic resource mobilization.