Impact Assessment of Covid-19 The Case of Eastern Africa
UNECA Sub-Regional Office for Eastern Africa Eastern Africa one of the fastest growing regions in the world
Average Growth Rates (%), 2014 - 2020 8% In 2019, the fastest Eastern Africa-12 7.0 7.0 growing economies were: 7% 6.6 6.6 6.4 6.1 6% 5.7
5% 3.8 Africa 4% 3.2 3.1 3.2 3.0 3% 2.5 2.9 2.9 2.8 2.7 2.7 2% 2.3 2.5 1.6 World 1%
0% 2014 2015 2016 2017 2018 2019* 2020* Source: National sources, UNDESA, ECA calculations Note: Eastern Africa average excludes Somalia and South Sudan; *Estimate/forecast Despite high levels of growth, Severe economic vulnerabilities still remain in Eastern Africa as a whole…
Slow paced structural change
Demographic pressures Lack of job opportunities Reduced trade performance in recent years Demographic pressures are real… Working Age Population (millions) Annual Increase between 2015 and 2030 2.5
2.1 2 Each year, these economies 1.5 need to create an aggregate 1.2 of new jobs 1 1 million 1 7 0.5 0.5 0.3 0.2 0.1 0 0 0 0
Eritrea Kenya Djibouti Ethiopia Rwanda Somalia Tanzania Uganda Seychelles Madagascar South Sudan Source: UNdata & ILO Yet job creation has not kept pace with economic expansion GDP vs. Employment Growth Rates Average between 2006 and 2016 8%
6% 6% growth required simply to absorb new entrants to job market 4% Madagascar D.R. Congo Comoros Kenya Ethiopia Burundi Africa Uganda Rwanda Tanzania 2% Djibouti Employment Growth Rate Eritrea Seychelles XX Somalia Job creation rate well below rate of economic expansion 0% 0% 2% 4% 6% 8% 10% 12% GDP Growth Rate Source: UNdata & ILO Intra-regional trade has stopped growing and stagnated over the past decade in Eastern Africa Intra-Regional Trade (USD m)
EAC IGAD 3500 3500
3000 3000
2500 2500
2000 2000
1500 1500
1000 1000
500 500
0 0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: ECA; UNCTADstat Covid-19 brings a whole new level of vulnerabilities…
In Africa as a whole and Eastern africa in particular, some economic effects are expected in the Service sector:
• Slow-down in economic activity due to preventive and restrictive measures • Will result in
• Losses to regional Airlines • Loss of public revenues and houselholds income through tourism-related activities; Regional exports heavily dependent on services, so if economic activity slows down and services are hit, effects could be substantial
Transport Services 14%
Travel Services 5%
Other Services Merchandise Trade 20% 61%
Source: UNCTADStat African services trade generate more than 150 Bn USD per year
African Services Exports, USD Billions
200
150
100
50
0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
-50
-100
imports exports Tr ade balance Trade deficits are less present in services than in Merchandises
Ethiopia
Kenya
Tanzania
Uganda
Madagascar Merchandise trade balance Seychelles Service trade balance Rwanda
Somalia
Djibouti
Burundi
D.R. Congo
-15,000 -12,000 -9,000 -6,000 -3,000 0 3,000 USD million
Source: UNCTADStat The Contribution of Tourism sector in some Top Tourism destinations in Africa amount to 140 bn USD in 2019. In a scenario where the sector looses 20% of revenues, that will correspond to a 28 bn USD loss from COVID.
GDP (USD bn) % share of Visitor % share of International GDP exports exports arrivals (mn) South Africa 32.1 9 9.7 9 10.5 Egypt 29.6 12 12.2 27 11.3 Morocco 22.7 19 9.6 20 12.3 Nigeria 18.6 5 1.6 3 - Kenya 8 9 1.7 15 1.5 Ethiopia 7.4 9 2.5 38 0.9 Tanzania 6.7 12 2.5 28 - Tunisia 6.5 16 2.2 11 8.3 Cote d’Ivoire 4.6 10 0.5 4 1.8 Mauritius 3.5 24 2.2 37 1.4 Air transports provide substantial revenues to several economies (about 9 bn USD in total for countries listed below). With flights suspended because of COVID 19, important losses ahead. Top African Air transport exports, USD Millions, 2017
Ethiopia 2,576
Morocco 1,598
Egypt 1,439
Kenya 828
Tunisia 580
Madagascar 337
Mauritius 274
Algeria 256
Rwanda 183
Seychelles 156
United Republic of Tanzania 155
Togo 139
Côte d'Ivoire 125
Ghana 122
Namibia 114
Cabo Verde 86
0 500 1000 1500 2000 2500 3000 Some African economies dependent heavily on tourism: Among the top 10 in this category, 3 are from Eastern Africa (Toursim share of GDP, %)
Botswana 13
Rwanda 14
Madagascar 16
Tunisia 16
Morocco 19
Gambia 20
Mauritius 24
Sao Tome and Principe 28
Cape Verde 46
Seychelles 67
0 5 10 15 20 25 30 In Eastern Africa the contribution of tourism to the economies varies across countries, and so COVID 19 will have different effects via this sector
EA Tourism Percentage Share of GDP
Democratic Republic of Congo
Uganda
Tanzania
Seychelles
Rwanda
Madagascar
Kenya
Ethiopia
Comoros
Burundi
0 10 20 30 40 50 60 70 For the continent, the number of tourists coming from African countries is growing, but that might not be enough to protect the sector from experiencing important losses as travel bans are in the rise
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0 2013 2014 2015 2016
Africa Arrivals Total arival s Indeed, the origin of Toursists is well diversified for several countries, but still COVID is likely to affect substantially the revenues Distribution of Tourists by region of origin (in %)
Kenya, 2019
Tanzania
Cote d'Ivoire
South Africa
Morocco
Seychelles
Egypt
0 10 20 30 40 50 60 70 80 90 100
Tourists from Africa Tourists from Asia-Pacifc Tourists from Americas Tourists from Europe Not specified the region is a net commodity importer…
Ethiopia South Sudan
Somalia
Uganda Kenya
Net Exporter Congo (DRC) Net Importer Tanzania
...and so the overall impact of CODIV is likely to be more ambiguous as Madagascar prices of oil and other commodities
Powered by Bing are goind down © GeoNames, HERE, Microsoft Conclusions
1. Regional growth likely to be very negatively impacted by Coronavirus
2. Measures to prevent spread of disease will slow down economic activity and hit severely the Service sector, across the board.
3. Commodity Price shock will hit hard the net commodity exporters in the region – but will be more ambiguous on other countries.
4. Disruption to trade likely to be severe – but will require creative responses by regional governments to scarcities in some sectors.
5. Over the mid-to long-term, disruption in supply chains (particularly with China) could lead to filling the gap by regional producers – need to implement the AfCFTA! Andrew Mold Chief, Regional Integration and AfCFTA Cluster UNECA Sub-Regional Office for Eastern Africa Kigali, Rwanda www.uneca.org