By Varaidzo Zhakata
BRITON Woods institution, the International Monetary Fund (IMF) has forecasted contraction of African economies in light of the COVID- 19 induced lockdowns, and external shocks that will also have an impact on the continent’s oil exporters (8 SSA oil exporters, Algeria and Libya).
According to a report presented by Abebe Aemro Selassie at the IEA Africa Ministerial Roundtable on COVID-19 Impact on Africa’s Energy Sector, the predicted average African real gross domestic product (GDP) growth in 2020, reduced from 3.8 percent (%) in October 2019 to -2.8%, currently.
For African oil exporters (8 SSA oil exporters, Algeria and Libya), it was a revision from 2.5 percent to -5.2 percent.
The IMF also stated that the human toll will be steep, especially in African oil exporters, as measured by per capita growth, and Briton Woods institution anticipates an average real GDP growth per capita to reach -4.9 percent for the continent, and a staggering -7.4 percent, in oil exporters.
The forecast further highlights that the crisis will also put government budgets under great pressure with an approximate total loss in fiscal revenues amounting to $US92 billion, a decline of about a quarter, compared to October estimate, for the continent and of about US$34 billion for African oil exporters, or a loss of more than a third. This has pushed the public debt burden to more than 65% of GDP in 2020 on average, with a particularly fast increase in oil exporters.
Since the oil price collapse of 2014, production and investment in the oil sector, in most African oil exporters have been on a secular decline, for a combination of factors, including structural issues, governance, and security concerns in several countries like Nigeria and Libya.
The report also highlighted that if this trend continues, limiting volumes, and if oil price persists in the $30-40 range, African oil exporters will have to face difficult fiscal challenges, where most projected fiscal break-even prices are greater than US$50 and, in several cases, close to or greater than US$100, for instance, Algeria, Cameroon, Nigeria and Libya.
Investment in energy in Africa, whether it is oil extraction and refining or energy generation, may be affected in the next years by the conjunction of demographic trends, technological changes, the urgency of tackling climate change and the possible accelerating effect of the pandemic.