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17 August 2020Heike Wengert, Munich Re Economic Research
COVID-19: Global Economic Outlook and Implications for Sub-Saharan Africa
217 August 2020COVID-19: Global Economic Outlook and Implications for Sub-Saharan Africa – Heike Wengert
Agenda
1. COVID-19: Global Economic Outlook 2. Implications for Sub-Saharan Africa3. Q&A
COVID-19: Global Economic Outlook
Image: 3alexd / Getty Images
4COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
The world economy in 2020: From positive outlook to severe recession in just a couple of months
IMF WORLD ECONOMIC OUTLOOK, JANUARY 2020
Tentative Stabilization, Sluggish Recovery?
“The global economy is projected to contract sharply by -3 % in 2020, much worse than during the 2008-09 financial crisis.”
“The risks for even more severe outcomes … are substantial.“
“Global growth is projected to rise to 3.3 %in 2020 …”
“Downside risks … remain prominent, including … further worsening of relations between the US and its trading partners … "
Source: IMF, Munich Re Economic Research
IMF WORLD ECONOMIC OUTLOOK, April 2020
The Great Lockdown
IMF WORLD ECONOMIC OUTLOOK UPDATE, JUNE 2020
A Crisis Like No Other, An Uncertain Recovery
2.93.3 3.4
2019 2020e 2021e
World
3.3 3.5 3.5
2019 2020e 2021e
Sub-Saharan Africa
IMF GDP growth projections (real, in %) IMF GDP growth projections (real, in %) IMF GDP growth projections (real, in %)
2.9
-3
5.8
2019 2020e 2021e
World
3.1
-1.6
4.1
2019 2020e 2021e
Sub-Saharan Africa
2.9
-4.9
5.4
2019 2020e 2021e
World
3.1
-3.2
3.4
2019 2020e 2021e
Sub-Saharan Africa
“The pandemic has had a more negative impact on activity in 1H 2020 than anticipated, and the recovery is projected to be more gradual ...” “Fundamental uncertainty … significant
downside risks … scenario 2nd outbreak…”
5COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Global outlook for 2020 has deteriorated at an unprecedented speed since mid March… but signs of stabilisation since May
2.6 2.4 2.2
0.9
-1.0
-1.8
-2.7
-3.8-4.3
-4.6 -4.7 -4.8
-6.0
-5.0
-4.0
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
01/20 02/20 03/20 03/20 03/20 03/20 04/20 04/20 05/20 05/20 06/20 07/20
MR Economic Research forecasts for 2020 global real GDP growth since January 2020* (in %)
* Baseline forecastsSource: Munich Re Economic Research
6COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Economic policy uncertainty reached record levels
0
50
100
150
200
250
300
350
400
450
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Global Economic Policy Uncertainty Index (news-based measure)
US electionBrexit
referendum
Global Financial
Crisis
Gulf War II9/11
Source: www.policyuncertainty.com (last data point: July 2020), Munich Re Economic Research
Trade disputes, geopolitics
Coronavirus
7COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Stock markets have seen a strong rebound after declines in March – investors looking forward to a recovery of the economy?
2,200
2,400
2,600
2,800
3,000
3,200
3,400
01/20 02/20 03/20 04/20 05/20 06/20 07/20 08/20
S&P 500
2,300
2,700
3,100
3,500
3,900
01/20 02/20 03/20 04/20 05/20 06/20 07/20 08/20
Major stock market indices (since January 2020)
Source: Bloomberg (as of 12 August 2020), Munich Re Economic Research
-34%+49%
Eurostoxx 50
-38%
+40%
PresenterPresentation NotesFor example, monetary policy supports financial markets but less so the real economy. Longer term, fiscal and monetary easing will burden firms' balance sheets.Unlike economic indicators, financial markets are forward-looking.The composition of the stock market and the economy differ greatly. SME have little stock market presence despite representing a large part of the economy.
22
26
30
34
38
42
46
50
54
58
06/2016 06/2017 06/2018 06/2019 06/2020
8COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Global economic activity hit a record low in April, contraction was still substantial in May, expansionary territory again in July
Aggregate Composite Purchasing Manager Indices (PMI)
Advanced Economies
Emerging Markets
Worldabove 50 means expansion
Source: Bloomberg (as of 12 August 2020), Munich Re Economic Research
22
26
30
34
38
42
46
50
54
58
06/2016 06/2017 06/2018 06/2019 06/2020
9COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Lockdown-induced downturn strong in services, manufacturing hurt by supply chain disruptions and lack of demand
Global Purchasing Manager Indices (PMI) – Manufacturing vs. Services
above 50 means expansion
Source: Bloomberg (as of 12 August 2020), Munich Re Economic Research
Manufacturing
Services
COVID-19 – Global Economic Outlook
Extent and speed of worldwide downturn in H1 2020 significantly exceeding developments during the global financial crisis
10
65
70
75
80
85
90
95
100
105
2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2018 Q1 2020 Q1
Multiple negative economic effects resulting from Lockdowns / social distancing Supply-chain disruptions Loss of demand (e.g. travel) Sentiment effects (fear /
precaution) Financial market repercussions
Sectors hit most: Hospitality, leisure Travel & Tourism Personal services Transport (airlines, rail)
Source: Oxford Economics, Munich Re Economic Research
-3.3% during 2 quarters
-10% during 2 quarters
World real GDP (index, 2019 Q4 = 100)
PresenterPresentation Notes… this is what we think that we know
11COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
All major central banks have enacted unprecedented monetary stimulus
Measure Intensity
Interest rates cuts
Liquidity support ✓✓
Asset purchases ✓✓✓
Easing regulations ✓
USD swap line ✓
ECB
Measure Intensity
Interest rates cuts ✓✓
Liquidity support ✓✓✓
Asset purchases ✓✓✓
Easing regulations ✓
USD swap line ✓
BoE
Measure Intensity
Interest rates cuts ✓✓✓
Liquidity support ✓✓✓
Asset purchases ✓✓✓
Easing regulations ✓✓
USD swap line
Fed
Measure Intensity
Interest rates cuts
Liquidity support ✓
Asset purchases ✓
Easing regulations
USD swap line ✓
BoJ
Measure Intensity
Interest rates cuts ✓
Liquidity support ✓✓
Asset purchases
Easing regulations ✓
USD swap line
PBoC
Source: IHS Markit
2.33.0
3.9
0.30.9 0.7
3.5
4.5
5.8
0.5
2.11.7
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Apr 20 Mai 20 Jun 20 2008 2009 2010
COVID-19 Global financial crisis
Other G20 G7
12COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Economic policy is doing “whatever it takes” – G20 fiscal response dwarfs global financial crisis and still moves up
Announced fiscal measures (% of GDP)
Source: IMF Fiscal Monitor (database as of June 2020)
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
MX
CN
SAU
RU
IDN
AUS
ARG
USA C
AZA
FIN
DBR
ATU
RKO
R ES FR UK JP DE IT
Additional spending and forgone revenue
Loans, equity, and guarantees
13COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Short-term work schemes limit unemployment spikes in Europe, US with extended unemployment assistance to support incomes
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2018 Q1 2020 Q1
Unemployment rate, 2000 Q1 – 2020 Q4e (quarterly average, in %)
Source: Oxford Economics, Munich Re Economic Research
Germany
USA
Eurozone
UK
14COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Fall in world trade projected to be in a similar magnitude as in 2009, export-oriented countries highly dependent on global recovery in trade
Global imports of goods and services(year-over-year real growth, in %)
-20
-15
-10
-5
0
5
10
15
20
2006Q1
2008Q1
2010Q1
2012Q1
2014Q1
2016Q1
2018Q1
2020Q1
2022Q1
Source: Oxford Economics, Munich Re Economic Research
Exposure to global trade: Exports in % of GDP (in 2019)
0% 20% 40% 60%
GermanyAngola
South KoreaMauritius
GhanaIvory Coast
CanadaFrance
UKSouth Africa
DCRSenegal
IndiaChinaJapan
CameroonBrazil
NigeriaUSA
KenyaEthiopia
Selected Sub-SaharanAfrican countries
Selected large economies
PresenterPresentation NotesIt might take at least two years to reach last year’s level of world trade again
Selected countries, not highest
80
85
90
95
100
105
110
115
120
COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Global recovery in two stages: strong V-shaped rebound in the beginning, but more sluggish recovery afterwards
15
Turning point in Q2 2020: Many countries in lockdown in April, but restrictions in many regions have eased in May and June
Global economy has since staged a robust rebound (e.g. retail sales in Europe and US)
But despite a strong initial bounce, high unemployment, surging insolvencies and consumer reluctance will limit the scale of the revival in H2 and beyond
At least one year of growth needed to get back to pre-crisis peak
Considerable downside risks remain (e.g. rise in COVID-19 cases in some parts of the world, massive wave of insolvencies)
Source: Oxford Economics, Munich Re Economic Research
World real GDP: baseline and distribution of plausible scenarios
Pre-coronavirus baseline (Jan 2020)
Current baseline
Index, Q4 2019 = 100
16COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Global economic outlook: sharp recessions in 2020 and relatively slow recovery in many large economies in 2021
-4.8
5.7
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
10.0
World USA EZ Germany UK Japan China India Brazil SouthAfrica2018 2019 2020e 2021e
Annual real GDP growth 2018–2021e (in %)
Source: Munich Re Economic Research (as 21 July 2020)
17COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Under any plausible scenario, inflation in major economies will be very low in 2020 – longer-term outlook poses more uncertainties
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
World USA EZ Germany UK Japan China India Brazil SouthAfrica
2018 2019 2020e
Annual CPI inflation 2018–2021e (in %)
Source: Munich Re Economic Research
2021e
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
10yr government bond yields (in %)
US and European yields have fallen to new record lows, Treasuries below 1% for first time – safe haven flows continue
18
UK
USA
Germany
-0.5
0.60.2
Source: Bloomberg (as of 12 August 2020), Munich Re Economic Research
As of 11 August2020
0.1Japan
COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
iStock-528612314
Implications for Sub-Saharan Africa
20COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
The COVID-19 outbreak has set off the first recession in Sub-Saharan Africa in 25 years, yet less severe than in other regions …
-4.8
0.0
-4.5 -5.4 -5.5 -5.6-7.7 -7.8 -7.9
5.78.1
3.35.3 5.1 4.9 5.5 5.8 4.4
-12.0
-8.0
-4.0
0.0
4.0
8.0
12.0
World EmergingAsia
MatureAsia/Pacific
SubSaharan
Africa
EasternEurope
NorthAmerica
LatinAmerica
WesternEurope
MENA
2019 2020e 2021e
Annual real GDP growth 2018–2021e (in %)
Source: Munich Re Economic Research
Real GDP growth in 2020 (in %, Sub-Saharan African and selected other large economies)
21COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
… and wide variation between countries in Sub-Saharan Africa
Source: Oxford Economics, Munich Re Economic Research
-5.4
-12.0
-8.0
-4.0
0.0
4.0
Viet
nam
Chi
naR
wan
daBu
rund
iG
uine
aEt
hiop
iaC
ôte
d'Iv
oire
Gha
naBe
nin
Keny
aC
amer
oon
Sene
gal
Burk
ina
Faso
Nig
eria
Aust
ralia
Gam
bia
Turk
eySu
b-Sa
hara
n Af
rica
USA
Indi
aJa
pan
Ger
man
yR
ussi
aD
CR
Gab
onC
anad
aM
exic
oBr
azil
Nam
ibia
Zam
bia
Sout
h Af
rica
UK
Ango
laIta
lyM
aurit
ius
Spai
nAr
gent
ina
Bots
wan
aC
ongo
, Rep
.
Selected Sub-Saharan African countries
Selected large economies
PresenterPresentation NotesFare even better than Advanced Economies
22
COVID-19: The economic impact may be more severe in emerging market economies as they are buffeted by additional pressure
Direct effect of containment /
mitigation measures
Commodity markets: drop in demand/prices
Currencies under pressure
Fiscal stress(lower government revenues, higher
expenditure)
Tourism: revenues are plunging
Capital outflows
Source: Munich Re Economic Research COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Weak health care systems
PresenterPresentation NotesImpact transmission channels
First there is the direct effect of
Global vulnerability heatmap - Americas flashing red, Sub-Saharan Africa seems less vulnerable, except for South Africa
23COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Overall COVID-19 structural vulnerability Covid-19 structural vulnerability scorecard
Source: Oxford Economics, Munich Re Economic Research
Europe 3.5 4.2 4.4 3.0MENA 4.0 3.9 3.8 3.8Asia 4.3 3.8 4.1 2.4Latin America 4.4 4.2 4.4 3.3Sub-Saharan Africa 4.7 3.5 4.8 2.2
Structuraleconomicvulnerability
Pandemicprevalence
Health-relatedvulnerability
Government response
24COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
The pandemic is still developing with regional differences highly relevant – Surge in Latin America, Africa less affected – so far
Daily deaths of patients diagnosed with coronavirus (7-day rolling average)
Source: Financial Times (as of 14 August 2020), Munich Re Economic Research
Resurgence in COVID-19 deathsapproaching mid-April peak
PresenterPresentation NotesPeak of daily deaths was in mid April, with Europe as the region hit mostThe surge in Latin america means global daily death toll on the rise once againLatin America now accounts for 45% of average global daily deathsThe US share of average global daily deaths has risen again to 18%India‘s problems are also increasingAfrica‘s share of daily daths is low compared to other regions: current estimate 4%
Keep in mind: data problems
25COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Sub-Saharan Africa benefits from a young population, relativelyfew people are over 60
Population over 60 (in %)
Source: UN, Financial Times (as of 23 July 2020), Munich Re Economic Research
PresenterPresentation NotesThe vast majority of people worldwide who die of COVID-19 are over 60.The continent’s young population means the death rate is likely to be lower. There is also tentative evidence emerging that African countries may have a high prevalence of asymptomatic cases thanks to its young population. An antibody study conducted by the Mozambican government in the northern city of Nampula with a population of 750,000 found that some two-thirds of people infected had suffered only very mild symptoms or no symptoms at all.
26COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
However, the scope for the pandemic to spread as aggressively as elsewhere remains a very real threat, especially in South Africa
Daily new confirmed COVID-19 cases (rolling 7-day average)
Source: European CDC (last updated: 16 August 2020)
Adequate testing? Rate of positive tests (in % of total)
PresenterPresentation NotesSouth Africa ranks 5th based on total number of infections, and some weeks ago daily infections were still rising. Recent data is better
The default view on a logarithmic y-axis is helpful to compare the growth rates between countries: on a logarithmic axis the steepness of the line corresponds to the growth rate.
The available data on confirmed cases only becomes meaningful when it can be interpreted in light of how much a country is testing. This is the Our World in Data built the global database on COVID-19 testing and the line colors in this chart show whether a country is testing adequately or not.
27COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Many African countries were quick to react to the pandemic, despite few cases; but economies cannot afford long lockdowns
COVID-19 government response stringency index (starting January 1, up to July 17)
Source: Financial Times, University of Oxford Blavatnik School of Government, IMF, Munich Re Economic Research
Measures in Sub-Saharan Africa No. of countries
Quarantine and self-quarantine 44
Travel restrictions and border closure 43
Cancellation of public gatherings 42
Closure of school and universities 36
Shelter in place and lockdown 34
Remote work 25
Many Sub-Saharan economies have reopened before the infection has peaked
28COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Sub-Saharan countries dependent on commodity exports and tourism are hit most
IMF real GDP growth forecasts for Sub-Saharan Africa (in %)
Source: IMF (June 2020), Munich Re Economic Research
-10-8-6-4-202468
2020e 2021e 2020e 2021e 2020e 2021e 2020e 2021e 2020e 2021eTourism dependent
countriesNon-resource-
intensive countriesOther resource-
intensive countriesOil exportersSub-Saharan Africa
Commodity markets: widespread rally recently, with demand(China) and supply factors playing a role, yet oil prices still far down
29
Oil price, Brent (in USD per barrel)Commodity price indices (31.12.2019 = 100)
Source: Bloomberg (as of 12 August 2020), S&P GSCI, Munich Re Economic Research
0
20
40
60
80
100
120
140
160
Dez/ 19 Feb/ 20 Apr/ 20 Jun/ 20
Agriculture and livestock Energy
Industrial metals Precious metals0
10
20
30
40
50
60
70
80
Jan Feb Mar Apr May Jun Jul Aug
Spot price (August 11, 2020):USD 37.2
COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
PresenterPresentation NotesThere was a widespread rally in commodity markets in July and early-August as a combination of bullish factors drove prices higher. First, the US$ tumbled in July – showing its largest monthly fall since 2010 – as US real yields on Treasuries fell to very low levels and confidence in the US currency was undermined by political fighting ahead of the US election and high and rising levels of Covid-19 cases. Other key drivers included a solid economic recovery in China, high levels of investor interest in commodities and challenges on the supply side as Latin America cut mine output. Gold and iron ore prices are both up another 13% m/m, while Brent is up 4% and most of the base metals were at least 5% higher m/m. Copper was a notable exception though and is down 1% m/m.
Travel & Tourism (direct spending of residents and non-residents % of GDP in 2019)
30COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
The fall in tourism is a key vulnerability for some countries in Sub-Saharan Africa
0
5
10
15
20
25
30
Source: World Bank, Munich Re Economic Research
PresenterPresentation NotesImpact of COVID-19 on tourism: fewer tourist arrivals mean lost export revenues from tourism due to lockdowns and travel restrictions
31COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Sub-Saharan countries eased macroeconomic policies in response to the crisis, yet are constrained by vanishing fiscal space …
Policy rates (cumulative change since end 2019, in %)
Fiscal response (additional resources in % ofGDP)
Source: IMF (as of June 2020)
0
4
8
12
SSA EMs AEs
-3
-2.5
-2
-1.5
-1
-0.5
0
Sout
h Af
rica
Esw
atin
iTh
e G
ambi
aLe
soth
oM
ozam
biqu
eN
amib
iaZa
mbi
aSe
yche
lles
Sout
h Su
dan
Uga
nda
Gha
naD
RC
Mau
ritiu
sKe
nya
Gui
nea
Nig
eria
WAE
MU
Bots
wan
aR
wan
daC
EMAC 0
2
4
6
Nigeria Kenya Ghana Ethiopia Mauritius Senegal S' AfricaAdditional spending and forgone revenueLoans, equity, and guarantees
32COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
… and deteriorating financing conditions: capital outflows, a sharp widening of spreads and temporary shut outs from capital markets
Sub-Saharan Africa bond index spread(change in basis points relative to start)
Cumulative nonresident portfolio flows to emerging markets (% of 2020 GDP)
-1.5 -1 -0.5 0
Other EMs
South Africa
Ghana
Ivory Coast
Namibia
Kenya
Rwanda
Zambia
NigeriaMar - April 2020 Since April 2020
Source: IMF (June 2020)
33COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Exchange rate risks and debt sustainability concerns as constantcompanions of the crisis, much-needed IMF/WB assistance
90
100
110
120
130
140
150
12/19 01/20 02/20 03/20 04/20 05/20 06/20 07/20INR RUB ZARBRL MXN MYR
0
50
100
150
200
250
300
Japa
nIta
lyU
SAAn
gola UK
Mau
ritiu
sSo
uth
Afric
aG
hana
Sene
gal
Ger
man
yKe
nya
Ethi
opia
Cot
e d'
Ivoi
reC
amer
oon
DC
RN
iger
ia
2019 2020
Exchange rates (per USD; Dec. 2019 = 100) Government debt (in % of GDP)
Source: Bloomberg (as of 12 August 2020)
Depreciation
PresenterPresentation NotesCountries receive IMF assistance and debt service relief
34COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Good news: PMIs back in the green, but uncertainties linger and South Africa gives cause for concerns
SSA PMI’s expanded in July as expected, with activity benefitting from post lockdown domestic and external demand recovery
Labour markets, which remain under pressure, and rising infections may limit pace of normalization
GDP weighted Sub Saharan composite PMI Composite PMI
Source: IHS Markit, JP Morgan, Munich Re Economic Research
Improvement was broad-based, led by Kenya (easing of travel restrictions), Nigeria and Uganda
S’Africa
48.449.749.249.448.647.648.348.444.535.132.542.544.944.6
35COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
South Africa: The pandemic is evolving at a challenging time
-10
-5
0
5
2000 2005 2010 2015 2020e
30
35
40
45
50
55
2016 2017 2018 2019
Drivers of recession: Decline in external demand from Asia (already in Jan/Feb) and Europe (March), own nationwide lockdown end of March, current re-tightening of restrictions
Key sectors of the economy, such as mining, manufacturing and construction, were effectively halted, services set to join
Ongoing electricity supply issues Confidence of 12-month recovery from COVID19 crisis
below other Sub-Saharan countries Significant financing needs led to request for IMF support
COVID-19:Total confirmed cases per million people, still rising
Leading indicators: South African manufacturing PMI below 50 since mid 2019
GDP growth• Below potential in
last decade• Stagnation in 2019• Deep recession in
2020• Slow recovery• High risk for even
worse outcome
(real, in %)
Source: IHS Markit, Munich Re Economic Research
PresenterPresentation NotesIMF 27 July 2020
The pandemic is evolving in South Africa at a challenging time. With severe structural constraints to growth, economic activity has weakened over the last decade despite significant government spending, resulting in high unemployment, poverty, and income inequality. Like in other emerging economies, financial market volatility has increased during the pandemic, but the financial system is showing resilience.
Real GDP growth (q-t-q, in %, 4Q 2019 = 100)
36COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Overall, Sub-Saharan Africa is expected to recover a bit faster thanother emerging / frontier regions, yet downside risks remain high …
80
90
100
110
120
130
140
2018Q1 2019Q1 2020Q1 2021Q1 2022Q1 2023Q1 2024Q1 2025Q1
Emerging Asia Latin America MENA Sub-Saharan Africa
Source: Munich Re Economic Research
driven by China
37COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
… and the crisis impact could wipe out almost 10 years of progress in development
Real GDP per capita (2000–20, index 2000 = 100)
Source: IMF
Almost 10 years ofprogress lost
The Great Reset? Do we have to expect paradigm shifts due to COVID-19? Can Sub-Saharan Africa benefit from a reset?
38
Global power shift?
Deglobalisation?
Restructuring of supply chains?
Digitalisation?
Climate policies?Larger role of governments?
Geopolitical tensions?
Source: Munich Re Economic Research
Distributional conflicts?
Financial stability?
COVID-19 – Global Economic Outlook and Implications for Sub-Saharan Africa
Heike Wengert (HWengert@munichre.com)
Thank you very much for your attention!
mailto:HWengert@munichre.com
COVID-19: Global Economic Outlook and Implications for Sub-Saharan AfricaAgendaCOVID-19: Global Economic OutlookThe world economy in 2020: From positive outlook to severe recession in just a couple of monthsGlobal outlook for 2020 has deteriorated at an unprecedented speed since mid March… but signs of stabilisation since MayEconomic policy uncertainty reached record levelsStock markets have seen a strong rebound after declines in March – investors looking forward to a recovery of the economy?Global economic activity hit a record low in April, contraction was still substantial in May, expansionary territory again in JulyLockdown-induced downturn strong in services, manufacturing hurt by supply chain disruptions and lack of demandExtent and speed of worldwide downturn in H1 2020 significantly exceeding developments during the global financial crisisAll major central banks have enacted unprecedented monetary stimulusEconomic policy is doing “whatever it takes” – G20 fiscal response dwarfs global financial crisis and still moves upShort-term work schemes limit unemployment spikes in Europe, US with extended unemployment assistance to support incomes�Fall in world trade projected to be in a similar magnitude as in 2009, export-oriented countries highly dependent on global recovery in tradeGlobal recovery in two stages: strong V-shaped rebound in the beginning, but more sluggish recovery afterwardsGlobal economic outlook: sharp recessions in 2020 and relatively slow recovery in many large economies in 2021 Under any plausible scenario, inflation in major economies will be very low in 2020 – longer-term outlook poses more uncertaintiesUS and European yields have fallen to new record lows, Treasuries below 1% for first time – safe haven flows continueImplications for Sub-Saharan AfricaThe COVID-19 outbreak has set off the first recession in Sub-Saharan Africa in 25 years, yet less severe than in other regions …… and wide variation between countries in Sub-Saharan AfricaCOVID-19: The economic impact may be more severe in emerging market economies as they are buffeted by additional pressure�Global vulnerability heatmap - Americas flashing red, Sub-Saharan Africa seems less vulnerable, except for South AfricaThe pandemic is still developing with regional differences highly relevant – Surge in Latin America, Africa less affected – so farSub-Saharan Africa benefits from a young population, relatively few people are over 60However, the scope for the pandemic to spread as aggressively as elsewhere remains a very real threat, especially in South AfricaMany African countries were quick to react to the pandemic, despite few cases; but economies cannot afford long lockdownsSub-Saharan countries dependent on commodity exports and tourism are hit mostCommodity markets: widespread rally recently, with demand (China) and supply factors playing a role, yet oil prices still far downThe fall in tourism is a key vulnerability for some countries in Sub-Saharan AfricaSub-Saharan countries eased macroeconomic policies in response to the crisis, yet are constrained by vanishing fiscal space …… and deteriorating financing conditions: capital outflows, a sharp widening of spreads and temporary shut outs from capital marketsExchange rate risks and debt sustainability concerns as constant companions of the crisis, much-needed IMF/WB assistanceGood news: PMIs back in the green, but uncertainties linger and South Africa gives cause for concernsSouth Africa: The pandemic is evolving at a challenging timeOverall, Sub-Saharan Africa is expected to recover a bit faster than other emerging / frontier regions, yet downside risks remain high …… and the crisis impact could wipe out almost 10 years of progress in developmentThe Great Reset? Do we have to expect paradigm shifts due to COVID-19? Can Sub-Saharan Africa benefit from a reset?Thank you very much for your attention!
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