The COMESA regional economy is projected to grow at a paltry 0.6% this year down from 5.2% recorded in 2019 and 6.0% in 2018.
The slight dip in 2019 was attributed to lower commodity prices while the expected slump in 2020 will result from the devastating impact of the Covid-19 pandemic suggesting a deeper economic contraction for the region.
According to a report on macroeconomic developments in COMESA region in 2019, the slowdown in growth was experienced in most COMESA member countries except Egypt, Ethiopia, Malawi, Rwanda and Seychelles which registered improved economic growth compared to 2018.
“The impressive growth of above 5% in both years reflected among others, improving growth fundamentals, with a gradual shift from private consumption toward investment and exports,” says the report prepared by the COMESA Monetary Institute.
The projected contraction of the regional economy will be driven by the impact of containment measures, the decline in global demand and regional spillovers, the external financial constraint and the impact of multiple shocks.
According to the CMI report, COVID -19 mitigation measures including travel restrictions, quarantines, lockdowns, border closures among other measures have not only disrupted economic activities but also led to mass unemployment and loss of livelihoods, especially in the informal sector.
“Decline in global demand and travel has resulted in rapid fall in trade and tourism while disruption of regional trade due to border closures has severely affected cross-border trade in the region,” the report states. “Severe contraction is also expected in countries where tourism significantly contributes to economic growth such as Mauritius, Seychelles, Egypt and Kenya, among others.”
The report noted that capital outflows have been significant in a number of countries and as a result, most of the currencies in the region are under pressure to depreciate. Together with the sharp decline in capital inflows and remittance, and postponement planned bond issuance means that most countries in the region are facing serious external financing constraints.
The impact of multiple shocks particularly the effects of floods, locust invasion and the collapse of commodity prices will significantly contribute to the economic contraction in the region, according to the CMI report.
Accordingly, the immediate concern for the region now is to contain the spread of Coronavirus as well as opening the economies.
“How to strike a balance between the two almost conflicting objectives will determine the speed and extent of economic recovery and return to normalcy,” the report adds. “Key towards getting the balance right will depend on how effective and efficient governments in the region will be as they continue to carry out public health measures and the extent to which the public will adapt the same.”
Going forward, the report recommends that strengthening of continental value chains should be a priority given the uncertain global business environment.
“In the medium-long term, the effective implementation of regional integration agenda of the Regional Economic Communities and the continental free trade area will be key to strengthening regional production networks and trade, reducing the continent’s vulnerability to external shocks, and consequently leading to improvements in external current account balances.”