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confidentially speaking

The Africa Confidential Blog

  • 5th March 2020

Coronavirus forces economic rethink

Blue Lines

It is a tragic paradox that African states, with experience of managing epidemics, are better placed than many other countries to contain the spread of Covid-19 nova coronavirus. Yet Africa is likely to be the region hardest hit by the indirect economic effects as the coronavirus epidemic spreads from Asia to Europe and North America.

For oil producers, the most obvious symbol of the epidemic is the build-up of unsold barrels of oil. Almost three-quarters of Angola's and Nigeria's export production scheduled for April is yet to find buyers. Other producers in Congo-Brazzaville, Chad and Gabon report similar problems. Most of this is due to the sharp cut in demand from Asia. Industrial production has halved in China over the past month. Few companies can confidently predict the pace of recovery.

With falling demand pushing the oil price to US$53 a barrel, Nigeria's finance minister Zainab Ahmed is to launch a mid-term review of the national budget which was premised on oil prices running at some $4 higher. But the effects of the Asia slowdown will go far beyond the oil sector as international conferences are postponed, tourism slows and flights are cancelled. The International Air Transport Association forecasts losses of $29 billion this year due to the epidemic. African airlines, already predicting losses of $200m this year, could see earnings fall by a further $40m. Although the WHO asks countries not to ban flights from the most affected areas, Kenya Airways and RwandAir have already halted all flights to China.