Africa’s GDP to contract 3.1% this year, Nigeria by 3.7% says Reuters survey

Sub-Saharan Africa’s economy will contract this year with Nigeria, Africa’s biggest economy expected to contract 3.7% but bounce back to 2.0% growth next year according to a survey by Reuters.

The contraction follows shutdowns which disrupted activity and as daily cases of coronavirus are still rising in the region.

The forecast 3.7% contraction reflects consensus of economists in Nigeria and presents a more realistic picture than the benign outlook given days ago by the central bank.

Following months of lockdowns which have muted economic activity a Reuters poll taken in the past week suggested the region will contract 3.1% this year but bounce back to around 3.5% growth in 2021.

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Some countries have begun relaxing restrictions but virus cases are still increasing, unlike in many developed countries that have started to show signs of recovery, so the uncertainty meant the range of forecasts for next year was wide – between flatlining and 4.8% growth.

South Africa has reported the most cases in Africa, partly reflecting more widespread testing, and it is harder to gauge the full extent of outbreaks elsewhere although there are no signs numbers are falling.

“Growth downgrades dominate in a region where external and fiscal buffers were already substantially eroded. The impact of COVID-19 will reduce growth even further,” Standard Chartered wrote in a note.

Continental peer South Africa was expected to grow 3.5% next year following an 8.0% contraction this year, a Reuters poll showed last week.

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However, Ghana, one of the continents oil exporters, was still expected to grow, expanding 1.9% this year and 4.2% in 2021.

“Despite the obvious downside risks from lower oil prices and headwinds from COVID-19, we believe Ghana has a decent growth outlook and reasonably comfortable external sector metrics relative to other African oil exporters,” said Michael Kafe, economist at Barclays.

“The fallout from COVID-19 and associated lockdown means GDP growth is likely to be weak this year. However, unlike other African oil exporters such as Angola, Gabon and Nigeria, where GDP growth is likely to contract this year, we expect Ghana to post positive GDP growth.”

Kenya – east Africa’s biggest economy – was expected to have a lacklustre performance this year with no growth, a poor outcome having averaged around 6% annual growth in the past decade.