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African Development Bank Regional Economic Outlook 2020 for Southern Africa

A higher level of preparedness is urgently needed to prevent and mitigate the COVID-19 pandemic in Southern Africa, including additional resources for testing and to reduce the impact on households and the economy, the African Development Bank said in its new Southern Africa Regional Economic Outlook.

Report recommends inclusive, broad-based and pro-poor policies to address inequality and reduce poverty rates; Impact of COVID-19 in South Africa projected to affect rest of Southern African economies.
In the worst-case scenario, growth in Southern Africa would fall to -6,6 percent this year before recovering to 2,2 percent in 2021.

Growth is projected at –4,9 percent in the baseline case, mainly driven by the deep recession in South Africa, induced by a fall in commodity prices, containment measures, weather-related events, and the structural issues related to public utilities. The region’s growth is projected to be the most affected by COVID-19.

Before COVID-19, Southern Africa’s economy was projected to recover from an estimated 0,7 percent growth in 2019 to 2,1 percent this year. As has been the case historically, South Africa, the region’s largest economy, is projected to contribute an average of 60 percent of regional economic output this year.

Following the outbreak of COVID-19, economic growth forecasts declined by seven percentage points from the original projection under the baseline scenario, and 8,7 percentage points under the worst-case scenario.

The impact of COVID-19 in South Africa is projected to trickle to the rest of the Southern African economies.

Botswana, Eswatini, Lesotho and Namibia are seen as more vulnerable to South Africa’s impending contraction in economic growth, while Mozambique’s sales of gas and electricity could be adversely affected. In addition, countries that rely on tourism, such as Mauritius, will be adversely affected.

However, the immediate outlook depends on the spread of new cases. South Africa is now the fifth-worst affected country in the world, with close to 400,000 confirmed cases.

The service sector, which accounts for over 50% of the GDP of most of the regional economies, is projected to be negatively impacted by the pandemic, worsened by travel bans, as well as disruption to transport, distribution, hotels and restaurants, entertainment, retail and trade.