African countries that are heavily dependent on the tourism industry have a difficult recovery period after Covid-19, which continues to devastate global economies.
Economists from the International Monetary Fund (IMF) and Renaissance Capital estimate that countries with a large agricultural sector and low exposure to tourism will recover more quickly from the economic crisis fueled by the pandemic.
According to the IMF, the biggest impact of the Covid-19 crisis was on economic growth for tourism-dependent economies such as Mauritius, Seychelles, Cabo Verde, Comoros and the Gambia, although the countries that export products were also hit hard.
For tourism-dependent economies, the sector represents, on average, about 18 percent of gross domestic product (GDP) and plays a crucial role in livelihoods, making up about 25 percent of total employment.
Tourism is also a major source of fiscal revenue, accounting for 18 percent of revenue in the Seychelles; while foreign exchange averaged more than 46 per cent of export receipts.
Despite a global recovery in many sectors, tourism inflows after 2023 are not expected to return to 2019 levels again.
“Growth in more diversified economies will slow significantly, but in many cases will still be positive by 2020,” the IMF said in its October Outlook report for sub-Saharan Africa.
“Oil-exporting countries have also been hit hard, with an average contraction in 2020 at negative four percent, while exports of non-oil products are expected to contract by negative 4.6 percent.”
Relocation of lock
Growth in more diversified economies such as Côte d’Ivoire and Rwanda will slow significantly, but will remain positive in 2020.
“We expect the Kenyan economy to grow by 1.5 per cent in 2020 due to strong agricultural growth and the mitigation of Covid-19 restrictions in the second half of the year. We believe significantly lighter restrictions and the unlikely reopening of the closure will support an increase in growth to 4.2 percent in 2021, ‘Renaissance Capital economists said in their Macroeconomic update report for sub-Saharan Africa, dated November 2020.
According to Renaissance, countries with significant agricultural sectors, low tourism exposure and countries with fiscal and domestic buffers will recover quickly from their economic crises, despite the adverse risks such as political risks in Ethiopia and Zambia and the challenges of debt sustainability in Angola. , can dampen short-term economic recovery in these countries.
According to Renaissance, the agricultural sector, especially with smallholder farmers, will not grow cash crops – cocoa, coffee, cotton, sugar cane or tobacco – one of the sectors most isolated due to the economic impact of the Covid-19 crisis. due to the fact that it is not strongly integrated with global supply chains and the banking system.
“If a country has good rains and agriculture is a big sector, the economy should see growth by 2020, despite the Covid-19 pandemic,” they said.
The IMF projects that the economy for sub-Saharan Africa could contract by negative three percent in 2020 and increase modestly by 3.1 percent in 2021, strengthened by improvements in exports and commodity prices as the world economy recovers, along with a recovery in both private consumption and investment.
According to the IMF, the revival of new cases of coronavirus in many advanced economies and the spectrum of repeated outbreaks across the African region suggest that the pandemic is likely to remain a cause for concern for some time to come.
“Nevertheless, amid high economic and social costs, countries are now beginning to cautiously reopen their economies and are seeking policies to resume growth,” the IMF said.
“With the imposition of barriers, local activity declined sharply during the second quarter of 2020, but with the weakening of controls, higher commodity prices and the easing of financial conditions, there were preliminary signs of a recovery in the second half of the year. “
The current outlook is subject to greater uncertainty than usual and depends on the persistent Covid-19 shock, the availability of external financial support and the availability of an effective, affordable and reliable vaccine.
Other risks include political instability or the return of climate-related shocks, such as floods or droughts.
According to the IMF, limited resources will mean that policymakers who want to revive their economies will have difficult choices, as both fiscal and monetary policies must balance the need to boost the economy with the need for debt sustainability, external stability and longer term credibility.