Impact Assessment of Covid-19The Case of Eastern Africa

UNECA Sub-Regional Office for Eastern Africa

Eastern Africa one of the fastest growing regions in the world

3.8

3.1

1.6

2.9 2.7

2.93.2

7.0 7.0

5.7

6.6 6.66.1

6.4

2.8 2.72.5

3.2 3.0

2.3 2.5

0%

1%

2%

3%

4%

5%

6%

7%

8%

2014 2015 2016 2017 2018 2019* 2020*

Eastern Africa-12

Africa

World

Source: National sources, UNDESA, ECA calculationsNote: Eastern Africa average excludes Somalia and South Sudan; *Estimate/forecast

Average Growth Rates (%), 2014 - 2020

In 2019, the fastest growing economies were:

Slow paced structural change

Demographic pressuresLack of job opportunities

Reduced trade performance in recent years

Despite high levels of growth, Severe economic vulnerabilities still remain in Eastern Africa as a whole…

Source: UNdata & ILO

Working Age Population (millions) Annual Increase between 2015 and 2030

Each year, these economies need to create an aggregate of 7 new jobsmillion

Demographic pressures are real…

0 0

2.1

1

0.5

0.2

0

0.3

0.1

1.2

1

0

0.5

1

1.5

2

2.5

Djibouti

Eritrea

EthiopiaKenya

Madag

ascar

Rwanda

Seych

elles

Somali

a

South Su

dan

Tanzania

Uganda

AfricaBurundi

Comoros D.R. Congo

DjiboutiEritrea

EthiopiaKenyaMadagascar

Rwanda

Seychelles

Somalia

TanzaniaUganda

0%

2%

4%

6%

8%

0% 2% 4% 6% 8% 10% 12%

XX

Source: UNdata & ILO

GDP vs. Employment Growth RatesAverage between 2006 and 2016

GDP Growth Rate

Empl

oym

ent G

row

th R

ate

6% growth required simply to absorb new entrants to job market

Yet job creation has not kept pace with economic expansion

Job creation rate well below rate of economic expansion

Intra-regional trade has stopped growing and stagnated over the past decade in Eastern Africa

Intra-Regional Trade (USD m)

Source: ECA; UNCTADstat

EAC IGAD

0

500

1000

1500

2000

2500

3000

3500

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

0

500

1000

1500

2000

2500

3000

3500

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

Covid-19 brings a whole new level of vulnerabilities…

In Africa as a whole and Eastern africa in particular, someeconomic effects are expected in the Service sector:

• Slow-down in economic activity due to preventive and restrictive measures• Will result in

• Losses to regional Airlines• Loss of public revenues and houselholds income through tourism-related

activities;

Regional exports heavily dependent on services, so if economic activity slows down and services are hit, effects could be substantial

Source: UNCTADStat

Transport Services14%

Travel Services5%

Other Services20%Merchandise Trade

61%

African services trade generate more than 150 Bn USD per year

-100

-50

0

50

100

150

200

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

African Services Exports, USD Billions

imports exports Trade balance

Trade deficits are less present in services than in Merchandises

-15,000 -12,000 -9,000 -6,000 -3,000 0 3,000

D.R. Congo

Burundi

Djibouti

Somalia

Rwanda

Seychelles

Madagascar

Uganda

Tanzania

Kenya

Ethiopia

Merchandise trade balance

Service trade balance

USD million

Source: UNCTADStat

The Contribution of Tourism sector in some Top Tourism destinations in Africa amount to 140 bn USD in 2019. In a scenario where the sector looses 20% of revenues, that will correspond to a 28 bn USD loss from COVID.

GDP (USD bn) % share ofGDP

Visitorexports

% share ofexports

Internationalarrivals (mn)

South Africa 32.1 9 9.7 9 10.5Egypt 29.6 12 12.2 27 11.3Morocco 22.7 19 9.6 20 12.3Nigeria 18.6 5 1.6 3 -Kenya 8 9 1.7 15 1.5Ethiopia 7.4 9 2.5 38 0.9Tanzania 6.7 12 2.5 28 -Tunisia 6.5 16 2.2 11 8.3Cote d’Ivoire 4.6 10 0.5 4 1.8Mauritius 3.5 24 2.2 37 1.4

Air transports provide substantial revenues to several economies (about 9 bn USD in total for countries listed below). With flights suspended because of COVID 19, important losses ahead.Top African Air transport exports, USD Millions, 2017

86

114

122

125

139

155

156

183

256

274

337

580

828

1,439

1,598

2,576

0 500 1000 1500 2000 2500 3000

Cabo Verde

Namibia

Ghana

Côte d'Ivoire

Togo

United Republic of Tanzania

Seychelles

Rwanda

Algeria

Mauritius

Madagascar

Tunisia

Kenya

Egypt

Morocco

Ethiopia

Some African economies dependent heavily on tourism: Among the top 10 in this category, 3 are from Eastern Africa (Toursim share of GDP, %)

28

24

20

19

16

16

14

13

0 5 10 15 20 25 30

Seychelles

Cape Verde

Sao Tome and Principe

Mauritius

Gambia

Morocco

Tunisia

Madagascar

Rwanda

Botswana

46

67

In Eastern Africa the contribution of tourism to the economies varies across countries, and so COVID 19 will have different effects via this sector

0 10 20 30 40 50 60 70

Burundi

Comoros

Ethiopia

Kenya

Madagascar

Rwanda

Seychelles

Tanzania

Uganda

Democratic Republic of Congo

EA Tourism Percentage Share of GDP

For the continent, the number of tourists coming from African countries is growing, but that might not be enough to protect the sector from experiencing important losses as travel bans are in the rise

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

70,000,000

2013 2014 2015 2016

Africa Arrivals Total arivals

Indeed, the origin of Toursists is well diversified for several countries, but still COVID is likely to affect substantially the revenuesDistribution of Tourists by region of origin (in %)

0 10 20 30 40 50 60 70 80 90 100

Egypt

Seychelles

Morocco

South Africa

Cote d'Ivoire

Tanzania

Kenya, 2019

Tourists from Africa Tourists from Asia-Pacifc Tourists from Americas Tourists from Europe Not specified

the region is a net commodity importer…

Congo (DRC)

Madagascar

Uganda

Somalia

Tanzania

Kenya

EthiopiaSouth Sudan

© GeoNames, HERE, MicrosoftPowered by Bing

Net ExporterNet Importer

...and so the overall impact of CODIV is likely to be more ambiguous as prices of oil and other commoditiesare goind down

Conclusions

1. Regional growth likely to be very negatively impacted by Coronavirus

2. Measures to prevent spread of disease will slow down economic activity and hit severely the Service sector, across the board.

3. Commodity Price shock will hit hard the net commodity exporters in the region– but will be more ambiguous on other countries.

4. Disruption to trade likely to be severe – but will require creative responses byregional governments to scarcities in some sectors.

5. Over the mid-to long-term, disruption in supply chains (particularly with China) could lead to filling the gap by regional producers – need to implement theAfCFTA!

UNECA Sub-Regional Office for Eastern AfricaKigali, Rwanda

www.uneca.org

Andrew MoldChief, Regional Integration and AfCFTA Cluster