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New report, COVID-19 in African Cities: Impacts, Responses and Policies, launched by ECA & partners
With the ongoing coronavirus pandemic crippling economies the world over and set to trigger into motion Africa’s first recession in 25 years, the Economic Commission for Africa and its partners teamed-up to produce a new report which proposes several interventions to promptly and effectively address COVID-19 challenges on the continent at the urban level.
The report, titled COVID-19 in African Cities: Impacts, Responses and Policies, analyses the current situation within the African continent and efforts channeled at mitigating the global pandemic within the context of cities in the region.
Produced by the ECA, UN Habitat, UN Capital Development Fund (UNCDF), United Cities and Local Governments of Africa (UCLG), African Development Bank (AfDB), and Shelter Afrique, the report, which was virtually launched Tuesday, proposes responses for short, medium and long-term interventions to be led by national and local governments with the support of international and regional development Institutions.
To adequately address the challenges of COVID-19, six key recommendations have been identified in the report.
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Applying local communication and community engagement strategies
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Supporting SMEs and the informal economy
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Deepening decentralized responses to COVID-19 through strengthened local government capacities
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Targeting informal settlements through tailored measures
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Establishing mechanisms to promote rapid access to housing and prevent forced evictions
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Integrating urban planning and management as key priorities for recovery and rebuilding strategies towards long-term resilience
In their remarks during the virtual launch, officials from the partner organisations agreed COVID-19 has revealed the high vulnerability of African cities to the effects of shocks, and their limited capacity to mitigate and recover from the associated impacts. All this as Africa’s cities continue to grow rapidly under conditions of severe infrastructure and service deficits, absence of adequate productive jobs, weak planning and management capacities and institutions, among others.
Informality, poverty and inequality persist as a manifestation of the underlying structural constraints of Africa’s urbanization. Under these conditions, and without deliberate policy responses and adequate investments, cities may well become liabilities for inclusive and resilient future growth and transformation, the report notes.
It also notes that considering the economic and fiscal impacts of COVID-19 on national economies and the need to ensure that people have access to adequate food, housing, safe water and sanitation and reliable information, it was fast becoming clear that there is a need to increase and specify the role of local governments.
“These authorities are important in advancing community engagement, supporting risk communication and awareness building and facilitating adaptation measures,” reads the report.
COVID-19 has shown that it is important to rehabilitate the function of stabilization and redistribution of financial transfers from national to local and regional governments.
Strengthening local economies is one of the most effective responses to reducing the sensitivity of national economies to pandemics like COVID-19 and to the cycles of the global economy, notes the report.
“The degree of economic and financial impact of COVID-19 in Africa has been severe at all scales from national to local,” said Ms. Edlam Abera Yemeru, Chief of the Urbanization and Development Section at the ECA in remarks during the launch.
“The economic effects of COVID-19 have been particularly severe due to underlying vulnerabilities in African economies. The pandemic has exposed pre-existing underlying vulnerabilities in the economy of African cities that have made the urban impact of the crisis severe.”
She said in Addis Ababa, Ethiopia, for example, the impact of COVID-19 on hotels has been severe with 88 percent of hotels with membership in the AA hotel association being partially or fully closed due to low occupancy. Monthly losses are estimated at US$35 million and 15,000 workers have so far been laid off.
Ms. Yemeru said the local economic and financial effects of COVID-19 have a direct impact on economic development broadly and industrialization specifically.
“Going forward, local economic recovery and rebuilding should be at the core of economic recovery and rebuilding strategies of the continent and countries, and related stimulus packages,” she said.
“Continental and national COVID-19 discussions and efforts do recognize the vulnerability of cities and local governments, and acute impact, but insufficiently consider the role of productive, job rich and competitive cities in economic recovery, rebuilding and resilience in the medium and long term.”
Priorities should be on creating economically resilient cities, concluded Ms. Yemeru.
This report has been jointly published by UN-HABITAT, UNCDF, UCLG-A Africa, and UNECA.
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tralac’s Daily News selection
An East African Budget Day special feature from tralac. The joint budget theme for the 2020/21 budgets: Stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery
KPMG regional overview: 2020/2021 East Africa budget analysis. Riding under the theme of “Stimulating the economy to safeguard livelihoods, jobs, businesses and industrial recovery,” this year’s budget process has seen:
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Kenya adding an 8-point Economic Stimulus Plan to its ambitious “Big Four” Agenda;
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Uganda focusing on improving the wellbeing of its citizens, boosting economic transformation and improving good governance;
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Tanzania prioritizing, amongst others, economic growth, industrialisation and providing an enabling environment for doing business and encouraging investments.
We expect a raft of legislation across the region to anchor these expenditure proposals and the revenue raising measures in law. [Note: KPMG has posted individual budget summaries accessible from the above link]
East African Business Council: pdf Highlights of 2020/21 EAC Partner States Budgets (421 KB)
Kenya’s 2020/21 Budget: details of the new EAC CET measures
Taking into account the impact of these shocks on the domestic economy, growth is now projected at a lower rate of 2.5% in 2020 down from the 5.4% growth recorded in 2019. Moving forward, so as to boost economic activities and foster higher growth rates, we shall not only implement a rapid Economic Stimulus Programme but also lay down a firm ‘Post Covid-19 Economic Recovery Strategy’. These initiatives are ultimately expected to stimulate economic activities thereby culminating to a growth of 5.8% in 2021 and 6.5% by 2024. Our chosen fiscal consolidation plan has been adversely affected by the events over the last six months. In this respect, we are now targeting a fiscal deficit of 8.3% of GDP in financial year 2019/20 from the previous target of 6.3% of GDP. In the financial year 2020/21, the fiscal deficit is targeted at 7.5% of GDP and is expected to improve to 6.1% of GDP in FY 2021/22.
EAC Common External Tariff: I will highlight measures on custom duty as agreed at the regional level during the East African Community Pre-Budget Consultations meeting for the FY 2020/21. These measures are expected to generate about Ksh38.9 billion in tax revenue to the Exchequer. Manufacturing is a major pillar in the “Big Four” Agenda where the government aims to increase the contribution of the sector to GDP from about 8% to 15% by 2022. In this regard, I have proposed, at the regional level, measures aimed at promoting local manufacturing and also measures to ensure that locally manufactured products are competitive. The Customs measures that have been agreed upon at the regional level shall, in accordance with the East African Community practice, be effective from 1st July 2020. Extracts:
Our metal and allied sector continues to face stiff competition from imported iron and steel products. In order to protect the sector, the rate of import duty of 35% with the corresponding specific rates on a wide range of these products have been maintained for another year.
Kenya has sufficient capacity to produce paper and paper board products. In order to protect manufacturers of these products from cheap imported products, we have maintained the import duty rate at 25% for another one-year.
Kenya has capacity to manufacture baby diapers. However, the inputs used in manufacturing these products attract import duty. In order to support manufacturing of the products locally, all inputs for manufacture of baby diapers will be imported duty free under EAC Duty Remission Scheme. In addition, to promote local production of new clothing and apparels including fashion and design, inputs used in the textile and apparel sector will be imported duty free under the Scheme.
The telecommunication sector provides good opportunities for innovations particularly for our youth. In order to stir growth in this sector and encourage local investments, inputs for assembly or manufacture of mobile phones will be imported duty free under the EAC Duty Remission Scheme.
Uganda’s 2020/21 Budget: re-igniting business activity
The crises we have recently faced cannot, however, distract us from our long-term development strategy. These emergencies, indeed, present several lessons and opportunities that we have drawn on to craft the Economic Stimulus and Growth Strategy I will elaborate today. These opportunities include the following:
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The acceleration of our import substitution and export promotion strategy for a range of goods including medicines and other health products; and the products of agro-industrialization and light manufactures, which Uganda can produce with a comparative advantage;
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Digitalization of many aspects of socio-economic activity to improve efficiency and reduce costs. This can be applied through e-Commerce; e-Government (including tele-conferencing, procurement and the dispensation of justice); e-Learning; robotic automation, artificial intelligence, cyber security and cloud computing; and digital marketing in tourism. This permits to fast track implementation of the Fourth Industrial Revolution ;
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Transforming informality of doing business to being formal.
Re-igniting business activity. Micro, Small and Medium enterprises are the backbone of Uganda’s economy, representing an estimated 85% of private sector companies in regard to employment. The vast majority are operated by households and have also been extremely vulnerable to the recent emergencies, as they have low cash reserves and limited access to affordable investment finance. In order to improve the availability of investment finance and the cash-flows of Micro, Small and Medium Enterprises and other manufacturing firms, we will implement [inter alia] the following measures:
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Provide credit through SACCOs and Micro Finance Institutions to support micro and small-scale enterprises. I am proposing an allocation of UShs 94 billion for FY2020/21;
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Increase access to credit at Uganda Development Bank to offer low interest financing to manufacturing, agribusiness and other private sector firms, for which I have provided UShs. 1,045 billion over the medium term;
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Increase funding to Uganda Development Corporation for public private partnership investments to facilitate our import substitution and export promotion strategy, for which I have provided, to start with, UShs. 138 billion.
- Ministry of Finance, Planning, Economic Development: Background to the budget fiscal year 2020/21
Based on the key assumptions in the preparation of this budget as alluded to earlier, macroeconomic targets for 2020/21 budget are as follows:
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Real GDP growth is projected to slow down to 5.5% from the initial projection of 6.9% in 2020 compared to the actual growth of 7.0% in 2019. This decline is due to heavy rainfall which destroyed transport infrastructure and impact of COVID-19 pandemic to our trading partners.
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Containing inflation at a single digit between 3.0 to 5.0% in 2020/21
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Domestic revenue is projected at 14.7% of GDP in 2020/21 from the likely outturn of 14.0% in 2019/20
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Tax revenue is estimated at 12.9% of GDP in 2020/21 from the likely outturn of 12.1% in 2019/20
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Government expenditure is projected at 22.1% of GDP in 2020/21
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Budget deficit (including grants) is estimated at 2.6% of GDP in 2020/21 which is below the target of 3.0% of macroeconomic convergence criteria as agreed in the EAC, and
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Maintain foreign reserve sufficient to cover at least four months of imports of goods and services.
Foreign reserves in 2019/20 remained at satisfactory level to sustain importation of goods and services. The foreign reserves amounted to $5.3bn during the period ending April 2020 sufficient to cover 6.1 months of imports of goods and services as compared to $4.4bn, which was sufficient to cover 4.3 months of imports of goods and services in similar period in 2015. This was attributed to the increase in foreign investment and export of goods and services. In addition, the level of foreign reserve attained is above the country’s target of 4.0 months of imports, as well as above the agreed EAC and SADC targets of 4.5 months and 6.0 months respectively.
Related East Africa Budget Quick Links:
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Deloitte Insights: Economic impact of the Covid-19 pandemic on East African economies
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Andy Mold: How East Africa could bounce back from the COVID-19 pandemic
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EAC implements its COVID-19 response plan: reinforces border officers and communities in the fight against cross border transmission
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EAC States to roll out digital Covid-19 certificates for truck drivers
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COMESA: Regional states show remarkable resilience to Covid-19, defying earlier predictions
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KPMG: The impact of Covid-19 on the manufacturing sector in Kenya (pdf)
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Kenya’s exports to its three leading markets in the EAC fell by Sh3.51 billion in the first full month following the adoption of Covid-19 containment measures
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WFP East Africa: Update on the Desert Locust Outbreak
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UNCTAD: Global trade continues nosedive, forecasts a 20% drop in 2020
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Tackling COVID-19 in Sub-Saharan Africa
The pandemic-induced crisis will have severe impacts on household incomes and industries in the region and requires swift policy actions.
The COVID-19 infection rates in Sub-Saharan Africa (SSA) have remained modest so far.[1] But with notoriously underfunded health systems[2] and the prevalence of other endemic diseases such as HIV and malaria, many analysts believe that the worst is yet to come. Virtually all countries in SSA have already introduced containment measures. In fact, the region – hosting 33 of the world’s 47 LDCs – responded promptly.[3]
The extent to which COVID-19 containment measures are and can be enforced in the region remains to be seen as they are not likely to prove effective due to higher dependence by households on daily income, insufficient government resources to compensate those affected by the containment measures, and the difficulty of implementing social distancing in societies where social interaction is a matter of daily survival.
The response in the region in terms of healthcare measures includes increased healthcare budgets and accelerated efforts to source medical supplies and health services with outside – mostly WHO – aid. Countries have also responded to rising food security risks. For example, Niger has introduced the “distribution of food from the strategic reserve”. Rwanda has begun “door-to-door provision of rice, beans, and flour every three days”, and in the Gambia, the prices of essential goods have been frozen for food commodities.
On the economic side, the focus has been on a mix of monetary and fiscal measures to solve the need for cash by companies and households in need.[4] However, the scope of such packages remains limited at 0.6 per cent to 1.1 per cent of GDP for some developing countries compared to above 10 per cent in OECD countries.[5]
Impacts on industry and households
Due to lower global demand, SSA will experience a drop in domestic sales and exports, supplies, investments and labour. At the same time, households are restricted in their movements and receive less income from employers, businesses and remittances, and consequently consume less.
While these circular effects may hold true for all countries affected by COVID-19, the distinctiveness of SSA lies in its dependence on the below three aspects.
Dependency on exports and imports
Many of the region’s countries share the common characteristics of low levels of income and resources and relatively low engagement in world trade.[6] The share of both imports and exports in GDP of most SSA countries hovers around 30 per cent, with one group of countries being even less integrated, and a small group with imports and exports above 50 per cent. However, the limited trade SSA countries engage in is crucial to their economies; if it decreases, the trickle-down effects will seriously affect them.
LDCs’ industries are additionally suffering because of their dependence on exports of primary commodities, which constitute the largest share of LDC exports in (unequal) exchange for imports of consumer, capital and intermediate goods from their trading partners, with resultant widening trade deficits and debt dependence.
Dependency on foreign direct investment (FDI), debt and aid
FDI flows to SSA countries are low by global standards, but high in terms of their ratio to domestic GDP[7], signalling the importance of FDI for the region’s economic growth, where local investment capacities are usually limited. According to the United Nations, the tendency of SSA LDCs’ FDI share is declining.[8] In view of COVID-19, it can be expected that FDI will drop even further. LDCs receive less than 10 per cent of total aid available for developing countries and dependence on aid is on the rise, accounting for a significant share of LDCs’ state budgets. Furthermore, a larger share of outstanding debt is owed to private lenders at higher interest rates.[9]
Household dependence on informal sector and remittances
The labour participation rate in the informal sector in many LDCs in SSA is up to 90 per cent, with a slightly larger share of women than men.[10] People working in the informal sector are severely affected by COVID-19 containment measures prohibiting free movement. Households in SSA also substantially depend on remittances. In countries like Nigeria, for example, remittances dwarf the income from FDI and oil revenues. Due to COVID-19, the incomes of SSA households are likely to decrease because less money is being sent home by migrants, who themselves are facing reduced incomes in their host countries.[11] Migrants are often the first to be laid off, and in some cases may even have to return to their home countries.
Policy options
What are the implications of COVID-19 containment measures for SSA industries? Many informal businesses and smaller companies may have to drop out of production and file for bankruptcy while households face reduced income and poverty. Such events will hit SSA’s economies hard, likely leading to a downward spiral with intensifying impoverishing effects, and the first recession in SSA in the last 25 years.[12]
Consequently, accelerated structural change could result in larger and international companies taking over those parts of production normally carried out by local businesses. This bears the risk that countries will deindustrialize too soon, thereby losing important incomes and employment in industry. Meanwhile, there may be a tendency by global players and companies in industrialized countries to move parts of their production closer to “home”, causing SSA industries to become even more marginalized, thus capturing even less value in global production and trade.
Vulnerable groups, including women, youth, refugees, workers, ex-combatants, etc., will be particularly affected as they find themselves losing their jobs[13], income and food security.
The above calls for clear policy actions:
Manufacturers can be supported in the repurposing of production, i.e. in the manufacturing of medical equipment and devices such as masks, gloves, sanitizers, hospital wear, beds and ventilators.[14] Other measures to consider are improving the ease of doing business in times of social distancing. Appropriate technology should be promoted that allows remote working, e-commerce and online networking. For that purpose, digital infrastructure and online connectivity need to be improved and extended. As important as such measures are, they only constitute a small fraction of the relief required for SSA’s industrial sector as a whole.
In the short term, the bulk of government support should be provided in the form of debt relief for businesses that have fallen into negative revenue traps as a result of COVID-19. Such measures – already being widely applied – include guarantee funds and credit programmes as advocated by the IMF, but should also include more fiscal stimulus such as writing off debts and subsidies via standard tax and duty exemptions and cost-cutting initiatives (rents, utilities, etc.) for those companies most affected. Without debt forgiveness (rather than a partial, one-year deferment already agreed with the G20[15]) and urgent support from donors and development agencies, some SSA countries may not be able to implement such measures.
Helping companies write off losses alone may, however, not suffice in promoting economic regeneration. In fact, many analysts emphasize the importance of enabling business continuity and assisting enterprises in laying the foundation for recovery.[16] Substantial efforts are required to re- and further engage companies in different sectors so they can explore different products and markets, and to not leave all the space to global players. This represents an opportunity for the region to diversify and reorient its product mix and introduce new technologies. Moreover, the channels from which these companies source supplies could become less import-dependent and more resilient to disruptions in global value chains.
To achieve such a reorientation of industries, SSA countries need to mobilize innovations and investments and integrate them into new business models. Training, technology exchange and investment promotion are important policy measures that can reinforce this process. Engaging youth – 60 per cent of SSA’s population is below the age of 25 – and women will allow to further exploit the continent’s entrepreneurial potential.
Governments could use the opportunity to lead industry into this new direction. In line with recommendations from the Africa Union[17], the development of a regional agenda for industrial revival in response to COVID-19 would build on opportunities to diversify the economy, help anticipate changes in the global structure of trade and industry and promote efforts to accelerate regional integration, exploiting the momentum of the African Continental Free Trade Area[18] and the UN’s COVID-19 recovery strategies.[19]
This crisis also represents an opportunity for the region to diversify and reorient its product mix and introduce new technologies.
Frank Hartwich is Research and Industrial Policy Officer at the Department of Policy Research and Statistics (PRS) of UNIDO. Massoud Hedeshi is an independent policy analyst and a former consultant of UNIDO.
This opinion piece is part of a series of articles by UNIDO's Department of Policy Research and Statistics. The article benefited from the support and contributions of the Africa Regional Division and UNIDO Field Offices in the region. The views expressed in this article are those of the authors based on their experience and on prior research and do not necessarily reflect the views of UNIDO.
[1] According to the WHO COVID-19 Situation Report of 29 April, the total number of COVID-19 cases reported in SSA is close to 20,000, with around 500 fatalities. There are concerns about the accuracy of those figures as medical infrastructure for testing and diagnoses is not widely available across the region.
[2] According to a recent not yet confirmed WHO survey including 41 African countries, the average number of ICU beds per 1 million Africans is 5 compared to the OECD’s 3,500.
[3] ICNL. (2020) African Government Responses to COVID-19: An Overview from the COVID-19 Civic Freedom Tracker. International Centre for Not-For-Profit Law. 23 April 2020.
[4] On 26 March 2020, the African Union established the COVID-19 Response Fund, with members pledging USD 12.5 million. The World Bank and IMF have also allocated USD 18 billion each for Africa’s COVID-19 recovery while the African Development Bank announced a USD 19 billion “Response Facility” on 8 April.
[5] Raga, Sherillyn. (2020) Country fiscal and monetary policy responses to coronavirus – ongoing tracker. Overseas Development Institute. 2 April 2020.
[6] According to the UN Financing for Sustainable Development Report 2019, SSA accounts for 12 per cent of the world population but only makes up less than 1 per cent of global trade.
[7] EY. (2019) How can bold action become everyday action? EY Attractiveness Program Africa. September 2019.
[8] UN. (2020) Programme of Action for the Least Developed Countries for the Decade 2011–2020.
[9] World Bank. (2020) International Debt Statistics. Sub-Saharan Africa.
[10] ILO. (2018) Women and men in the informal economy: A statistical picture. Geneva: ILO.
[11] World Bank. (2020) World Bank Predicts Sharpest Decline of Remittances in Recent History. 22 April 2020.
[12] Mahler, Daniel Gerszon; Lakner, Christoph; Castaneda Aguilar, R. Andres and Wu, Haoyu. (2020) The impact of COVID-19 (Coronavirus) on global poverty: Why Sub-Saharan Africa might be the region hardest hit. World Bank Data Blog. 20 April 2020.
[13] ILO. (2020) The impact of the COVID-19 on the informal economy in Africa and the related policy responses. ILO Brief. 14 April 2020.
[14] South Africa, for example, is working on producing 10,000 ventilators by the end of June while Liberia is pursuing an initiative to produce locally-made reusable masks, and in Kenya, a factory has transformed into a surgical mask assembly line.
[15] The Business Times. (2020) Rich nations moving toward virus debt relief for poor countries. 15 April 2020.
[16] ILO. (2020) Interventions to Support Enterprises during the COVID-19 Pandemic and Recovery. ILO Enterprises Brief. 16 April 2020; McKinsey & Company. (2020) COVID-19: Implications for business. Executive Briefing. 13 April 2020.
[17] ECA. (2017) Transforming African Economies through smart trade and industrial policy. Economic Commission of Africa.
[18] According to the WEF, by removing tariffs and other trade barriers, the agreement can foster significant growth in trade, investment and employment across the continent.
[19] UN. (2020) A UN framework for the immediate socio-economic response to COVID-19. April 2020.
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UN seeks to build transport and trade resilience in wake of COVID-19
UNCTAD and the five UN regional commissions join forces to help developing countries tackle trade and transport challenges from the coronavirus pandemic.
A new joint UN project is seeking to help governments and businesses keep transport networks and borders operational and facilitate the flow of goods and services, while containing the spread of the coronavirus.
The project launched in May 2020 will implement UN solutions, standards, guidelines, metrics, tools and methodologies to help developing countries build transport, trade and logistics resilience in the wake of COVID-19.
The initiative brings together UNCTAD and the five UN regional commissions for Africa (ECA), Europe (ECE), Latin America and the Caribbean (ECLAC), Asia and the Pacific (ESCAP), and Western Asia (ESCWA), with funding managed by the UN Department of Economic and Social Affairs.
The project puts a premium on global reach and regional presence, international cooperation, as well as exchange of knowledge and good practices from all over the world.
It seeks to equip governments in developing and least developed countries to adapt to new post-COVID-19 conditions by tapping into UN expertise, standards, tools and guidance, while considering their specific and local conditions.
Three clusters
It comprises three clusters designed to match existing and emerging standards and best practices in transport and trade facilitation with new concerns and demands arising from COVID-19 on cross-border freight transport operations and trade transactions.
The first cluster focuses on contactless solutions and good practices. It aims at reducing physical contact among people in cross-border supply chains by facilitating the flow of goods without spreading the virus.
This will be done by implementing UN conventions and standards for seamless harmonized electronic exchange of data in digital transport corridors, border crossings and trade operations, as well as developing smart rail and road connectivity.
The second cluster is geared towards maximizing seamless connectivity. It focuses on eliminating obstacles to cross-border trade and transport operations arising from the COVID-19 crisis.
It aims at promoting synergies among border agencies by empowering national trade facilitation committees, improving customs automation and identifying non-tariff barriers.
The third cluster focuses on collaborative solutions on transport, trade and logistics operations by strengthening regional and sectoral cooperation to facilitate joint actions and solutions in responding to the COVID-19 pandemic.
It will give special attention to international transit issues, which are multilateral, and sectoral cooperation for ports as nodes of the global maritime shipping network, rooted in regional and national contexts.
Proven conventions and tools
The three clusters build on the UN’s proven conventions, standards, tools and instruments, such as UNCTAD’s Automated System for Customs Data (ASYCUDA), the eTIR International System (TIR Convention) carnet and trade data exchange standards of the UN Centre for Trade Facilitation and Electronic Business (UN/CEFACT), as well as the Framework Agreement on Facilitation of Cross-border Paperless Trade.
The clusters will also tap into regional intergovernmental cooperation platforms, analytical work and capacity-building programmes of the five UN regional economic commissions.
One UN response
The project responds to the UN Secretary-General António Guterres’s call for action to tackle the many socio-economic dimensions of the COVID-19 crisis. It seeks to make a difference in line with the UN framework for the immediate socio-economic response to COVID-19 calling for improved connectivity and lower transaction and transport costs. It lies at the heart of UN efforts to implement solutions for contactless, seamless and cooperative transport and trade.
These efforts are expected to promote prosperity, help national economies recover better from COVID-19 and accelerate progress towards the Sustainable Development Goals.
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The impact of COVID-19 on East African Economies
Summary of government intervention measures and Deloitte insights
The Coronavirus (COVID-19) pandemic is currently causing significant adverse impact on the global economy with governments around the world implementing various fiscal measures to mitigate its effects and provide relief for businesses and households. Within Africa, the impacts of COVID-19 are being felt in different ways and the measures taken by the respective governments have also differed on the areas of focus and comprehensiveness.
Africa’s projected GDP growth of 3.2% for 2020 is now expected to fall to -0.8%. This is due to the enforced partial or total lockdown of economies brought on by the pandemic. The outbreak has led to disruption in the various sectors, most notably the financial industry and the tourism and hospitality sectors.
A new report from Deloitte analyses some of the impacts for the East African region with a view on the effects on the general economy, as well as sectoral views touching on industries such as aviation, tourism agriculture, and manufacturing.
In Kenya, projected GDP growth in 2020 now stands at 1% from 5.7% due to the gravity of the pandemic; with the economy seeing a decline in tourism activity, export revenues, and a disruption in the supply chain. In Ethiopia, the country is expected to grapple with high unemployment, and GDP growth has been revised to 3.2% from 6.2% in 2020. Similarly, the outlooks in Tanzania and Uganda show a similar trend with GDP growth being revised to 2% and 3.5% respectively (decline in 3.3% and 1.8% percentage points). Tanzania is showing waning demand for mineral exports considering global supply chain interruptions. The economy in Uganda is also faced with the disruption of supply chains and weakened global demand for goods.
In addition to economic outlooks, the publication looks at how governments in each country across the region have responded to the pandemic through social and health-related measures and the fiscal and monetary interventions introduced to safeguard the economy.
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Global trade continues nosedive, UNCTAD forecasts 20% drop in 2020
New data shows a worrying deterioration of trade for developing countries and a continued struggle for the automotive and energy sectors, while office equipment rebounds.
International trade in goods is expected to continue its nosedive in the coming months as economies struggle to recover from lockdown measures used to slow the COVID-19 outbreak.
New UNCTAD data published on 11 June show that merchandise trade fell by 5% in the first quarter of the year and point to a 27% drop for the second quarter and a 20% annual decline for 2020.
“There is still a lot of uncertainty about the possibility of any economic recovery in the second half of the year,” says Pamela Coke-Hamilton, UNCTAD’s director of international trade.
“International trade is likely to remain below the levels observed in 2019,” she adds, “but how far depends on the pandemic’s evolution and the type and extent of the policies governments adopt as the try to restart their economies.”
The latest UNCTAD figures were featured in the first edition of the Global Trade Update, the organization’s new quarterly report providing a comprehensive snapshot of international commerce and the main issues affecting trade flows.
An increasingly worrying scenario for developing countries
Although the coronavirus-induced trade slowdown has spared no one, forecasts show a particularly rapid deterioration for developing countries. While South-South trade saw a drop of just 2% in the first quarter of the year, UNCTAD data shows a dramatic 14% fall in April.
“For developing countries, while declines in exports are likely driven by reduced demand in destination markets, declines in imports may indicate not only reduced demand but also exchange rate movements, concerns regarding debt and a shortage of foreign currency,” the report says.
Preliminary data for April suggests the sharpest downturn for South Asia and the Middle East, which could register trade declines of up to 40%. Meanwhile, the East Asia and the Pacific regions appear to have fared best, with trade drops remaining in the single digits both in the first quarter of 2020 as well as in April.
China appears to have fared better than other major economies in April, registering 3% growth for exports. But the most recent data indicates that the recovery may be short-lived, as the nation’s imports and exports fell by about 8% in May.
Automotive and energy sectors collapse, agri-foods stabilize
The report shows that economic disruptions wrought by COVID-19 have affected some sectors significantly more than others.
In the first quarter of 2020, textiles and apparel declined by almost 12%, while office machinery and automotive sectors fell by about 8%. In contrast, the value of international trade in the agri-food sector, which has so far been the least volatile, grew by about 2%.
Preliminary data for April indicates further declines in most sectors, with a very sharp contraction in the trade of energy (-40%) and automotive (-50%) products. Significant decreases are also observed in chemicals, machineries and precision instruments, with drops above 10%.
On the other hand, office machinery appears to have rebounded in April, largely because of China’s positive export performance.
“In general, the variance across sectors,” the report says, “has been driven by decreases in demand and disruptions of supply capacity and global value chains due to COVID-19.”
Medical products’ exports more than double
A notable side effect of the COVID-19 pandemic has been the increase in demand for medical goods and equipment, such as ventilators, monitors, thermometers, hand sanitizers, protective masks and garments.
While the international trade of such goods contracted at the onset of the pandemic, it rebounded in February and March and almost doubled in April 2020, as countries scrambled to secure medical and protective equipment.
The flow of imports and exports, the report says, followed the spread of the virus.
For example, the first two months of 2020 saw an increase in Chinese domestic demand, resulting in a jump in medical product imports, primarily from Europe and the United States, which had not yet been significantly hit by the pandemic.
Meanwhile, Chinese exports of such equipment dropped by 15% as national production shifted towards satisfying domestic need.
Data for March shows that at as the pandemic took hold in Europe, imports of medical equipment jumped by 21% in the region while continuing to increase in China (41%).
Then in April, as COVID-19 eased its grip on China and continued its spread across the globe, Chinese exports of medical equipment surged by a staggering 338%, driven primarily by exports of protective equipment.
The month’s data for the United States reflects the spread of COVID-19 within the nation, with medical product imports increasing by almost 60% while exports declined by approximately 20%.
Trade in medical products related to COVID-19 has been growing fast
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COMESA: Regional states show remarkable resilience to Covid-19, defying earlier predictions
At the onset of the Covid-19 pandemic, it was predicted that most of the health systems in Africa and the COMESA region would be overwhelmed by the unprecedented spread of the virus. Anecdotal evidence based on country-specific interventions, however, indicates that countries in the region have demonstrated remarkable resilience defying earlier predictions.
According to an analysis conducted by Governance, Peace and Security Unit at the COMESA Secretariat, stringent measures that regional States put in place including mandatory quarantine, curfews, closure of social and entertainment venues, closure of schools, encouragement of basic hygiene measures among other interventions played a big role in containing a surge.
“For the COMESA region with relatively weak health systems characterised by inadequate health personnel, inadequate equipment, inadequate budgets and a high burden of infectious diseases (such as Malaria, TB, HIV, Ebola), it was expected that the continued spread of the virus would overburden the health systems in the region,” the report says.
According to the analysis, reforms in the health sector, whereby governments have made policy commitments to implement Universal Health Care (UHC), have also worked well towards forestalling the earlier predicted surge. The UHC is premised on the idea that every citizen should receive health services they need without financial burden.
COMWARN regional data indicates that most governments in the region have introduced health reforms that have led to improvements in health services. For example, Tunisia, Seychelles, Rwanda, Mauritius and Egypt have already rolled the UHC programme with positive impacts on reduction in mortality rates, improved life expectancy and public health expenditure.
The report notes that majority of the regional States have strived to allocate 15% of public expenditure to the health sector and with the continued spread of the Coronavirus, this has triggered more financial investments in the sector.
“Countries in the region have increased health funding to deal with the emergencies associated with the spread of the Covid-19,” the GPS report states. “Extra budget allocations have been provided by governments to enhance for instance surveillance, purchase of medical supplies, construction of isolation centres, recruitment of more health personnel among others.”
Notwithstanding, countries in the region have registered important milestones in the improvement of healthcare since the adoption of the Millennium Development Goals (MDGs) in 2000 and the launch of the Sustainable Development Goals (SDGs) in 2015 as part of the 2030 agenda for sustainable development.
Reforms in the health sector have further led to the improvement in life expectancy from an average of 61.60 years in 2010 to 66.07 years in 2018. In the context of the COMESA Early Warning System’s (COMWARN’s) Structural Vulnerability Assessment (SVA) COMWARN SVA model, life expectancy is the number of years a new-born infant would live if prevailing patterns of mortality at the time of its birth were to stay the same throughout its life.
By 2017, Libya, Tunisia, Mauritius, and Seychelles had reduced child mortality to 1.4%, the lowest in the region. Other countries that have made tremendous progress are Egypt 2.3% Madagascar 4.2%, Kenya 4.5%, Uganda 5.2% and Comoros 6.9%.
The GPS analysis was based on four World Health Organization health delivery framework, which covers service delivery, health workforce, access to essential equipment and medication and adequate resources/finance. This framework is in tandem with the COMWARN’s SVA model that seeks to support long term vulnerability of member states towards sustained peace and prosperity by identifying projected vulnerabilities in respective countries.
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EAC implements its COVID-19 response plan and reinforces border officers and communities in the fight against cross border transmission
The EAC Secretariat in partnership with the African Union Border Programme is reinforcing the border officers and communities to reduce the risks for cross border transmission of the corona virus.
The Secretariat has availed 9600 pamphlets on secure cross border movements (in English, French and Swahili). The pamphlets contain EAC, WHO and Interpol guidelines on secure management of borders and cross border movements during the pandemic and will serve to give relevant information to the border officers to guide their daily work for safe and efficient cross border movements.
Furthermore, 16000 reusable masks, 12800 gloves and 1600 bottles of sanitizers have been availed to selected 16 One-stop Border Posts within the EAC region. These materials will be serve both the 16 OSBP and their immediate surrounding border communities. Additionally, a training on using governing borders during the pandemic and in case of other emergencies will be provided electronically (and where possible physically) as well as a support for the mobility of border officers to sensitize border communities and monitor informal border crossing points via the provision of motorcycles.
Each One Stop Border Post in the Partner States will receive 300 guideline pamphlets on secure cross border movements, 500 reusable Face Masks, 400 gloves and 50 bottles of sanitizers for each of the One Stop Border Post.
The Secretariat has availed this support to the ministries in charge of EAC affairs in the 6 Partner States.
In the Republic of Rwanda, the materials and information Kits were handed over to the Director General of MINAFFET who in turn handed them over to Immigration received the materials.
In the Republic of Uganda, the materials were received by the Dr. Andrew Musiime Director at MEACA on behalf of the Permanent Secretary Mrs. Edith Mwanje, who was busy on other state duties. The handover ceremony took place at MEACA Head Office board room at Kingdom Building, along Shimoni Road in Kampala. Dr. Musiime in turn handed the materials over to the representatives of the Uganda Police Force; Citizenship and Immigration Control for onward delivery to Uganda’s selected Six One Stop Border Posts of Busia, Malaba, Elegu, Mtukula Mirama hills and Katuna.
In his opening remarks, Dr. Bode, (Portfolio Manager, GIZ Country Office Kampala) who represented GiZ, reaffirmed GiZ’s continued support to the East African Community and the Republic of Uganda in particular, as one of the Partner States of the EAC. He stated that the total materials supplied to Partner States did cost 95.000 Euros, which are being disbursed for the EAC and its Partner States, and Uganda will have her 06 OSBPs benefit from this support. He said the support would reinforce the capacities of the border agencies in both prevention and sensitization on Covid-19.
Present during the handing over ceremony at the Ministry of East African Community Affairs Uganda; were Dr. Musiime (Director of EAC Affairs who represented the Permanent Secretary Mrs. Edith Mwanje); Col. Geofrey Kambere (Commissioner for Immigration); AIGP Asan Kasingye (Uganda Police Force) and Mr. Kaguta (EAC-Secretariat). The beneficiary agencies expressed their deepest gratitude and appreciation for the EAC and GiZ for their continued support to fight Covid-19 pandemic. The two emphasized the importance of protecting border posts and its officers in the fight against the spread of COVID-19; and promised to deliver the received materials to the selected border posts and be put use in protection of the border agencies’ staff jointly.
On behalf of the Permanent Secretary, Dr. Andrew Musiime, Director EAC Affairs in Uganda, pointed out the strong and successful partnership between the EAC and the German Government in all EAC sectors. He underlined the significance of raising awareness amongst Ugandan citizens about the dangers of COVID-19. He thanks the Government of German for their continued support to EAC through GiZ ; and more so to the Department of Peace and Security in areas of capacity building, training, equipment and logistics. He looked forward to further cooperation and engagement in this regard.
Handover in the Republics of Burundi, Tanzania and South Sudan are planned to take place in the coming 2 weeks.
The EAC has been swift to develop guidelines to complement Partner States measures to fight against the pandemic. The COVID-19 pandemic has and continues to bring several changes in daily lives particularly affecting movements including cross border movements. The handed over support and subsequent capacity building measures will reinforce border officers operating essential cross border movements despite the pandemic and finding themselves and the border communities in the frontlines.
The support has been facilitated by the GIZ support to the African Union Border Programme (GIZ-AUBP) as commissioned by the Federal Foreign Office of the Republic of Germany in strengthening border governance in Africa for peaceful, safe and efficiently governed borders conducive for regional integration.
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President Cyril Ramaphosa, as the AU Chairperson, convened a virtual meeting of the African Union Bureau and RECS today to discuss, inter alia, the Africa COVID-19 pandemic strategy and economic relief measures.
Today was Budget Day in Kenya, Rwanda, Tanzania and Uganda. Tomorrow’s compilation will carry an extensive set of budget documentation, commentaries and responses.
The Mauritius 2020-2021 Budget was presented last week (GoM)
Dr Renganaden Padayachy (Minister of Finance, Economic Planning and Development): Our “New Normal” will be the Economy of Life. That is why this budget is focusing on the following tryptic: Rolling out the ‘Plan de Relance de l’investissement et de l’économie’; Engaging in major structural reforms; Securing sustainable and inclusive development.
We also require a paradigm shift in our export strategy: Port dues and terminal handling charges for exports will be waived from July to December 2020 and reduced by 50% for the period January to June 2021. We are extending the Freight Rebate Scheme for exports to Africa; and the Trade Promotion and Marketing Scheme for exports to Japan, Australia, Canada and the Middle East. The Export Credit Insurance Scheme will be extended to cover all our exports. Government will support the first two years of operation of a “Made in Mauritius” warehouse set-up in Tanzania and Mozambique. To foster the transformation of the textile industry, a reputable international firm will conduct a comprehensive review of our export model. Companies will benefit from a 50% refund on the costs of certification, testing and accreditation of local laboratories. They will also be exempted from the payment of registration duty and land transfer tax for the purchase of immovable property.
Africa is our future. It is hand in hand that our socio-economic pathway will be written. Our Economic Recovery plan thus also focuses on reinforcing our partnerships with the rest of Africa. The MIC has earmarked Rs 10 billion to invest in African projects, including SEZ projects under a G2G framework.
Improving our Doing Business Environment. The reforms implemented by Government to facilitate business over the last three years have moved Mauritius amongst the top-ranking economies in the world for ease of doing business. We have to continue to facilitate business related public service delivery. This goes through e-services. An Integrated Single Window for Trade will be developed to connect all stakeholders within the port community. A Maritime Single Window will be introduced by the Mauritius Ports Authority to facilitate vessel clearances and reduce administrative bottlenecks at the port. The Corporate and Business Registration Department will become the central repository for all business information and licences through a digital platform.
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A commentary by Anthony Leung Shing (Country Senior Partner, PwC Mauritius)
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KPMG’s Budget Highlights (pdf)
Simon Evenett: Exports at risk from non-tariff measures - the experience of Commonwealth countries (The Commonwealth)
This International Trade Working Paper breaks new ground by combining three substantial databases of commercial policy change over the past decade to compute the shares of Commonwealth exports at risk from adverse policy changes and reforms by trading partners. The calculations undertaken for this study use the finest-grain trade data available globally, and the conservative methods employed imply that the resulting estimates almost certainly understate the scale of the threat to living standards. The study demonstrates that larger shares of Commonwealth member countries’ exports have been exposed to changes in other policies, undertaken by their trading partners, that have tilted the commercial playing field towards favoured, local firms. The principal findings of this study concerning Commonwealth export dynamics and concerning tariff and non-tariff measures are as follows:
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Overall Commonwealth export growth has been slower in the decade since the global financial crisis than in the years before. Although the slowdown has been less pronounced for Commonwealth exporters than for total world exports, this outcome is worrying, and it has likely diminished the contribution that integrating national markets has played in raising living standards.
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At the start of this year, 91.4% of the exports of developed country members of the Commonwealth faced tariffs and nontariff measures in destination markets. For developing country members of the Commonwealth, the corresponding percentage was slightly lower, at 88.5%.
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At the start of this year, the export exposure of developed and developing country members of the Commonwealth to policies that limit trade was twice the size of their exposure to policies reforming trade This discrepancy widens when attention is focused on non-tariff measures.
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There is considerable variation across groups of Commonwealth members in their exporters’ overall exposure to new technical and safety regulations imposed by trading partners. Seventy-eight per cent of developed country Commonwealth members’ exports have been exposed to such regulations, whereas a third of least developed country Commonwealth members’ exports have been so exposed.
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Except for the Pacific group, for every group of Commonwealth members, over half of the exports now compete against those of foreign rivals that benefit from state-provided export incentives.
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Given the composition of their exports, at the start of 2020 over half of exports from the Caribbean and American members of the Commonwealth faced import-competing rivals in foreign markets that have benefited from state aid. For the other groups of Commonwealth members, the comparable export exposure ranges from 14% to 31%.
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At present, Commonwealth exporters’ exposure to tariff increases is much less than their exposure to non-tariff measures. This finding still holds when export exposure to new technical and health regulations is stripped out. Non-tariff policies are where the action is.
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Although the focus in recent years has been on high-profile tariff increases, since the beginning of the most recent populist era (taken here to be 1 January 2017), Commonwealth export exposure to new tariff increases has been eclipsed by exposure to non-tariff threats. The notoriety of a trade policy instrument is not a reliable indication of the scale of the threat it poses to Commonwealth exports.
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The build-up of trade distortions that threaten Commonwealth exports started well before the most recent populist era. Recent high-profile tariff increases have only made overt a decade-long covert trend away from the principles of a level commercial playing field.
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The build-up of trade distortions threatening intra-Commonwealth exports has unfolded differently from those affecting extra-Commonwealth exports. For the former, export exposure to foreign rivals receiving state largesse for shipping abroad has exceeded exposure to potentially new harmful regulations. For the latter, the opposite applies.
COVID-19: Africa in urgent need of affordable broadband internet (ECA)
The ECA’s director of Technology, Climate Change and Natural Resources Management, Jean-Paul Adam, said the continent needs about $100bn to achieve universal, affordable and good quality internet access by 2030 (according to the World Bank). Presently, only 17.8% of households in Africa have internet at home and the continent accounts for only 21% of worldwide internet users. It is estimated that over a quarter of a billion school children in Africa have been affected by COVID-19 and most of them lack the digital tools to continue their education online. He cited affordability as one of the biggest barriers to internet access in Africa: “The average cost of 1GB of data on the continent is 7.12% of average income, with some countries having rates as high as 20%, which is way above the 1% – 2% deemed to be affordable.”
Global Investors for Sustainable Development Alliance: Statement of Action
The virtual meeting, convened by UN Secretary-General António Guterres (10 June) aimed at leading an urgent and coordinated response from the private sector, was chaired by UN Special Envoy for Climate Change and Finance, former Bank of England Governor Mark Carney. High profile attendees included GISD co-chairs Oliver Bäte (CEO of Allianz SE), Leila Fourie (CEO of the Johannesburg Stock Exchange), Brian Moynihan (CEO of Bank of America), Marcie Frost (CEO of California Public Employees’ Retirement System), Michael Corbat (CEO of Citigroup) and Anna Botín (Group Executive Chairman of Banco Santander).
We, the Members of the Global Investors for Sustainable Development Alliance, met in these extraordinary circumstances to send a strong message of unity and commitment. We reinforce the UN Secretary-General’s calls for wide ranging actions that match the scale of the crisis. We are determined to continue to transform finance and investment to bring the world on a trajectory to sustainable development. We are committed to make the post COVID-19 economy more sustainable and resilient to external shocks, such as climate-related ones. We will act within our companies, in our industries, and in partnership with public actors to enable a robust global response and recovery that is aligned with the 2030 Agenda for Sustainable Development. Some of our actions will be undertaken in partnership with policy makers and regulatory bodies. We will advocate for a coordinated international approach to financial regulation (pdf):
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We will promote a regulatory environment that facilitates finance and investment for sustainable development and create more resilient economies.
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Encourage rating agencies to better incorporate sustainable development considerations into their decision-making: We will work with rating agencies to increase the time horizon of their credit assessments and integrate social and environmental risks into their decision making, while also taking into consideration the different development stages and needs of countries.
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Advance internalization of key externalities: We will accelerate private and public sector collaboration to develop and approve models that price-in carbon emissions and other ways to incentivize sustainable business practices [UN Secretary-General’s remarks]
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pdf Statement of Action: COVID-19 and Beyond - Response and Recovery (132 KB)
OECD Economic Outlook: Volume 2020 Issue 1
With little prospect of a vaccine becoming widely available this year, and faced with unprecedented uncertainty, the OECD has taken the unusual step of presenting two equally likely scenarios – one in which the virus is brought under control, and one in which a second global outbreak hits before the end of 2020. If a second outbreak occurs triggering a return to lockdowns, world economic output is forecast to plummet 7.6% this year, before climbing back 2.8% in 2021. At its peak, unemployment in the OECD economies would be more than double the rate prior to the outbreaks, with little recovery in jobs next year. If a second wave of infections is avoided, global economic activity is expected to fall by 6% in 2020 and OECD unemployment to climb to 9.2% from 5.4% in 2019.
The economic impact of strict and relatively lengthy lockdowns in Europe will be particularly harsh. Euro area GDP is expected to plunge by 11½% this year if a second wave breaks out, and by over 9% even if a second hit is avoided, while GDP in the United States will take a hit of 8.5% and 7.3% respectively, and Japan 7.3% and 6%. Emerging economies such as Brazil, Russia and South Africa, meanwhile, face particular challenges of strained health systems, adding to the difficulties caused by a collapse in commodity prices, and their economies plunging by 9.1%, 10%, and 8.2% respectively in case of a double hit scenario, and 7.4%, 8% and 7.5% in case of a single hit. China’s and India’s GDPs will be relatively less affected, with a decrease of 3.7% and 7.3% respectively in case of a double hit and 2.6% and 3.7% in case of a single hit.
- Speech by OECD Secretary-General Angel Gurría; Presentation by OECD Chief Economist Laurence Boone
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Private sector leaders commit to mobilizing resources to build back better from COVID-19
In a meeting convened by United Nations Secretary-General António Guterres on 10 June, leaders of prominent financial institutions and businesses pledged to scale-up sustainable investments globally, especially in countries most in need as a result of the COVID-19 pandemic.
The Global Investors for Sustainable Development Alliance issued a statement vowing greater action to confront the global economic crisis driven by the COVID-19 pandemic and keep the Sustainable Development Goals on track.
“We, the Members of the Global Investors for Sustainable Development Alliance, met in these extraordinary circumstances to send a strong message of unity and commitment. We reinforce the UN Secretary-General’s calls for wide ranging actions that match the scale of the crisis,” the statement said.
The Secretary-General told the Alliance that the pandemic’s toll of skyrocketing unemployment, and the shuttering of businesses would hurt the poorest and most vulnerable and that rebuilding to pre-crisis levels of employment and output may take years.
“COVID-19 is having dramatic impacts on the way the world works – for example, by reducing energy usage and prompting the adoption of technologies that can decouple the economy from its reliance on fossil fuels,” Guterres said. “These changes can be the beginning of the process of shaping our world for the better. But the global community must go further, taking active steps to align recovery with sustainable development.”
The Alliance members agreed to accelerate efforts to align investment with sustainable development objectives and integrate the SDGs into their core business models. They also pledged to establish scalable innovative financing and investment vehicles to advance the SDGs, including through COVID-19 bonds, risk-sharing tools, joint investment and business matchmaking platforms.
In addition, the group promised to promote regulations that facilitate investment in sustainable development and create more resilient economies. They also pledged to accelerate private and public sector collaboration to develop models that price-in carbon emissions and other ways to incentivize sustainable business practices.
The virtual meeting, aimed at leading an urgent and coordinated response from the private sector, was chaired by UN Special Envoy for Climate Change and Finance, former Bank of England Governor Mark Carney. High profile attendees included GISD co-chairs Oliver Bäte, CEO of Allianz SE and Leila Fourie CEO of the Johannesburg Stock Exchange (JSE); as well as Brian Moynihan, Chairman & CEO of Bank of America; Marcie Frost, CEO of California Public Employees' Retirement System (CalPERS); Michael Corbat, CEO of Citigroup; and Anna Botín, Group Executive Chairman of Banco Santander.
“No country has been spared from the economic ravages of COVID-19, with an unprecedented increase in unemployment and severe impacts falling on the poorest and most vulnerable,” Leila Fourie said today. “The pandemic has exacerbated inequalities which the SDGs are meant to address, and threatens to set back decades of progress.”
Fourie added, “We can still achieve the Goals, but it will take the mobilization of resources from both public and private sources, on a scale greater than previously foreseen.”
According to the Secretary-General, COVID-19 should be a wake-up call for the world. He has urged a green recovery from the pandemic, focused on delivering new jobs and businesses through a “clean, green transition”, tied to sustainable growth and resiliency. He has specifically called for an end to fossil fuel subsidies and said climate risks should be incorporated into financial systems.
Guterres said that crises in general are set to become even more multi-layered and complex, stretching already limited resources and causing more widespread human suffering. He called on the GISD members to seize the moment of the COVID-19 crisis to shape the future for the better.
“COVID-19 has derailed many plans; it has shifted the focus away from long-term planning to immediate needs. But this crisis underscores the need to think long term, build resilience and limit the impact of future crises,” the Secretary-General said.
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Kenya’s National Baseline Survey Report: Kenya loses over Ksh 100B in revenue to illicit trade (KBC)
Kenya’s Anti-Counterfeit Authority, today, released findings of the National Baseline Survey on the extent of counterfeit and other forms of illicit trade in Kenya. According to the study conducted between October 2019 and February 2020, the Government revenue lost in 2018 stood at Ksh 102.99 billion up from Ksh 101.23 billion in 2017. From the 16 sectors of the economy that the study concentrated on, building, mining and construction were heavily affected by counterfeiting with a share of 23.37% in value of total illicit trade, followed by energy, electrical and electronics with a share of 14.67% in 2018.
The sector with the most government revenue loss was food, beverage and non-alcoholic drinks with a share of 23.19%, followed by textile and apparel at 20.09%. Thirty per cent of the firms were aware that their products were being counterfeited and sold in the market, whereas 56.4% of the sampled firms were not aware that their products are being counterfeited and sold in the market. Between 2016 and 2018, 7,484 jobs were lost in Kenya due to illicit trade with counterfeiting accounting for 32.59% of the jobs lost. The study also cites piracy as a critical form of illicit trade. According to the findings, the loss of sales as a result of pirated products stood at Ksh 2.2 billion over the period 2016-2018. Although the trend depicts marginal decline between 2017 and 2018, the loss as a result of total sales is quite high ranging between 37.69% and 42.14%, which is a clear indication of how piracy is wiping profitability of the affected firms and individuals. [Note: Tweeted highlights from the launch can be accessed on #IllicitTradeKE]
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Fake goods cost Kenya ‘Sh40bn’ yearly, says KAM (Daily Nation)
Counterfeits and substandard goods could be costing the country over Sh40 billion loss in revenue per year, the Kenya Association of Manufacturers has said. Association chairman Steven Smith said that such products have also exposed the local business people to unfair competition adding that some were a health risk to citizens. “Apart from unfair business competition, these counterfeits and substandard goods also affect the tax base of the country,” said Mr Smith, who is also the Eveready East Africa chief executive officer. He said that his association will push for the enactment of the Counterfeit Bill 2008 to protect local consumers and business community. “Enactment of the Bill will help us improve our capacity in business and protect the industry even in days to come,” said Mr Smith.
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EUIPO’s 2020 Status Report on IPR Infringement
This 2020 edition of the report is updated with the results of new studies. In particular, the EPO-EUIPO IP Contribution study, first published in 2013 and updated in 2016, quantifying the ‘weight’ of IPRintensive industries in the EU economy was updated again in 2019; the IP SME Scoreboard was also updated in 2019, as was the IP and Youth Scoreboard (both of these studies were first published in 2016). These ‘baseline’ studies of the Observatory are generally updated every three years. In the area of IPR infringement, a new joint OECD-EUIPO study on counterfeit medicines was published in 2020. The sectorial studies estimating the impact of the presence of counterfeits in the EU marketplace have all been updated to reflect the most recent data available. Finally, two studies dealing with the infringement of digital content were published in 2019, one quantifying the consumption of pirated content in all Member States, and the other on the use of illegal IPTV across the EU. The results of those studies are also included (pdf).
BloombergQuint: The ticking debt bomb in Africa threatens a global explosion
Carmen Reinhart, incoming chief economist at the World Bank, predicts that any recovery will be slow and fraught with tension. Most debtor countries require multiple overhauls to stabilize their economies, and negotiations with private creditors typically drag on for four years or longer. “The restructuring process has this long back-and-forth,” Reinhart said at the June 1 World Bank web conference. “I look at the restructurings of the 1920s and 1930s, and of the 1980s and 1990s, and what I see is a decade-long process.”
The AfDB has posted its Sierra Leone Country Diagnostic Note 2020. This CDN analyzes Sierra Leone’s economic and social developments and identifies the key development challenges that may require the Bank’s intervention in that country. It thus aims to underpins the preparation of the 2020-2024 Country Strategy Paper. Extract:
Regional Integration: Sierra Leone maintains close links with its neighbors as an active member of ECOWAS and the Mano River Union. It is to be noted that Sierra Leone moved to a more restrictive trade regime in 2017 by introducing several tariffs on targeted goods such as beverages and tobacco products. Nevertheless, the government remains committed to promotion of intra-regional trade, including cross-border trade by making progress in applying the ECOWAS common external tariff. Movement of people within the ECOWAS region has improved tremendously but movement of capital remains limited.
Regarding external balance, imports have been and remain structurally higher than exports. In 2015, the year of the recession, imports totaled $1,347m, as against only $581 for exports. Imports declined slightly to $1,316m and $1183m in 2016 and 2017, respectively while exports climbed to $670m in 2016 and then dropped to $637m in 2017 due to reduced production and export of iron ore. The current account balance was -13% of GDP in 2017 and is estimated at -16.9% in 2018. The current account balance is projected to deteriorate further to -18.4% of GDP in 2019 and -20.8% in 2020. Current account balance is largely financed by foreign direct investment, remittances from abroad and drawing down on reserves. Most of the exports are unprocessed commodities such as gold, diamonds, iron ore, rutile, fish, cashew nuts, while the bulk of imports include food items such as rice, petroleum, and machinery. One notes that the Sierra Leone’s trade flows have a low exchange rate elasticity. According to this economic structure, the country has not benefited from the depreciation of the Leone over recent years as the depreciation should typically encourage exports and discourage imports, thereby improving the country’s external balance position. The top ten major trading partners for Sierra Leone are China, Belgium, the USA, Romania, Turkey, Australia, the Netherlands, Japan, UK, and Singapore.
Ghana’s trade in ECOWAS: re-aligning a history of incoherent trade policies to post-covid scenarios. For local players, the best protection is in easing the cost of doing business locally. Apart from lower and less beneficial terms in accessing finance for trading, the cost of doing business in Ghana is high and this reduces the profitability due to the limited scale of operations. The advantage that could be presented in easing the cost of doing business will facilitate better outcomes. The world is going to change, and in the COVID-19 dispensation, insights from current commercial activities will refine interactions among traditional trading parties. Recommendations (extracts):
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A policy guiding improved data collection on retail activity will better align trade objectives and data transparency and have a clearer register of foreign players in the retail market with a view to ensure better regulatory and statutory compliance along the areas of business registration and taxation.
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To conform to ECOWAS Trade Liberalisation Scheme (ETLS) requirements along the lines of free trade and common tariffs, the Ghana Investment Promotion Centre (GIPC) should prioritize the creation of a common interoperable platform of nationally approved classes of goods and services that could be tradable under a free movement regime which would then be taxed according to optimal local laws to still meet revenue targets. The market provenance guideline in the ETLS protocol policy should be activated and pursued aggressively.
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Trade certification schemes should be designed along the national approval systems to adopt a more intra-regional set of standards for trade in goods and services. Pilots should be made on low hanging fruits such as manufactured foods and other products that are fast moving consumer goods and very visible categories. This can later be expanded to encompass retail commerce. It will allow for better data towards industrial self-sufficiency in the region. The GIPC should look very earnestly into expanding its scope into digital goods and services. [The author, Selorm Branttie, is vice president for technology and communication at IMANI and global strategy director for mPedigree. This a background article for IMANI-Atlas Global Voices Project.]
Doing Business Reform Advisory: Ten year results (World Bank)
The Sub Saharan Africa region has been the most active in terms of engagement and in the number of reforms. To date, 43 of the 48 countries in the region have engaged with DBRA and almost half of the reforms supported by DBRA in the world were implemented in SSA (322 in total). Reforms have mostly focused on the areas of business start-up, construction permitting, the protection of minority investors, property registration and insolvency frameworks. Over the last 10 years, Côte d’Ivoire, Kenya, Togo, Niger, Rwanda and Senegal improved the most on the overall ease of Doing Business. Notably, Rwanda implemented reforms supported by DBRA over six consecutive years and has been recognized as a global top ten reformer three times. Extract from the SSA analysis (pdf):
Thirty-seven SSA countries implemented 85 reforms between 2008 and 2018 aimed at streamlining business start-up. Burdensome regulations and out-of-date fee schedules have long affected the business creation process in the region. In 2008, the average time to create a business in SSA client countries was 55 days. In 2018, it only took 23 days. One notable way the time was reduced was through the creation of One-Stop-Shops or online registries. With DBRA assistance, 11 countries in the region created OSS or online registration platforms. For example, in 2013, Guinea launched a OSS which helped reduce the time to register a business from 40 to 12 days. In the first 5 months of its creation, 750 businesses were registered.
The time to start a business has been halved and the cost has been cut by four in SSA. In 2008, the average cost to start a business in SSA amounted to 185% income per capita, double the worldwide average of 91% in 2008. This average cost was reduced to 46% of income per capita in 2018, albeit still twice as high as the worldwide average cost to start a business.
COVID-19 is reducing domestic remittances in Africa: What does it mean for poor households? (World Bank)
While much work has gone into tracking international remittances, less is known about remittances sent by migrants within countries. This gap limits informed assessments of these remittances’ trends and impacts, especially at a time of crisis when the information would be extremely important. Tracking internal remittances is crucial for several reasons. Initial analysis further stresses the importance of domestic remittances for poor households in SSA. A few things are apparent from analyzing domestic and international remittances among households in Ghana, Nigeria, and Sierra Leone:
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The percentage of households receiving domestic remittances is much higher on average than the percentage receiving international remittances.
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The poorest households don’t benefit directly from international remittances as much as they do from domestic remittances. [The author: Samik Adhikari]
A Roadmap for Cross-Border Data Flows in the New Data Economy (WEF)
The World Economic Forum partnered with the Bahrain Economic Development Board and a Steering Committee-led project community of organizations from around the world to co-design the Roadmap for Cross-Border Data Flows (pdf), with the aim of identifying best-practice policies that both promote innovation in data-intensive technologies and enable data collaboration at the regional and international levels. Creating effective policy on cross-border data flows is a priority for any nation that critically depends on its interactions with the rest of the world through the free flow of capital, goods, knowledge and people. Now more than ever, cross-border data flows are key predicates for countries and regions that wish to compete in the Fourth Industrial Revolution and thrive in the post COVID-19 era. Despite this reality, we are witnessing a proliferation of policies around the world that restrict the movement of data across borders, which is posing a serious threat to the global digital economy, and to the ability of nations to maximize the economic and social benefits of data-reliant technologies such as artificial intelligence and blockchain.
UN calls on governments to help landlocked neighbours: UN multi-agency statement
When borders around the globe close, every country suffers, but those without territorial access to the sea are affected in unique ways, said a UN statement urging governments to provide smooth transit transport for landlocked neighbors. Issued by six UN agencies, the statement warned that economic and social conditions in many landlocked developing countries (LLDCs) – often the poorest in their regions – are worsening rapidly due to COVID-19 lockdown measures and international restrictions on the movement of goods and people. The heads of UN agencies called for:
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Governments to refrain from any unjustified restraints on traffic and goods in transit to make sure that goods, medical equipment and basic goods and commodities can depart from and reach the LLDCs when needed, without delay or hinderance.
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LLDCs and neighbouring countries to make use of trade facilitation standards and digital technologies that limit physical checks in transit, physical contact at borders and protect the health of workers, such as electronic exchange of information, electronic tracking, automation of customs procedures and other paperless solutions. The implementation of international conventions on trade and transport is of utmost importance.
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Governments around the globe to respond to this pandemic not only by minimizing disruptions to international transport but also by viewing the crisis as an opportunity to reorient international freight transport operations towards a more sustainable path.
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The strengthening of global and regional cooperation on transport connectivity.
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pdf Joint Call for Smooth Transit and Transport Facilitation To and From LLDCs (474 KB)
Today’s Quick Links:
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Kenya: State caught between a rock and a hard place in 2020/21 budget
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UNCTAD-IMO statement: “Keep ships moving, ports open and trade flowing” [ pdf Download (95 KB) ]
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AfDB Project Appraisal Report: Support project for G5 Sahel member countries to combat the coronavirus pandemic
Related News
COVID-19: UN calls on governments to help landlocked neighbours
Well-functioning transit transport services and procedures are essential to ensure people in landlocked developing countries have timely access to medical products and basic goods during and after the crisis.
When borders around the globe close, every country suffers, but those without territorial access to the sea are affected in unique ways, said a United Nations statement urging governments to provide smooth transit transport for landlocked neighbors.
Issued on 9 June by six UN agencies, the statement warned that economic and social conditions in many landlocked developing countries (LLDCs) – often the poorest in their regions – are worsening rapidly due to COVID-19 lockdown measures and international restrictions on the movement of goods and people.
On average, these 32 vulnerable nations lag behind the world average by 20% in the UN’s human development index. One-third of their 440 million inhabitants live in extreme poverty, 51% face food insecurity daily, and 40% lack access to electricity.
“The impacts of a combined lockdown measures, health pandemic and a global recession will likely halt or potentially even reverse LLDCs’ progress towards the Sustainable Development Goals and the aspirations included in the Vienna Programme of Action for the LLDCs for the Decade 2014-2024,” it said.
The Vienna programme of action was adopted by the international community in recognition of the complex challenges facing LLDCs and their special development needs.
The statement was signed by the heads of UNCTAD, the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), and the UN’s regional economic and social commissions for Africa (UN ECA), Asia and the Pacific (UN ESCAP), Europe (UN ECE) and Latin America and the Caribbean (UN ECLAC).
Unprecedented times call for decisive action
Even in normal times, functioning and efficient transport networks and procedures are crucial to connect these vulnerable nations to world markets, as their exports and imports must transit through at least one neighbouring state and often have to change the transport mode – making trade much more complex and costly.
“In these unprecedented times, there is an even more urgent need to ensure smooth transport of goods to and from these countries,” the statement said.
It added: “Transit transport is critical for LLDCs in both the short-term health response to the crisis by ensuring the delivery of much-needed medical equipment and basic goods, and the long-term economic response by facilitating trade and access to global markets and spurring economic pick-up post COVID-19.”
In addition to asserting the UN’s readiness to continue its support to LLDCs and their trading partners, the statement pleaded for decisive and immediate action to help landlocked developing countries while continuing to protect global public health. The heads of UN agencies called for:
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Governments to refrain from any unjustified restraints on traffic and goods in transit to make sure that goods, medical equipment and basic goods and commodities can depart from and reach the LLDCs when needed, without delay or hinderance.
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LLDCs and neighbouring countries to make use of trade facilitation standards and digital technologies that limit physical checks in transit, physical contact at borders and protect the health of workers, such as electronic exchange of information, electronic tracking, automation of customs procedures and other paperless solutions. The implementation of international conventions on trade and transport is of utmost importance.
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Governments around the globe to respond to this pandemic not only by minimizing disruptions to international transport but also by viewing the crisis as an opportunity to reorient international freight transport operations towards a more sustainable path.
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The strengthening of global and regional cooperation on transport connectivity.
Related News
COVID-19 to plunge global economy into worst recession since World War II
The global economic outlook during the COVID-19 Pandemic: A changed world
The swift and massive shock of the coronavirus pandemic and shutdown measures to contain it have plunged the global economy into a severe contraction. According to World Bank forecasts, the global economy will shrink by 5.2% this year. That would represent the deepest recession since the Second World War, with the largest fraction of economies experiencing declines in per capita output since 1870, the World Bank says in its June 2020 Global Economic Prospects.
Economic activity among advanced economies is anticipated to shrink 7% in 2020 as domestic demand and supply, trade, and finance have been severely disrupted. Emerging market and developing economies (EMDEs) are expected to shrink by 2.5% this year, their first contraction as a group in at least sixty years. Per capita incomes are expected to decline by 3.6%, which will tip millions of people into extreme poverty this year.
The blow is hitting hardest in countries where the pandemic has been the most severe and where there is heavy reliance on global trade, tourism, commodity exports, and external financing. While the magnitude of disruption will vary from region to region, all EMDEs have vulnerabilities that are magnified by external shocks. Moreover, interruptions in schooling and primary healthcare access are likely to have lasting impacts on human capital development.
“This is a deeply sobering outlook, with the crisis likely to leave long-lasting scars and pose major global challenges,” said World Bank Group Vice President for Equitable Growth, Finance and Institutions, Ceyla Pazarbasioglu. “Our first order of business is to address the global health and economic emergency. Beyond that, the global community must unite to find ways to rebuild as robust a recovery as possible to prevent more people from falling into poverty and unemployment.”
Under the baseline forecast – which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting – global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
The U.S. economy is forecast to contract 6.1% this year, reflecting the disruptions associated with pandemic-control measures. Euro Area output is expected to shrink 9.1% in 2020 as widespread outbreaks took a heavy toll on activity. Japan’s economy is anticipated to shrink 6.1% as preventive measures have slowed economic activity.
“The COVID-19 recession is singular in many respects and is likely to be the deepest one in advanced economies since the Second World War and the first output contraction in emerging and developing economies in at least the past six decades,” said World Bank Prospects Group Director Ayhan Kose. “The current episode has already seen by far the fastest and steepest downgrades in global growth forecasts on record. If the past is any guide, there may be further growth downgrades in store, implying that policymakers may need to be ready to employ additional measures to support activity.”
Analytical sections in this edition of Global Economic Prospects address key aspects of this historic economic shock:
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How deep will the COVID-19 recession be? An investigation of 183 economies over the period 1870-2021 offers a historical perspective on global recessions.
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Scenarios of possible growth outcomes: Near-term growth projections are subject to an unusual degree of uncertainty; alternative scenarios are examined.
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How does informality aggravate the impact of the pandemic? The health and economic consequences of the pandemic are likely to be worse in countries with widespread informality.
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The outlook for low-income countries: The pandemic is taking a heavy human and economic toll on the poorest countries.
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Regional macroeconomic implications: Each region is faced with its own vulnerabilities to the pandemic and the associated downturn.
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Impact on global value chains: Disruptions to global value chains can amplify the shocks of the pandemic on trade, production, and financial markets.
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Lasting scars of the pandemic: Deep recessions are likely to do long-term damage to investment, erode human capital through unemployment, and catalyze a retreat from global trade and supply linkages.
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The implications of cheap oil: Low oil prices that are the result of an unprecedented drop in demand are unlikely to buffer the effects of the pandemic but may provide some support during a recovery.
The pandemic highlights the urgent need for health and economic policy action, including global cooperation, to cushion its consequences, protect vulnerable populations, and strengthen countries’ capacities to prevent and deal with similar events in the future. It is critically important for emerging market and developing economies, which are particularly vulnerable, to strengthen public health systems, address challenges posed by informality and limited safety nets, and enact reforms to generate strong and sustainable growth once the crisis passes.
Emerging market and developing economies with available fiscal space and affordable financing conditions could consider additional stimulus if the effects of the pandemic persist. This should be accompanied by measures to help credibly restore medium-term fiscal sustainability, including those that strengthen fiscal frameworks, increase domestic revenue mobilization and spending efficiency, and raise fiscal and debt transparency. The transparency of all government financial commitments, debt-like instruments and investments is a key step in creating an attractive investment climate and could make substantial progress this year.
Regional Outlooks
East Asia and Pacific: Growth in the region is projected to fall to 0.5% in 2020, the lowest rate since 1967, reflecting disruptions caused by the pandemic. For more, see regional overview.
Europe and Central Asia: The regional economy is forecast to contract by 4.7%, with recessions in nearly all countries. For more, see regional overview.
Latin America and the Caribbean: The shocks stemming from the pandemic will cause regional economic activity to plunge by 7.2% in 2020.For more, see regional overview.
Middle East and North Africa: Economic activity in the Middle East and North Africa is forecast to contract by 4.2% as a result of the pandemic and oil market developments. For more, see regional overview
South Asia: Economic activity in the region is projected to contract by 2.7% in 2020 as pandemic mitigation measures hinder consumption and services activity and as uncertainty about the course of the pandemic chills private investment. For more, see regional overview.
Sub-Saharan Africa: Economic activity in the region is on course to contract by 2.8% in 2020, the deepest on record. For more, see regional overview.
Related News
tralac’s Daily News selection
Diarise, Thursday (11 June): Rwanda, Kenya, Tanzania, and Uganda are expected to table their respective 2020/2021 national budgets. Industrialists are lobbying, through the EABC, for the retention of low inputs taxes after the bloc failed to finalise a review of its common external tariff structure ahead of Thursday’s Budget Day. They want Kenya, Tanzania, Uganda and Rwanda to extend duty remission on key inputs from outside the bloc, while imposing higher taxes on finished products that raise competition with local goods.
AfCFTA: COVID-19 is a hiccup in delay says Afreximbank’s president (The Africa Report)
I am pleased that those preparatory activities are now set to resume virtually. So, the pandemic amounted to a brief distraction. Work is getting back on track. For instance, we expect the Pan-African Payment and Settlement System (PAPSS) which Afreximbank is supporting to start piloting by September 2020, that is just three months delay as the initial date was June 2020.
While no new date has been officially announced it is anticipated that the start of trading under the AfCFTA will not be unduly delayed. Obviously, the biggest obstacle to implementation as a result of COVID-19 is the delay in concluding the negotiations, especially on outstanding phase one such as schedules on tariff concessions, rules of origin, and liberalization of services.
COVID-19 halted the negotiations for a while but they are set to resume virtually. We expect that these issues would be settled before year end. We are hoping that the delay could provide an opportunity for more countries to ratify the agreement, such that when trading under the AfCFTA effectively starts, the integrated African market extends beyond the 29 countries that have ratified the agreement to date.
World Bank’s pdf June 2020 Global Economic Prospects: Sub-Saharan Africa (625 KB)
Economic activity in the SSA region is on course to contract by 2.8% in 2020, the deepest on record. Per capita GDP is anticipated to fall even more sharply, likely pushing millions in the region back into extreme poverty. Growth could resume to 3.1% in 2021 assuming the pandemic fades in the second half of the year, that domestic outbreaks of the virus follow a similar path, and that growth in major trading partners rebounds. Sub-Saharan Africa faces daunting hurdles to contain COVID-19, given weak health care capacity, lack of access to basic sanitation, and the prevalence of informal economic activity across much of the region. The economy of Nigeria is expected to shrink by 3.2% this year, given the collapse in oil prices, which represent 80% of the country’s exports, about a third of banking sector credit, and half of government revenues. South Africa’s output is forecast to contract 7.1% this year, the deepest contraction in a century, as stringent but necessary containment measures curtail economic activity.
Under the [global] baseline forecast - which assumes that the pandemic recedes sufficiently to allow the lifting of domestic mitigation measures by mid-year in advanced economies and a bit later in EMDEs, that adverse global spillovers ease during the second half of the year, and that dislocations in financial markets are not long-lasting - global growth is forecast to rebound to 4.2% in 2021, as advanced economies grow 3.9% and EMDEs bounce back by 4.6%. However, the outlook is highly uncertain and downside risks are predominant, including the possibility of a more protracted pandemic, financial upheaval, and retreat from global trade and supply linkages. A downside scenario could lead the global economy to shrink by as much as 8% this year, followed by a sluggish recovery in 2021 of just over 1%, with output in EMDEs contracting by almost 5% this year.
Monitoring COVID-19 impacts on firms in Ethiopia: Results from a high-frequency phone survey of firms (World Bank)
This note summarizes the results of round 2 (R2) of the HFPS-F1, implemented between 6 May and 27 May, 2020 in Addis Ababa. While the original sample in Addis Ababa consisted of 645 firms, only 550 of those firms responded to the R2 survey. The information presented here is based on the sample of 550 firms that responded to both round 1 (R1) and round 2 (R2) surveys. Key highlights (pdf):
Since the last survey round, firms in Addis Ababa have progressively resumed operations. The share of firms that completely ceased operations decreased from 41% in R1 to 29% in R2. This re-opening has not translated in a rebound in firm earnings, with the share of firms reporting zero earnings in the last completed month (April 2020 for the R2 interviews) increasing from 36% in R1 to 40% in R2. The COVID-19 pandemic has affected firms in Addis Ababa mainly through a substantial drop in demand for their products or services. Compared to R1, a higher share of firms in R2 also reports higher prices for materials and intermediate goods as a significant problem.
The financial stress on firms has increased between R1 and R2, with an increasing share of firms reporting difficulties in paying staff wages and invoices. According to firms, the most relevant policy measure that could help them weather the storm is to waive tax payments. One-fifth of larger firms are in favor of wage-subsidies. A fairly small share of firms – 8% - laid off workers between R1 and R2, mainly affecting temporary workers. [Note: Data collection continues in the coming months by following the same firms every three weeks. Round 3 of data collection started on 28 May, 2020 and includes the follow-up of the existing sample of firms in Addis Ababa as well as a sample of firms in Adama, Bahir Dar, Hawassa, and Mekelle.]
Berbera Corridor set to boost trade between Somaliland and Ethiopia (EA Business Week)
Somaliland President Muse Bihi opened the first completed 12-kilometre phase of the project, the second major infrastructural project the country is building after the expansion of the Port of Berbera by Dubai Ports World (DP World). The 72 kilometre-road is an ambitious and strategic road project that will also enable Somaliland to benefit greatly from the winds of change blowing across the Horn of Africa. The project is worth $400m and, once complete, will link Ethiopia’s border town of Togochale to Berbera Port in Somaliland, which is strategic to landlocked Ethiopia. It is estimated Somaliland imports to Ethiopia are worth over $800m annually and the Berbera-Togochale corridor will be instrumental in facilitating import-export trade for Ethiopia’s economy. The road project is funded by the Abu Dhabi Fund for Development. DP World has signed a 30-year concession agreement to administer the Berbera port, located on the southern coast of the Gulf of Aden. The expansion will lead to the capacity of the port increasing by 50%.
Aubrey Hruby, Aubrey Rugo: Investing in African logistics (Project Syndicate, Financial Express)
The expansion of both asset-heavy and asset-light local logistics companies is also essential. Before the pandemic, demand for logistics companies in Africa was already rising, and a growing amount of venture capital was being channelled toward local logistics start-ups. Even as the COVID-19 crisis results in trade disruptions, trucking remains critical for supplying food, medicine, and other essentials to individuals and health-care facilities. One promising asset-light firm - the Nigerian start-up Kobo360 - connects truckers and companies to delivery services. Since launching in Lagos in 2017, it has expanded its operations to four countries. Kobo360 already has more than 10,000 drivers and trucks on its app, and provides services to major companies like DHL, Honeywell, and Unilever.
But a mature logistics market will also require investment in asset-heavy tech-enabled trucking operations. When DHL - the world’s biggest logistics company by revenue - expands to a new country, it often follows the asset-light model of leasing vehicles. But a lack of control over the quality of the hired trucks often meant that goods arrive damaged or late. This was a particularly serious problem in India, where logistics spending was at least 4-5% higher than in Europe. So, in 2018, DHL launched a transportation subsidiary in the country, and aims to invest in a fleet of 10,000 trucks over the next decade. African markets will require similar mixed investments.
Nigeria: Foreign Trade Statistics Q1 2020 (NBS)
The value of Nigeria’s total trade stood at N8,304.8 billion in Q1,2020.This was 17.94% lower than the value recorded in Q4, 2019 but 0.80% higher than the value recorded in Q1,2019. The import component of this trade was valued at N4,221.9 billion (50.8%) while the export component totaled N4,082.9 billion, indicating 49.2% of the total trade. A trade deficit of N138.98 billion was recorded during the quarter, marking two consecutive quarters of negative balance of trade, as the value of imports surpassed exports. It is worth noting that the consecutive quarters of negative trade balances (and lower imports and exports) occurred against the backdrop of a global slowdown in economic activity as a result of the COVID-19 pandemic. The global health crisis resulted in several countries implementing varying degrees of restrictions with respect to international trade, travel and tourism. When compared with the preceding quarter, the deficit in Q1 2020 represented an improvement by 76%. On a year –on-year basis however, the deficit was lower by 116.71%.
Crude oil, Nigeria’s dominant export, accounted for N2,944.6 billion, representing 72.12% of total exports in Q1,2020. The value of crude oil export was 18.86% less than the value recorded in Q4, 2019 and 12.80% lower than the value recorded in the corresponding quarter of 2019. Non crude oil exports were valued at N1,138.3 billion, representing 27.9% of total exports during the period under review.
During the quarter, Nigeria imported goods mainly from Asia, which was valued at N1,966.5 billion (or 46.58%). Other major imports originated from Europe, valued at N1,534.7 billion, or 36.35%, while imports from America and Africa amounted to N580.2 billion (13.74%) and N118.95 billion (2.82%) respectively. Import from Oceania stood at N21.6 billion (0.51%) while goods valued at N28.3 billion originated from ECOWAS.
Major export trading partners and percentage share in Q1, 2020 export trade: India (15.61%), Spain (9.87%), Netherlands (9.72%), South Africa (7.82%), Cameroon (7.39%).
Major import trading partners and percentage share in Q1, 2020 import trade: China (26.28%), Netherlands (11.14%), USA (10.45%), India (7.92%), Belgium (6.11%)
Rwanda Meat Value Chain Trade Competitiveness Project: AfDB appraisal report
The objective of the project (September 2020 - August 2022) is to improve meat production, expand the value chain, improve market and cross-border trade in the sector and increase the contribution of the meat value chain in Rwanda’s economy. The specific objectives of the project are to: enhance the competitiveness of the meat value chain in Rwanda through the strengthening of the institutional and regulatory framework in the meat sector; enhance the capacity of private sector actors in the value chain; and increase Cross-border Trade and exports through market linkage activities. The project will target directly over 650 producers, processors and traders across the country, with 74% being women in informal cross border trade. Extract:
The meat value chain has a great potential for value addition to Rwanda’s economy, estimated at about $107m worth of exports to DRC alone, excluding the domestic market. The GoR has indicated through its national strategic documents, sector priorities and discussions, a need for a more structured and targeted intervention in the meat value chain. At present, the livestock quality in the country is low, the meat demand from DRC (which receives over 70% of the country’s livestock export) is for live animals. This is because DRC traders offer more competitive prices to farmers for live animals than the Rwandan abattoirs and meat processors and prefer fresh meat (as opposed to frozen). However, a consequence of this is that there is not much value addition, and Rwanda also loses potential value from by-products of livestock (leather and leather products, meat products etc.). This project will be a huge step in the direction towards resolving this unfavourable market model. The project will also target two of Rwanda’s busiest border crossings for cross-border trade, Poids Lourds, connecting Gisenyi to Goma in Rubavu, and Rusizi I, connecting to Kamembe to Bukavu in Rusizi. Over 50% of Rwanda’s informal cross-border exports pass through these two borders. Both borders have also seen recent growth in informal cross border trade indicating increasing demand for Rwandan exports. The two cities of Goma and Bukavu alone represent a potential market for food of approximately $387m per annum.
Today’s Quick Links:
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Angola establishes Diamond Hub and an Angolan Diamond Bourse
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Tenbite Ermias (Head of Africa, CDC Group]: DFIs are key to Africa’s economic recovery
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Note by South Africa: Conglomerate effects of mergers
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The consequences of a more resource efficient and circular economy for international trade patterns: a modelling assessment (pdf)
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tralac’s Daily News selection
Africa eyes the world’s top trade job — but spars over its candidate (Politico)
A political heavy-hitter from Nigeria is shaking up the race to lead the World Trade Organization, but her immediate challenge is whether the rest of Africa will rally behind her candidacy this week. Nigeria on Friday nominated Ngozi Okonjo-Iweala, a former finance minister and corruption-buster who now sits on the board of Twitter, to succeed Brazil’s Roberto Azevêdo as WTO director general in Geneva, ideally by September.
To her supporters in Geneva, she is just the candidate that the beleaguered institution needs for a reputational boost, steering it into the much-vaunted “African century” and away from the stark polarization of Washington-Beijing hostilities that have brought the WTO to a practical standstill in the past months. Okonjo-Iweala’s critics argue her expertise lies more in finance than trade, with one diplomat saying she was “not a trade name” and an African official saying, “International trade law isn’t really on her CV. Did they want to play the gender card with a high-profile successful woman close to the private sector?” [Reuters Factbox: Who’s bidding to be next World Trade Organization chief?]
Status of Integration in the SADC Region (SADC)
This report [compiled as an input to the inaugural AU-RECs Coordination Meeting of mid-2019 and just released by SADC] highlights the Status of Regional Integration in SADC and seeks to inform SADC Member States and the wider range of relevant stakeholders on the progress made in achieving the regional integration agenda. It covers four key pillars:
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Industrial Development and Market Integration
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Infrastructure Development in Support of Regional Integration
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Special Programmes of Regional Dimension
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Peace and Security Cooperation.
Extract: More than 33 protocols have been signed by Member States to drive forward the integration agenda of SADC. These protocols range from trade and investment, peace and security, to transboundary natural resources and the empowerment of women and young people (see Table 1.1: Status of Protocols and Agreements in SADC). However, not all the protocols and agreements have been ratified to advance the regional laws from being stated intentions to actual application. Some of the protocols and agreements yet to be ratified by SADC Member States are:
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Protocol on Science, Technology and Innovation signed in 2008. It aims to promote development and harmonization of science, technology, and innovation policies, advocating investment in research and development and promoting public awareness of science and technology;
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Protocol on the Facilitation of Movement of Persons signed in 2005. It seeks to fulfil the objectives of the SADC Treaty, which requires Member States to develop policies aimed at the progressive elimination of obstacles to the free movement of capital and labour, goods and services and of the people of the Region generally among Member States;
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Protocol of Trade in Services signed in 2012. The protocol, among other things, provides for the establishment of “an integrated regional market for services”, to unlock the potential of the Region’s services market so that businesses and consumers may take full advantage of the opportunities presented by a shared community in SADC;
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Protocol on Environmental Management for Sustainable Development signed in 2014. It aims to harmonize all existing regional instruments that deal with environmental issues;
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Protocol on Employment and Labour signed in 2014. The protocol provides and recognises the importance of collective bargaining; social dialogue and consultations among employers, trade unions and government, equal treatment and social protection for workers and their families in the Region;
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New Protocol on the Tribunal in the Southern African Development Community signed in 2014. It specifies that the new Tribunal’s jurisdiction will be confined to advisory interpretation of the SADC Treaty and any other protocols adopted by Member States; and the
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Agreement on Assistance in Tax Matters signed in 2012. It requires that Member States draw up effective guidelines for the effective exchange of information and the implementation of mutual agreement procedures.
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pdf Status of Integration in the SADC Region - April 2019 (1.04 MB)
Tanzania Economic Update: Addressing the impact of COVID-19 (World Bank)
Notwithstanding Tanzania’s strong growth performance in 2019, a new World Bank report says its economy will also suffer the effects of the COVID-19 pandemic and global economic crisis. The World Bank’s 14th Tanzania Economic Update (TEU) forecasts economic growth to slow sharply in 2020, to 2.5% from the 6.9% growth the government reported in 2019, while recognizing significant uncertainty as the pandemic continues to unfold. The report recognizes mitigating steps government has already taken, and this forecast assumes the authorities will take additional health and economic policy measures to mitigate negative impacts. However, there are downside risks for even slower growth if additional policy response is delayed or not well-targeted, or the external environment does not markedly improve this year. The TEU analyzes the key transmission channels of the global crisis to the Tanzanian economy, including lower export demand, supply chain disruptions for domestic producers and suppressed private consumption. International travel bans and caution against contracting the virus have severely hurt the tourism sector, which had been one of the fastest-growing sectors in the economy. Key transmission channels under our baseline scenario include:
Export demand will decrease as growth slows for Tanzania’s main trade partners and travel restrictions halt tourist arrivals. Firms exporting agricultural commodities and final manufactured goods will continue to be affected. For Tanzanian exports like textiles that are part of global value chains, this will in turn reduce demand for imported raw materials and intermediate goods. The volume of exports will also shrink as disruption in value chains pushes up the costs of inputs and transportation, delaying import delivery times and thus the quantity of the imports that exporting industries use as raw materials. Preliminary reports from the port of Dar es Salaam show that maritime traffic has slowed down. Second-round effects will also be generated by Tanzania’s regional trade partners that also export to Europe and Asia. As these countries experience lower demand from China, India and the EU, they will seek fewer goods and services from Tanzania. Our baseline assumption is for exports to decline by 10.0%, and imports by 1.5%, driven mainly by lower volumes.
Lower transit trade is also expected to decrease Tanzanian exports of transport services to its neighbors. Dar es Salaam port is the second largest port in East Africa and has become a gateway for Tanzania’s neighbor countries. Preliminary exports-imports data at the transaction level for 2018 show that between 25 and 30% of the total imports that arrive through Dar es Salaam are later sent using land transport to Uganda, Rwanda, Burundi (through the Northern and Central corridors) and Zambia and Malawi (through the Southern corridor). Disruptions and closures at the borders could reduce the traffic and thus the exports of freight transport (90% of registered trucks carrying cargo from Dar es Salaam port are Tanzanian), which are estimated to represent around 75% of total exports transport services ($1.3bn in 2019). The regional transport corridors are also key for Tanzania’s trade with its neighbors, given that its exports to countries in East Africa have become more prominent: Tanzanian exports to the region in 2018 represented 16.7% of its total exports (up from 8.5% in 2001), with Kenya (6.6%), Malawi (2.2%), Burundi (2.2%), and Zambia (0.8%) as the main trade partners.
Safeguarding Africa’s food systems through and beyond the crisis (McKinsey)
There is widespread concern about the potential impact of the COVID-19 pandemic on Africa’s agricultural and food systems. This should certainly be a priority for leaders across the public, private, and development sectors: some 650–670 million people in Africa, roughly half of the population, already face food insecurity. Of those, more than 250 million people are considered to be severely food insecure. Agriculture is also one of Africa’s most important economic sectors, making up 23% of the continent’s GDP. In sub-Saharan Africa, it provides work for nearly 60% of the economically active population. Africa’s exports of food and agricultural products are worth between $35bn and $40bn a year, and some $8bn a year flows through intra-regional trade in these products (Exhibit 1). In addition, Africa’s food and agricultural imports amount to between $45bn and $50bn a year—along with $6bn a year in imports of agricultural inputs. Extract:
Around 80% of agriculture exports from Africa are to four regions: Western Europe (around 45%), South and East Asia (20%), the Middle East (10%), and North America (5%). Based on 2015–18 averages, those exports are valued at some $35bn to $40bn a year (Exhibit 3). This could result in a severe economic blow for countries such as Côte d’Ivoire, Ethiopia, Ghana, Kenya, Tanzania, and Uganda - all of which rely on these exports as their primary or secondary source of export earnings.
Supply disruptions could put between $1bn and $5bn of export value at risk for 2020 and affect the livelihoods of 10 million farmers through job loss or price reductions—and up to 40 million people could be affected if dependents are factored in (see sidebar, “Export crops at risk from supply and demand disruptions”).
Tunisia Public Expenditure Review: Modernizing the state for better and fairer public spending (World Bank)
This PER employs a rich set of detailed spending data at the level of the central government and state-owned enterprises to analyze how public expenditures in Tunisia can be allocated and spent in a more effective and equitable manner. It is organized in three blocks. The first block - composed of chapters one to four - analyzes the macro-fiscal profile and the two largest spending items, namely wages, energy, and food subsidies, as well as the single largest liability, namely pensions, and the social protection system which is critical for protecting vulnerable households from shocks and from the potential negative effects of certain reforms. The second block - composed of chapters five and six - covers the education and health sectors, the two most important social services for human capital development, which account for the largest share of social spending. The third block - composed of chapters seven to nine -analyzes the issues of public investment efficiency and SOE performance in the electricity, water, roads, and transport sectors.
International Trade Committee of the House of Commons: address by Deputy-Director General Alan Wolff (WTO)
Given the strains on the trading system caused by the pandemic, both with respect to health and national economies everywhere, international cooperative action is necessary. One way to proceed would be to build on the initiatives that have already been offered and to maximize the scope of consensus with respect to subjects to be covered. To frame today’s discussion for essential collective actions, the following four questions deserve to be answered:
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First: in the face of the pandemic, is the current level of policy space — the scope for unconstrained trade-restrictive national actions — appropriate, or should it be modified?
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Second: Is there anything trade ministers can do acting collectively to aid in the much-needed economic recovery?
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Third: Should the current crisis give rise to broader trade initiatives, under the heading of WTO reform?
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Fourth: Are there near-term organizational steps to be taken as a way to regularize discussions?
Trade in digital services is booming: here’s how we can unleash its full potential (WEF)
Since the start of the COVID-19 pandemic, digital services such as online education, virtual meeting rooms and online marketplaces have kept our economies running and helped us stay connected. Almost all of these services are underpinned by cross-border digital trade. Even if you meet colleagues from your own town in a video conference, consult a local doctor online, or follow a virtual class by a teacher in your neighbourhood, the companies providing the networks and platforms for these interactions are probably at least partly in another country. The global exchange of digital services is easy to overlook given its intangibility, but it’s been one of the fastest-growing areas of trade in recent years. Trade in telecom and IT services, which underpin digital trade in services, has been growing particularly strongly. In 2018, telecommunications, computer and information services was the fastest-growing services sector in terms of global exports, increasing by 15%, according to the WTO. A closer look at three areas of digital trade in services at the core of the response during the pandemic - telework, remote education and healthcare - shows what needs to be done to allow this sector to flourish.
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Status of Integration in the Southern African Development Community
The Status of Integration in the SADC Region Report highlights the key achievements and successes made by the Southern African Development Community (SADC) in the area of regional integration, as well as the challenges that have been faced along the way.
This review of the status of integration in SADC in terms of achievements realized and challenges encountered, reveals that implementation has progressed well despite the several challenges faced, and SADC has been successful at many levels and across a wide range of areas relating to regional cooperation and integration. There are variations across the sectors, but the most important achievement is that appropriate policy frameworks, protocols and decisions have been put in place, ratified and domesticated in key areas.
In the process of implementing the various initiatives on regional integration, useful lessons can be drawn which include, the challenges of domestication of agreed policies and legal frameworks, roadmaps for implementation, enforcement and follow-up mechanisms, administrative issues, capacity issues, statistics and information sharing, and budgetary constraints.
This Report highlights the Status of Regional Integration in SADC and seeks to inform SADC Member States and the wider range of relevant stakeholders on the progress made in achieving the regional integration agenda. It covers four key pillars –
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Industrial Development and Market Integration;
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Infrastructure Development in Support of Regional Integration,
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Special Programmes of Regional Dimension; and
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Peace and Security Cooperation.
Industrial Development and Market Integration
This is Priority A for SADC, including sustainable industrial development, productive competitiveness and supply-side capacity; free movement of goods and services; stability oriented macroeconomic convergence, financial market integration, and monetary cooperation; intra-regional investment and foreign direct investment; and deepened regional integration.
The pdf SADC Industrialisation Strategy and Roadmap 2015-2063 (2.34 MB) , which is a landmark milestone for the Region, was developed as an inclusive long-term modernisation and economic transformation scheme. The Strategy seeks to achieve major economic and technological transformation at national and regional levels, accelerate growth of the SADC economies, and enhance comparative and competitive advantages. SADC is further developing a Protocol on Industry, which will be a binding instrument that will entrench and give legal effect to the SADC Industrialisation Strategy and Roadmap.
Much work has already gone into the implementation of the SADC Industrialisation Strategy and Roadmap. Implementation of the Costed Action Plan is ongoing in Member States, with a number of activities already undertaken. These include the profiling of regional value chains in the priority sectors of agro-processing, mineral beneficiation and pharmaceuticals as well as the development of the SADC Mining Vision, which will complement the African Mining Vision.
The SADC Free Trade Area, launched in August 2008, now covers twelve (12) of SADC’s sixteen (16) Member States. The benefits of an enlarged regional market are beginning to show. It is heartening to note that since 2013, intra-regional trade in SADC has been consistently above 20% and growing, which can be considered to be a relatively good achievement compared to the pre-FTA era high of around 16%. Current focus is on consolidation of the FTA, which is perceived to set the stage for higher levels of integration.
SADC is also part of the part of the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA) which was officially launched in June 2015. The envisaged COMESA-SADC-EAC Tripartite Free Trade Area is a major regional African trade and development initiative that aims to establish a Free Trade Area and subsequently Customs Union of the three African regional economic communities. To support the free movement of services in the Region, the Protocol on Trade in Services has now been ratified by 7 countries.
SADC is implementing a cross-border settlement system called SADC Real Time Gross Settlement System (SADC-RTGS). A total of 81 banks (central banks and commercial banks) are participating in the system. The SADC-RTGS has performed impressively since July 2013 when the system went live, with a total of 1,275,591 transactions settled as at end 2018, representing ZAR5.21 Trillion. The benefits of the cross-border payment system are its efficiency and the reduction in transaction costs. Whereas previously transactions would go through correspondent banks, all intra-regional transactions are now handled within the Region. For example, where transactions previously took two to three days to clear, now they are cleared within 24 hours and fees paid to non-SADC clearing banks are removed. The elimination of intermediaries – often Western correspondent banks – means money stays in the Region and payments are processed faster.
In the area of exchange controls, all Member States have liberalised the current account. Four Member States (Botswana, Mauritius, Seychelles and Zambia) have liberalised the capital account. The Common Monetary Area (CMA) Member States: Lesotho, Namibia, South Africa and Swaziland, have no exchange controls among themselves but have exchange controls vis-à-vis the rest of the world.
In the area of financial inclusion notable progress has been made. The Implementation Plan for the SADC Financial Inclusion Strategy and SME Access to Finance was approved by Ministers in July 2018, thus paving way for the implementation of activities and assisting Member States to develop their own Strategies and programmes aimed at empowering the SMEs, youth and women to participate and contribute to economic activity. A total of 10 Member States have either developed their own Financial Inclusion Strategies or a national roadmap on financial inclusion.
The cost of cross border remittances has been reduced by 7 percentage points from an average of 20% per transaction to about 13% in the corridor between South Africa and DRC, Eswatini, Lesotho, Malawi and Mozambique. The challenge is to further reduce these costs to meet the G20 target of 5% per transaction.
The SADC Stock Exchanges have embarked on a programme for the Centralization of Government Bond Trading in Exchanges, which is expected to influence a change in policies in SADC countries, leading to removal of some of the existing barriers hindering capital market growth in SADC. Ministers of Finance and Investment 2018 approved a framework for the centralization of the bond markets in SADC Region so that government stocks/bonds be listed and traded on stock exchanges.
Progress with regard to the achievement of the Macro Economic Convergence (MEC) targets was reasonably good prior to the global financial crisis of 2008-9. However, a weak global economic recovery since the global economic crisis; volatile commodity prices; weak exchange rates; and climate change factors have affected economic performance in the Region, in turn hampering progress on macroeconomic convergence. The Peer Review Panel noted that a majority of Member States underperformed in achieving the agreed macroeconomic convergence indicators. Only three Member States (Botswana, Lesotho and Tanzania) met the set targets of the primary macroeconomic convergence indicators (Inflation, Fiscal Deficit and Public Debt) in 2017.
To improve the investment and business environment and remove barriers to investment, SADC is implementing a Regional Action Programme for Investment (RAPI). In that regard SADC has developed an Investment Policy framework to guide Member States in developing their National Investment Action Plans. To support investors in accessing information, SADC has developed an investment portal which is linked to Member States investment portals. In addition, SADC has developed a Bilateral Investment Treaty Template to assist Member States in the negotiation of investment treaties. Further, SADC has developed a Foreign Direct Investment (FDI) Strategy to support the mobilisation of FDI into the Region.
SADC developed the SADC Model Double Taxation Avoidance Agreement to assist Member States in the negotiation of tax avoidance agreements which are critical for investment and businesses. The network of double taxation avoidance agreements in the region has increased from 52 in August 2015 to 59 by December 2018. Three guidelines to enhance cooperation is taxation and related matters have been developed and are under implementation. These are Guidelines on Value Added Tax; Excise Tax; Tax Incentives.
This report was prepared as an input to the inaugural AU-RECs Coordination Meeting of mid-2019. This is in line with the broader AU institutional reform agenda as outlined in Assembly Decision 635 adopted in January 2017, which, among other things, requires the AU Commission to regularly engage with RECs and development partners to assess progress on implementation of programmes aimed at achieving continental integration.
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Buhari nominates Okonjo-Iweala as Nigeria’s candidate for WTO’s DG election (Premium Times)
Nigeria has nominated a former Minister of Finance, Ngozi Okonjo-Iweala, as its candidate for the Director-General of the WTO election coming up next year. President Muhammadu Buhari confirmed the nomination on Thursday in an official announcement through the Nigerian Embassy and Permanent Mission to the AU and UNECA in Addis Ababa. In the diplomatic note to inform all member countries’ embassies and permanent missions, President Buhari said he was communicating Nigeria’s decision to withdraw the candidacy of Yonov Frederick Agah for the election. He did not disclose the reasons for the withdrawal of Mr Agah’s candidature. Mr Agah is currently one of the four deputy directors-general of the WTO. He was first appointed deputy director-general October 1, 2013. He was reappointed for a second four-year term on October 1, 2017. His tenure runs out on October 1, 2021. The President said Mrs Okonjo-Iweala would serve as Nigeria’s candidate for the term 2021-2025 at the elections scheduled for in Geneva, Switzerland in 2021.
Kenya overtakes Angola as third-largest economy in Sub-Sahara Africa (Business Daily)
Kenya has overtaken Angola as the third-largest economy in Sub-Sahara Africa, IMF fresh estimates released Friday has shown. The East Africa’s largest economy, that has been the fourth largest economy in the Sub-Sahara Africa, has surpassed Angola to become third-largest economy in dollar terms. Kenya now is behind Nigeria and South Africa. Bloomberg reports that Angola has contracted every year since 2016 as oil output declined, and the kwanza was devalued in 2019 while Kenya’s shilling held steady. The coronavirus pandemic and restrictions to limit its spread will probably see Angola’s gross domestic product contract 1.4% in 2020, while Kenya’s is projected to grow by one percent, according to the IMF report.
Regional Economic Outlook: Sub-Saharan Africa
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pdf Chapter 1. COVID-19: An Unprecedented Threat to Development (4.43 MB)
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pdf Chapter 2. Adapting to Climate Change in Sub-Saharan Africa (335 KB)
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pdf Chapter 3. Digitalization in Sub-Saharan Africa (548 KB)
Angola cuts oil shipments to China as it seeks debt relief (Reuters)
Angola has cut the number of oil cargoes that it will ship to Chinese state firms to pay down debt to Beijing as it seeks to renegotiate repayment terms to deal with the crippling impact of the coronavirus, three sources familiar with the matter said. Angola said this week it had asked for G20 debt relief and was in advanced talks with some countries importing its oil on adjusting financing facilities, but expects no further debt overhaul to be needed beyond this. The sources said that China’s state-owned Sinochem would receive five cargoes in July, down from the usual seven or eight, while the trading arm of Chinese giant Sinopec called Unipec would receive none. Unipec typically receives two to three cargoes earmarked as debt repayment. Sonangol, Angola’s finance ministry, Sinopec and Sinochem did not immediately respond to requests for comment. China’s foreign ministry said on Wednesday that the relevant departments were in contact with Angola over its request for debt relief.
ECOWAS COVID-19 Ministerial Committee: extracts from the communique
The Ministers were concerned that the epidemic continues to spread in the ECOWAS region, although the Member States are at different stages of evolution. They noted that as at 1 June 2020, 35,115 people had been confirmed to have Covid-19 in the region since the first case on 27 February, of whom 56% still had active infection, 42% had recovered and 2% had unfortunately lost their lives. They observed that, despite the improved surveillance and rapid increase in testing, only about 0.11% of the population had been tested to date. Following presentations by experts and exhaustive discussions, the Ministers agreed (inter alia):
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Develop a cross-border surveillance and management strategy for use during epidemics. The idea of designated border crossings with enhanced surveillance facilities, trained personnel, and robust data sharing platforms including smartcards should be explored
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Ensure data driven decisions, particularly when easing lockdown. Ministers agreed that the easing of lockdown which has already started in some Member States should be data-driven, adapted to local context, and implemented gradually; that its effect on the pandemic should be evaluated after a period of about two weeks; and that lockdowns should be reapplied in the event of a resurgence in cases.
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The Ministers tasked WAHO to work with the Department for Trade, Customs & Free Movement at ECOWAS Commission, and the Ministerial Coordination Committee on Transport, to come out with health-related guidelines and protocols on regional cross-border movement by air, land or sea for consideration by the Ministers.
As lockdown fuels food shortages, Africa goes online for groceries (Reuters)
Launched in October 2018 and selling surplus fruits and vegetables from local farms, Fresh in a Box found itself scrambling to add more farmers to its roster to supply the sudden rush of new customers, said co-founder Kudakwashe Musasiwa. He added that it now distributes about 2.6 tonnes of vegetables daily from nearly 2,000 small-scale farmers to customers’ doorsteps. “With COVID-19, something incredible happened. We had to find a way of scaling up really quickly because all of a sudden our demand shot up,” Musasiwa said.
Like Zimbabwe’s Fresh in a Box and the Market Garden app in Uganda, which is connecting women produce vendors to a new wave of online customers, Namibia has also seen a rise in the popularity of online markets under lockdown. A website called Tambula - meaning “take” in the local Oshiwambo language - is described as “an online mall” by its founder Jerobeam Mwedihanga, who launched the site about a week into Namibia’s lockdown, which started in March. “Rental fees in malls are high in Namibia,” said Mwedihanga, 36, an IT engineer, whose site delivers electronics, beverages, furniture and more. “And there are many home-run businesses with no place to showcase their products.”
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Reuters: Zambia reviews 2020 budget after COVID-19 hits revenue
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WTO webinar explores way forward for sustainable trade after COVID-19
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Forbes Africa: Why African women in agriculture face the greatest double burden of Covid-19 and food insecurity
Selected perspectives on intra-African trade policy issues:
Ibrahim Sagna (Director and Global Head, Advisory and Capital Markets at Afreximbank): ”The opportunities from more integrated and diverse trade across the continent are evident from the benefits already accruing for a select group of trailblazers. In Francophone West Africa, harmonization of currency and regulation has demonstrated what regional co-operation can achieve. Trade hubs like Côte d’Ivoire and Senegal have already emerged (measured as a share of total regional imports). It is however on the Anglophone side that resides the largest trading hub. South Africa alone is the source of about 35% of all intraregional imports in Africa (and about 40% of intraregional manufacturing imports). Size does not always matter. Algeria, Egypt, and Nigeria, which collectively represent about half of Africa’s total GDP, account together for only 11% of continental trade. In contrast, the three leading intra-African exporters in 2015–2017 were Eswatini, Namibia, and Zimbabwe—all three, nations of limited size, but leading Africa in export contributions. Importantly, all three are members of the SADC.”
Stephen Karingi (Regional Integration Division Director at the ECA): “One of the things we have been able to demonstrate empirically is that the AfCFTA has the potential to deepen not only the regional integration of the continent but also to allow us to do more value addition in our production processes. We know what the AfCFTA means for this continent. COVID-19 has exposed that had we implemented the AfCFTA earlier, we would be in a better position than we are now,” he said, adding the ECA’s analytical work had been able to demonstrate the big role that services are going to play in terms of economic development.
Raghav Prasad (Mastercard’s SSA Division President): “Let me put it very simply: in Africa, our biggest competitor is cash. Around 99% of all transactions in Africa are in cash. I could spend all my time thinking about Visa or American Express or I could try to reduce that 99% – come with new ways to expand and digitalize cash. By the way, cash is very expensive. You have to print, store, transport, secure it. We estimate that the cost of cash is around 1.5% of the GDP of an economy. That is where we can make a difference.”
KRA new rules target e-commerce (Business Daily)
The Kenya Revenue Authority is targeting e-commerce platforms with new taxes to fund Sh3 trillion 2020/2021 budget. Under the draft 2020 Value Added Tax (Digital Market Supply) Regulation, downloadable digital contents, subscription based media, software programmes, electronic data management and supply of music, film and games will be taxed. Others include search engines and automated help desk services, online tickets, e-learning platforms, audio, vision or digital media, transport hailing platforms, among others. “A person supplying taxable services through a digital marketplace shall be required to register for VAT in Kenya,” the regulation says. Finance CS Ukur Yatani has mooted plans to tax such digital platforms such as WhatsApp and Facebook as part of effort to meet and fund a budget that is currently facing constraints. Such challenges include infrastructure projects under the Big Four Agenda and reviving an economy.
Effective market access for Least Developed Countries’ services exports: an analysis of the WTO’s services waiver for LDC (UNCTAD)
In 2016 UNCTAD commissioned a study on “LDCs Services Waiver–Operationalized?” The study carried out an in-depth assessment of the preferences offered in the context of the waiver and juxtaposed them with what LDCs had asked for through their Collective Request. This deliberation has now been further developed in the current overview paper (pdf) enriched by findings from the four pilot country studies, namely Cambodia, Nepal, Senegal and Zambia, that accompany this overview. Taking a bottom-up approach, the paper further looks at the waiver notifications from the perspective of four services-exporting LDCs: Cambodia, Nepal, Senegal and Zambia. The four countries examined all are successful services exporters. All four have active, sometimes fast-developing services industries across multiple sectors. A closer look reveals many export stories that may surprise, for example: animation studies in Cambodia and Nepal supplying services to Europe and the USA including Disney; a Nepalese information technology service supplier providing specialized software services for self-driving vehicles worldwide; Senegalese veterinarians providing advisory services in Mode 4 to breeders across West Africa and in some European countries; Zambian insurances covering several African countries through commercial presences (Mode 3) or Cambodian banks opening dozens of branches in regional markets.
Adva Saldinger: Taking stock of the Trump administration’s Africa policy. The Trump administration’s Africa policy has had fits and starts, and while there are some promising developments, several experts told Devex that the framing of Africa policy as part of a US competition with China and others is not winning it friends on the continent.
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Grant Harris (senior Africa policy adviser to former President Barack Obama): ”There is an enormous problem with how this administration framed Africa policy vis-a-vis China. They framed Africa as a pawn in a great game, as if it’s something to be lost or won, that Africans don’t have agency, and there is no intrinsic value otherwise to strong relations with African states or engaging Africa as an important region of increasing political and economic weight globally.”
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Aubrey Hruby (senior fellow with the Atlantic Council’s Africa Center): ”What the US has struggled with, especially in this administration, around overarching Africa policy is that it’s very clear what we’re against — the Chinese model — but we don’t always make it extremely clear what we’re for. We still have that need to be clear about what our story is in terms of what is the American offer and vision for Africa policy.”
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Christopher Maloney (acting assistant administrator for USAID’s Bureau of African Affairs): ”We’re not offering vulnerability to strategic dependence, we really want to make sure that we’re walking with the country along its own unique journey to self-reliance.”
USAID’s ongoing development priorities and COVID-19 assistance response in Africa: Christopher Runyan (USAID senior coordinator for the Bureau for Africa). “The relationship between America and Africa is strong and when it comes to the current COVID-19 crisis, the US government’s response builds on a foundation of decades of support across the continent. The United States has committed more than $60bn over the last 20 years to support public health on the African continent – by far the largest contribution by any donor nation. We’ve trained more than 285,000 healthcare workers and partnered with ministries of health, hospitals, and village health centers across the continent. In Fiscal Year 2019 alone, USAID and the Department of State provided $8.3bn of assistance to 47 countries and eight regional programs in sub-Saharan Africa. This provides us a unique and powerful set of relationships with African country governments, local civil society, and non-governmental organizations, and individual communities who have come to know us and our assistance. Our primary concerns in Africa now are responding to the disease, the food security issues and disruptions in access to food, economic and employment impacts in Africa, and concerns for democratic backsliding, and the loss of progress in other development sectors.”
Dale Aluf: China’s bear hug for the blockchain (Asia Times)
As the world confronts the profound social, economic and political challenges that have emerged in the wake of Covid-19, Beijing has unleashed digital innovations that hold profound implications for the future of international trade, global governance, and geopolitics. On 25 April, in the midst of battling the pandemic, China’s government established the world’s largest blockchain ecosystem, the Blockchain Service Network (BSN), and its central bank introduced “digital yuan” pilot programs across four cities – making the People’s Republic the world’s first major economy to issue a national digital currency. Professor Michael Seung, co-director of the Fintech Research Center at the Fanhai International School of Finance at Fudan University, has called the BSN the “infrastructure of infrastructures,” explaining that the permissionless blockchain ecosystem “allows the vertical integration of cloud computing, 5G communications, industrial IoT, AI and big data, with fintech and other application-level services.”
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Blockchain-based Service Network: Introductory White Paper (pdf)
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Asia Times: Beijing to bypass US systems with e-RMB drive
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AfCFTA remains Africa’s ambitious plan to prosperity even in midst of COVID-19
The African Continental Free Trade Area (AfCFTA) is still the agreement with great potential to foster regional economic integration and economic growth, and take Africa to the next level, even in the midst of a crippling coronavirus crisis, panellists on a COVID-19 Recovery Mechanism and AfCFTA webinar agreed Thursday.
The panelists agreed the AfCFTA was a crucial move towards removing the continent’s heavy reliance on commodity and agricultural exports leading to exponential growth in the manufacturing sector, export diversification and creation of quality jobs if its full potential to be transformational for all Africans is tapped.
Regional Integration Division Director at the Economic Commission for Africa, Mr. Stephen Karingi, in his remarks said a lot of empirical work had been done by ECA showing what the AfCFTA means for Africa.
“One of the things we have been able to demonstrate empirically is that the AfCFTA has the potential to deepen not only the regional integration of the continent but also to allow us to do more value addition in our production processes,” he said.
This, added Mr. Karingi, presents an opportunity not only to create economic resilience but also create quality and more valuable jobs compared to jobs that are not based on industry.
“We know what the AfCFTA means for this continent. COVID-19 has exposed that had we implemented the AfCFTA earlier, we would be in a better position than we are now,” he said, adding the ECA’s analytical work had been able to demonstrate the big role that services are going to play in terms of economic development.
The ECA Director said Africa should also discuss the use of digital services to deliver health services and education as it talks about recovery and building resilience post COVID-19, adding e-commerce should be brought forward to Phase 11 negotiations of the AfCFTA.
For her part, Mama Keita, Director of the ECA’s Sub-Regional Office for East Africa, said in COVID-19 recovery, Africa should prioritise labour intensive sectors to preserve jobs and livelihoods. This includes the agricultural sector to ensure food security for the continent.
“Health and digital are indispensable sectors contributing to fix the health crisis so we should strengthen the health sector,” Ms. Keita said, adding environmental sustainability was also important as well as climate friendly activities ‘as we build back better’.
She said understanding current and past macroeconomic frameworks and constraints of States was important for assessing the means available for a robust COVID-19 response and recovery plan.
“The potential of the AfCFTA is undeniable. What is needed is commitment from everyone, including governments and the private sector,” said Ms. Keita.
She said post COVID-19 there was a need to secure demand for local products; enhance productive capacities to supply goods and services needed; and promote strategic sectors, including promoting innovation and local manufacturing.
Panelists agreed chambers of commerce on the continent have a great role to play in facilitating trade and ensure African nations traded with each other.
Richard Ngatia, President of the Kenya National Chamber of Commerce and Industry (KNCCI), said the AfCFTA was a monumental milestone on Africa’s developmental roadmap that must be exploited to the full for intra-Africa trade.
“It will unleash unlimited opportunities, new economies of scale, income and employment generation through greater market and economic integration,” said Mr. Ngatia, who moderated the discussion.
He said with COVID-19 having an immediate and significant impact on businesses in Africa, there was need for nations to identify opportunities for entrepreneurs with regard to the AfCFTA and put in place an economic recovery mechanism.
The webinar was organized by the KNCCI in partnership with the ECA and the Great Lakes Region Private Sector Forum.
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Rosa Whitaker, Stephen Lande: US trade is key to driving Africa’s post-coronavirus recovery (US News)
AGOA expires in 2025. Ideally it would be superseded by a US-Africa free trade agreement, but that is too ambitious an undertaking for the time available. A consensus African negotiating position is too much to ask at this stage. African trade negotiators already have their hands full completing the AfCFTA. Nonetheless, a bilateral agreement with Kenya does not have to be seen as second prize if it is of sufficiently high quality and the parties are resolved to serve the objectives of the AfCFTA.
At minimum, they should respect the AfCFTA requirement that Kenya not treat the US or any other third country more favorably than AfCFTA members. They should ensure that any duty preferences Kenya grants the US are coordinated with Kenya’s EAC partners and incorporated into the community’s common external tariff. And they should work closely with the African Union and AfCFTA secretariat, as well as like-minded African countries, in crafting non-tariff disciplines on matters such as investment, intellectual property, competition, government procurement and e-commerce that could serve as models for the continental agreement.
If the US-Kenya free trade agreement is to be a model, negotiators will have to keep its broader applicability to Africa at top of mind. The administration is right to seek a comprehensive agreement but if its terms are too stringent, it will cease to be a model and it will not contribute to the completion of the AfCFTA, let alone an AfCFTA that accommodates U.S. wishes and concerns. The US has much more to gain from a well-crafted and successful AfCFTA than it does from obtaining every concession it might seek from Kenya. The latter is a market of 60 million. AfCFTA encompasses over a billion. Moreover, an integrated Africa will be much better placed to resist pressures from China, the European Union and elsewhere to adopt policies that put US firms at a disadvantage.
Tanzania: Over 100 lorry drivers stranded at Namanga over Covid-19 tests (The Citizen)
Over 100 Tanzanian lorry drivers heading to Kenya are stranded at Namanga border following a dispute over their Covid-19 test results they submitted to the Kenyan authorities. Over a week ago, the ministers of transport of Kenya and Tanzania agreed that lorry drivers wanting to cross the border between the two countries must carry out Covid-19 tests in their respective countries and present test certificates to health authorities at the border posts. The aim was to curb cross border transmission of the novel coronavirus. The resolution, which was arrived at between Kenya’s transport minister James Macharia and his Tanzanian counterpart, Mr Isaack Kamwelwe, on 22 May was expected to ease tensions over the diplomatic row caused by the Covid-19 crisis.
But yesterday the conflict resurfaced, with Kenyan authorities refusing to recognise certificates of Tanzanian truck drivers who reported to have tested negative for Covid-19 at local laboratories in Arusha, as they sought to cross the border into Kenya. Longido District Commissioner, Frank Mwaisumbe, said that an arrangement is being made to establish a dry port at the Namanga border where Kenyans will now be picking the commodities transported by Tanzanian trucker divers who will be dropping the cargo at the borders.
Kenya: Port, railway revamp spell hope for EAC trade (Daily Nation)
The revamping of the Sh800 million Kisumu port, coupled with the rehabilitation of the old railway lines in the larger western region, now spells hope for regional trade between Kenya and other EAC States. Lack of supporting infrastructure had posed the biggest threat to the success of the port, but with the government’s commitment to repair the old railway system to the lakeside city, there is hope that the viability of the project would be guaranteed. President Kenyatta said that with the refurbished Kisumu port, Kenya can serve the region from Mwanza and Bukoba in Tanzania, to Jinja and Entebbe in Uganda; and Muhoma Bay in Rwanda at affordable costs and decent timing. “Beyond serving the region, the port is poised to promote the ship-building and repair industry in Kenya,” he said. It will also catalyse the development of other small ports, the President added.
The WTO Secretariat has published an information note looking at how micro, small and medium-sized enterprises are being affected by the COVID-19 pandemic. It notes the impact of supply chain disruptions on MSMEs and the extent to which smaller businesses are represented in the economic sectors hardest hit by the crisis. The report notes that supply chain disruptions can have a particularly severe impact on MSMEs because sourcing from new suppliers or absorbing price increases is more challenging for a smaller firm with limited supply options and capital. The report looks into a wide range of measures taken by governments to support MSMEs. These include measures to address cash flow issues, to expand trade opportunities for MSMEs and to make them more resilient. Extract:
The pandemic-related challenges add to the existing, well-known trade obstacles encountered by MSMEs. The participation of MSMEs in international trade continues to be limited. Firms with fewer than 250 employees account for only 34% of exports in developed countries, according to the WTO. In developing countries, MSMEs’ exports amount to only 7.6% of total sales in the manufacturing sector. Reasons commonly invoked to explain the low participation of MSMEs in international trade include lack of relevant skills, lack of knowledge about international markets, and cumbersome regulations and border procedures, as well as limited access to trade finance. The MSME trade finance gap, which is estimated at about $1.5 trillion per year by the Asian Development Bank, is likely to increase given the negative effects of COVID-19 on financial market confidence. This offers especially negative prospects for firms in developing countries where a lack of trade finance can severely hinder trade opportunities.
pdf Helping MSMEs navigate the COVID-19 crisis: WTO Information Note (254 KB)
Antoinette Sayeh, Ralph Chami: Lifelines in danger (IPS)
Remittances are income flows that sync the business cycle of many recipient countries with those of sending countries. During good times, this relationship is a win-win, furnishing much-needed labor to fuel the economies of host countries and providing much-needed income to families in the migrants’ home countries. However, this close business cycle linkage between host and recipient countries has a downside risk. Shocks to the economies of migrant-host countries—just the sorts of shocks being caused by the coronavirus pandemic—can be transmitted to those of the remittance-recipient countries. For example, for a recipient country that receives remittances representing at least 10% of its annual GDP, a 1% decrease in the host country’s output gap (the difference between actual and potential growth) will tend to decrease the recipient country’s output gap by almost 1%. Remittances represent much more than 10% of GDP for many countries, led by Tajikistan and Bermuda, at more than 30% (see Chart 2).
Banks in migrant-source countries rely on remittance inflows as a cheap source of deposit funding since these flows are altruistically motivated. Unfortunately, these banks are now likely to see their cost of operations increase, and their ability to extend credit—whether to the private sector or to finance government deficits—will be greatly reduced (Barajas and others 2018). Furthermore, the typically credit-constrained private sector—mostly comprising self-employed people and small and medium-sized enterprises—is likely to lose remittance funding, in addition to dealing with even tighter credit conditions from banks. All this will come on top of lower demand for their services and products as a result of the crisis.
Connecting digital economies: policy recommendations for cross-border payments (WEF)
This report is part of the World Economic Forum’s broader work on digital payments, which supports inclusive growth in the digital economy. The work explores ways to encourage financial inclusion, digital payment acceptance and global interoperability, covering existing and emerging technologies, including digital currencies. Through this effort, the Forum recognizes the importance of bringing the public and private sectors together to accelerate the benefits of the digital economy. This report was produced by the Platform for Shaping the Future of Trade and Global Economic Interdependence. Explore creating regional payment councils to bring the public and private sectors together (pdf): Moving beyond domestic payment councils, recent public- and private-sector collaboration in ASEAN could be a good model for regional cooperation on payments. ASEAN is a dynamic and techsavvy region, but its members have differential and sometimes conflicting rules and regulations for payments. Like most other regions, there is no cross-border payment system in ASEAN. However, ASEAN has made the integration of the region’s digital market a top economic priority and has recognized the importance of improving cross-border payments. To assist the ASEAN Secretariat in these efforts, the World Economic Forum launched a public-private initiative called the ASEAN e-Payments Coalition, which is working with the ASEAN Working Committee on Payment and Settlement Systems (made up of central bank representatives) to develop a regional payment framework that improves user payment experiences, promotes regional integration, increases trust and security, and improves the livelihoods of the underbanked. This model could also be adopted internationally, especially for intergovernmental organizations focused on financial services, such as the Bank for International Settlements.
Table of contents:
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Barriers to supplying payment services
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Standards and interoperability
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Security and trust
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Innovation enabling oversight
Ahead of the launch of the International Chamber of Commerce’s Global Survey on Trade Finance later this month, BNY Mellon’s Global Head of Trade Finance Product and Portfolio Management, Joon Kim, explains how banks are showcasing their resilience throughout the COVID-19 pandemic: “Compared to many industries, trade is often slow when it comes to introducing new innovations and capabilities. But with paper proving a barrier to trade, there has been a tremendous focus across the industry to find ways to migrate to digital formats. Banks have had to examine every aspect of their paper trails and are working intensely to create and deliver solutions that allow the paper element to be reduced. Considerable progress has been made in a number of areas and new methods are being adopted. For example, in the case of trade finance distribution, transactions are now being approved through e-signatures rather than wet ink signatures on printed documents. Elsewhere – with respect to export collections – clients are now providing digitised cover letters, eradicating the need for manual pickups. As the industry adapts, it is important that banks have regular dialogue with their clients and continue to increase the digital submission of documents.”
South Korea’s Shinhan, Hana team up to participate in Africa syndicated loan. Shinhan Bank and Hana Bank said Thursday that they had signed a contract with the African Export-Import Bank (Afreximbank) to participate in a $1 billion (1.2 trillion won) syndicated loan arranged by Afreximbank. The joint move by the two major Korean lenders came after Shinhan Financial Group and Hana Financial Group agreed to form an alliance for global expansion, May 25. “This will be a great opportunity for both of us seeking to bolster overseas expansion,” a Shinhan official said. “Africa, a region expected to grow quickly in the coming years, will be where our knowledge and experience of financing and development will be appreciated.”
African airlines’ traffic sank 98.7% in April, nearly twice as bad as the 49.8% demand drop in March, IATA reported yesterday. Capacity contracted 87.7%, and load factor dived 65.3 percentage points to just 7.7% of seats filled, lowest among regions.
IATA’s Alexandre de Juniac: media briefing on COVID-19. Things cannot get much worse than a 95% fall in traffic. A 30% increase in flights may sound impressive. But on that level of decline it still means that we have a gap of well over 90% to cover. The optimistic part of me sees this as green shoots. The realistic part of me knows that we will likely have a long and very difficult challenge to return this industry to normal. People have not lost the desire to travel. They still want to see their family and friends. They still desire to explore the world. They will need to meet in person to do business globally. There will be at least two kinds of headwinds.
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The first is economic. Governments have provided stimulus money to get the economy moving again. And we are seeing business confidence improving. Individuals and companies that have survived without travel expenses for several months may re-assess their travel priorities. Against that we will surely see many promotions and incentives to encourage travel. We can be reasonably confident in overcoming this hurdle.
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The second is confidence. And this will be the bigger challenge. Governments will need the confidence to re-open borders without imposing onerous quarantine measures. If governments impose quarantine measures, it is equal to keeping their borders closed and industry grounded. And individual travelers will need the confidence that travel itself poses no great risks than other activities; and that they won’t face quarantine or disruption on arrival.
Today’s Quick Links:
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AfDB: Statement of subscription and voting powers, as at 30 April 2020
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Paul Ejime: ECOWAS at 45 and the dream of its founding fathers
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Abdullah Mwinyi: The EAC’s strength lies in its ability to respond to challenges
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Temitope Adeyemi: Dumping and trade remedies in Nigeria
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Challenges in urban mobility and the way forward: a study of Maseru, Lusaka, and Harare
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Seven possible actions: Women’s rights and COVID-19 (AU)
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IMF Managing Director Kristalina Georgieva:
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The path forward: the global economy
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UNCTAD’s Richard Kozul-Wright: How South-South cooperation can support economic recovery
Related News
tralac’s Daily News selection
The AfDB has posted its pdf North Africa Regional Integration Strategy Paper 2020-2026 (891 KB)
The North Africa Regional Integration Strategy Paper (RISP-NA) 2020-2026 has been designed to support the efforts of six regional member countries of the African Development Bank Group - Algeria, Egypt, Libya, Mauritania, Morocco and Tunisia. RISP-NA 2020-2026 has gone through an unusually long process given the Bank’s experience in the area. Several factors have delayed the RISP-NA finalisation process. Internal reasons, particularly the revision of the Regional Integration Strategic Framework 2018-2025, also contributed to delays in RISP-NA preparation, as well as the decision in 2019 to adopt a bespoke approach before favouring a formal RISP which incorporates it as a cross-cutting theme. However, the new strategic framework provides a better response to North Africa’s regional integration challenges and issues. The bespoke approach is based on:
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A panel of independent and influential personalities who can conduct dialogue and advise policy makers to increase their commitment level and implement RISP-NA 2020-2026
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The development of a pragmatic vision for North Africa regional integration building the capacity of existing support structures, with the possibility of creating a regional economic community for the six North African countries.
With the exception of Mauritania and Egypt, whose main trading partners are in Asia, North African countries, which are very closely linked to the EU in terms of trade, are struggling to increase their exports within the region and to the rest of Africa. North African countries’ trade is more geared towards Europe (50% of their total trade in 2017 compared to 8.4% towards the rest of the African continent). The structure of exports and imports accounts for the predominance of trade with Europe, which meets the supply and demand of North African countries but carries high economic risks when Europe’s economic performance is weak. Nevertheless, it is should be noted that for North African countries, with the exception of Mauritania which trades with sub-Saharan African countries, the five main destinations of their exports are countries in the sub-region (Table 4).
The prospects for greater cooperation with sub-Saharan Africa are promising. Membership in AfCFTA (ZLECA) and overlapping membership in other RECs can provide a boost to regional integration in North Africa. There is currently renewed interest in regional integration in North Africa, as well as in strengthening cooperation between North Africa and other regions, particularly with the creation of AfCFTA. In addition, the countries of the region have taken bilateral initiatives to strengthen their trade relations with sub-Saharan Africa, through applications for ECOWAS membership by Morocco and Tunisia, as well as Morocco’s re-admission into the African Union in 2017. Furthermore, there are a significant number of technical cooperation agreements and experience sharing initiatives between North African and sub-Saharan African countries in various sectors, particularly energy, transport and finance.
The prospect of increased cooperation could benefit from the good infrastructure in North African countries, although good connectivity at regional level will be necessary. In this regard, for example, significant efforts have been made to build the Trans-Maghreb Highway, some sections of which are still to be completed, particularly at the borders. This highway, also known as the Maghreb Unity Highway, which is expected to link the five Maghreb countries, comprises an Atlantic road section from Nouakchott to Rabat, and a Mediterranean section from Rabat to Tripoli, through Algiers and Tunis. The highway extends beyond the Maghreb to Egypt, linking Tripoli to Cairo. The improvement of transport and logistics services can create huge business opportunities in the region, with multiplier effects that could unlock North Africa’s economic cooperation potential.
Besides the introduction, this Paper has five chapters. Chapter II describes the regional context. Chapter III analyses the regional integration agenda and the progress made, as well as regional integration related challenges and opportunities. It makes some proposals for strengthening regional integration, and presents previous and ongoing support operations, outcomes and lessons learned by the Bank. Chapter IV describes the Bank’s strategy for 2020-2026. Chapter V presents the strategy implementation in the region, and Chapter VI presents the conclusion and recommendation.
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Annex 4: How multi-membership in various RECs impacts regional integration and the AfCFTA
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Annex 5: The cost of non-integration in North Africa
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Annex 6: The Bank’s High 5s in North Africa
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Annex 7: Outcomes of country consultations
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Annex 8: Implications of the COVID-19 crisis on North African economies
ECA supports ECOWAS 2020 vision independent and final evaluation. The independent and final evaluation, under the technical leadership of ECA, was informed by national consultations. The aim of the national consultation was two-fold: to handle the population perception on ECOWAS Commission performances along the 2020 vision implementation during the last fifteen years and to collect population aspirations for the next 30 years. This last outcome is mainly to inform the formulation of the 2050 prospective vision, which stared since March 2020 and already made available the two first deliverable beside the Covid-19 impediments.
TradeMark East Africa launches a Sh2.1bn Safe Trade initiative (Daily Nation)
Donor-funded trade organisation, TradeMark East Africa, has unveiled a Sh2.1 billion emergency fund to support safe trade in the region even as Covid-19 trade wars threaten the East African Community. “The Safe Trade Emergency Facility will be quickly rolled out in all the countries TradeMark East Africa has a foot print in the region,” TMEA chief executive Frank Matsaert said in an emailed interview with Smart Company. The emergency fund will also ensure the smooth functioning of food and critically required medical supply chains and support measures to prevent job losses and make the region more resilient to future crisis. Further, it would introduce rapid inspection and clearance of goods as well as carry out regular research and surveys to inform regional governments’ response.
Why Tanzania, Kenya trade ties blow hot and cold (Daily Nation)
The price of Tanzania’s onions imported by Kenyan traders keep shifting. It increased from Sh108 per kilo in February this year to Sh118 in April due to logistical challenges posed by coronavirus testing at the Kenya-Tanzania borders. When President Kenyatta ordered the closure of the border except for cargo vehicles in May, and Tanzania retaliated by banning all cargo trucks, the price shot up to Sh150. The volatile onion prices mirror the erratic relations between the two countries. The challenges faced by onion traders are also representative of the woes businesses have to grapple with whenever there is a misunderstanding between the two countries, whose sibling rivalry is always never far from the surface. The question then is how does the trade between the countries look like? Who stands to lose more in case of an escalated dispute?
Mr Sallu Johnson, a regional expert on customs and logistics, told Smart Company that politics tends to get in the way of bilateral ties, with businesses bearing the brunt of any diplomatic tiff. He said that although there are agreements among, for instance, the buyers, sellers and transporters of onions, which specify who bears liability for the goods in transit, the contract does not deal with such an occurrence as the border closure. “Borders are meant to be transit points, not interchange terminals. A political order that goods should be offloaded and changed creates a logistical nightmare,” Mr Johnson said. “As a transporter ferrying the onions, you’re aware that it starts deteriorating as soon as it leaves the farm and any further delay reduces the quality, and you may end up selling them in Mombasa at a throw-away price so you do not incur a huge loss.” [The author: Otiato Guguyu]
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Kenya reaches out to neighbours in push to market Naivasha depot
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Kenya drops Chinese contractor for Naivasha-Malaba rail upgrade
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Simon Mkina, Godfrey Kimono, David Monodanga: On the road with East African truck drivers
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How new EAC electronic truck drivers tracking system will work
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Uganda: Inadequate space hinders COVID-19 control measures at Mutukula border post
Ghana: Call to implement ECOWAS Veterinary Pharmaceutical Protocol in livestock sector (Business Ghana)
The Women in Poultry Value Chain has called for the speedy implementation of the ECOWAS Veterinary Pharmacy Protocol in Ghana. The group, which is an umbrella organisation of women poultry value chain actors, believe that supporting the implementation of the ECOWAS Veterinary Pharmaceutical Protocol will allow Ghana’s livestock sector actors to prioritise action that safeguards the development of the livestock value chain. The Protocol was presented to Ghana’s parliament on 13 June, 2017 and ratified on 1 February, 2018 but implementation has since been delayed due to key recommendations made by Parliament to be carried out, including; the enactment and update of animal production and veterinary laws to align with the protocol.
pdf AU Guidelines on Gender Responsive Responses to COVID-19 (1.59 MB) . It is important that the AU considers how COVID-19 will disproportionately affect women including young women and girls, particularly the vulnerable and those living in crises and conflict affected countries and ensure a gendered perspective in the analysis and responses to the pandemic. This will enable the designing and implementation of programmes and strategies, as well as the establishment of monitoring and reporting systems that are appropriate on differential preventive measures. Applying a gendered lens implies, among others, questioning how socially-constructed roles and identities may affect vulnerability to and experiences of COVID-191. A gendered lens to COVID-19 responses will improve outcomes for not only women, but all people affected by the virus and contribute to saving lives in Africa.
World Bank Group’s Global Economic Prospects: advance analytical chapters .
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Chapter 3: Lasting scars of the COVID-19 pandemic
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Chapter 4: Adding fuel to the fire: cheap oil during the pandemic
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Note: The full text will be posted on 8 June.
Winners and losers from COVID-19: global evidence from Google search (World Bank)
As COVID-19 continues to wreak havoc across the world, researchers are attempting to quantify the economic fallout from the pandemic as it continues to unfold. Estimating the economic impacts of a prevailing pandemic is fraught with uncertainties about the epidemiology of the disease and the breadth of disruption of economic activities. This paper employs historical and near real-time Google search data to estimate the immediate impacts of COVID-19 on demand for selected services across 182 countries. The analysis exploits the temporal and spatial variations in the spread of the virus and finds that demand for services that require face-to-face interaction, such as hotels, restaurants and retail trade, has substantially contracted. In contrast, demand for services that can be performed remotely or provide solutions to the challenges of reduced personal interactions, such as information and communications technology, and deliveries, has increased significantly. In a span of three months, the pandemic has resulted in a 63% reduction in demand for hotels, while increasing demand for ICT by a comparable rate.
Today’s Quick Links:
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Stephen van Coller: Mobile money will be even more relevant in South Africa after Covid-19
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Muzi Nkosi: Digital banking is key to firms successfully managing Covid-19 fallout
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Mills Soko: South Africa must get ready for an inevitable loosening of trade ties with the US
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The changing trajectories of USA-Africa ties: A reappraisal
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East Asia Forum: Reconfiguring India’s exports during COVID-19
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pdf Topsy-turvy world: net transfer of resources from poor to rich countries (370 KB) (UNCTAD)