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SADC economic growth contracts

SADC economic growth contracts

Business Reporter

ECONOMIC growth for 2020 in the Southern African Development Community (SADC) initially forecasted at 3.3 % in October 2019 has been revised downwards to a contraction of about 3%.


This is according to a newly released report titled “the impact of COVID-19 on SADC region” released by the regional body.


The report states the impact of the COVID-19 pandemic is changing the economic landscape around the world including SADC region.


As the pressure mounts, industries are moving swiftly to build resilience, while governments are mobilizing to safeguard citizens and manage the social and economic fallout.


The report notes that in the short-run, there have been calls for a comprehensive package of debt relief to help poor countries cope with the COVID-19.


According to the analysis low and middle-income countries are currently experiencing capital flight and unsustainable debt burdens.


“Several low and middle-income countries are currently spending more than 20 % of their revenue to service debt, which crowds out much-needed health, education and infrastructure expenditures,” the report cited.


It further noted that fiscal policy measures during the COVID-19 outbreak that are implemented include government-funded paid sick and family leave, transfers, unemployment benefits, wage subsidies and deferral of tax payments.


“The increasing public debt levels will put additional burden to the Member States resources as debt service costs increase. With the decline in economic activity and in commodity prices, government revenues are expected to fall drastically,” the report noted.


It further noted that consequently, fiscal deficit is forecasted to widen to 5.7 % of GDP in 2020 compared to the previous estimate of 3.0% of GDP. Additionally, debt levels are forecasted to increase beyond the regional threshold of 60 % of GDP to 69.8 % of GDP in 2020.


The estimated regional and global economic contraction coupled with weak demand in commodities are expected to result in a deterioration of the SADC external position with current account deficit forecasted to widen to about 9 % of GDP in 2020 from an initial estimate of 4.2% of GDP the report forecasted.


“The deterioration of the external position together with the increased importation of medication and medical equipment will put pressure on foreign reserves and exchange rates of SADC Member States, which can result in significant exchange rates depreciation across the region in 2020. The longevity of the pandemic will determine the severity of the economic impact.” the report concluded.


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