Two of the largest economies in Africa- Nigeria and South Africa are expected to suffer serious setbacks this year according to the World Bank.
The World Bank report on Global Economic Prospects predicts that the economy of Sub-Saharan Africa will contract 2.8% this year-the the sharpest contraction on record. The fall in the per capita GDP is expected to be even deeper.
As a result of this millions in this region may potentially fall into extreme poverty, the report has warned.
The activity in Nigeria-region’s largest economy and post populous country is expected to shrink by 3.2% this year. Amidst the unprecedented collapse in oil prices, this year’s contraction is set to be the most severe in four decades.
The economy depends heavily on oil, which represents over 80% of the revenues. The drop in oil prices combined with the Covid-19 crisis has made the situation worse in Nigeria.
In South Africa, the economy is expected to shrink by 7.1% this year, which is the deepest contraction in a century.
Apart from the impact of ‘lockdown’, South Africa is facing serious problems with its electricity network and persistent power disruption, affecting internal production. Fiscal mismanagement is also an impediment to its economic stability and growth.
However, the World Bank predicts that the recovery rate would improve in the next fiscal year marginally. That recovery is subject o various factors including normal monsoon and opening up of the export market post-COVID-19.
Structural reforms if taken forward as planned could add to the improved recovery next year, the World Bank’s report says.