Coronavirus: 5 economies to watch as the impact spreads

In depth
This article is part of the dossier: Corona Chronicles: 23-27 March
Kurt Davis Jr.
By Kurt Davis Jr.
Investment banker

Kurt Davis Jr. is an investment banker and a member of the Council on Foreign Relations. He earned a M.B.A. in finance, entrepreneurship, and operations from the University of Chicago Booth School of Business and a J.D. in tax law and commercial law from the University of Virginia School of Law. He can be reached at

Posted on Tuesday, 24 March 2020 11:25

Empty sunbathing chairs are seen on a beach near the Hasdrubal Hotel in Hammamet
Empty sunbathing chairs are seen on a beach near the Hasdrubal Hotel in Hammamet, Tunisia , March 12, 2020. REUTERS/Zoubeir Souissi

African countries have been among the last to be hit by the global coronavirus pandemic. Yet, as the cases rise and governments rightfully take the necessary measures to slow the spread of the virus, the continent is likely to face widespread economic fallout as business slows to a near halt.

Some countries, i.e. Angola and Nigeria, were already going to feel the pain from an oil price war – largely driven by a falling out between Saudi Arabia and Russia – but a pandemic that has already pummelled stock markets across the globe will only be an add-on to the unavoidable economic damage expected in the short term for these countries.

READ MORE Coronavirus: Why oil-dependent economies must prepare for the worst

The reality is that many countries across the globe are on recession watch…some countries may already be in a recession (albeit not yet by the technical rules of a fall in GDP in two successive quarters).

Here are the five African economies to pay close attention to in the next few months.

South Africa

Predicting bad news for South Africa has been easy for most economic analysts and investors. This is not likely to change with the recent figures from Statistics South Africa which suggest South Africa will have to ride out a recession potentially into the summer.

The economy contracted at annualized rate of 1.4% in the last quarter of 2019 with power cuts weighing on economic output and business confidence at a near 30 year low (let’s remember Nelson Mandel became president in May 1994).

READ MORE Nedbank bets coronavirus can accelerate shift to digital banking

Private sector investment is already nosediving with most firms unwillingly to commit large sums of money to projects in the country. Gross fixed capital investment was already down 10% on an annualized basis in the last quarter.

All these realities are hitting the South African currency which is crashing towards R17 per dollar passing 4-year lows.

READ MORE South Africa: Why Gold has not risen more on Coronavirus

With South African integrated energy and chemical company Sasol going to market to raise cash, the country may learn quicker than expected how much the international markets are writing off the country in the short term.

The spread of coronavirus within South Africa will also create more problems for the country.

Due to the very international nature of the country, South Africa is probably at the highest risk of the virus spreading in the near term, as underlined by recent statements from President Cyril Ramaphosa declaring a “national state of disaster” followed by a 21-day lockdown due to begin on Thursday at midnight.

READ MORE African Stock Markets: The Show Must Go On

That said, the country and its leadership will still need to push forward on restructuring the bankrupt state airline and the debt-laden state power company Eskom.

Both restructuring plans will likely include job cuts that could hamper consumer spending in the country.

A drop in local consumer spending and output coupled with a larger global recession could spell massive trouble for the country…and obviously the next discussion would be around how Moody’s deals with the country’s investment grade status.


This oil producing giant is feeling the ‘oil pain’ more than most countries on the continent.

Oil accounts for nearly 75% to 80% of the budget for the country, including approximately 90% of exports.

READ MORE Angola: Finance Minister Vera Daves has one of Africa’s toughest jobs

President João Lourenço has focused heavily on lowering cost of production in the country to better prepare the country for a low price environment of $60 per barrel with some bright spots from these efforts.

That said, most producers do not express confidence in their ability to get production prices anywhere near a level to survive a $40 per barrel environment (let alone a $30 per barrel environment).

The country nevertheless cannot stop pumping as it cannot lose its market share (in a very competitive market) and it cannot lose its access foreign currency.

READ MORE Angola is collateral damage of coronavirus hit on oil, China

Thus, Angola can expect a massive burden to be placed on the country’s already tricky economy and budget, both of which are lacking for alternative sources of revenue.

Coronavirus is currently not much a conversation in Angola…let’s hope it stays that way.


A falling oil price would normally bid well for a country that is more an oil importer than exporter.

Yet the trouble for Ethiopia is the worrisome economic outlook for its major trade partners due to both the oil price war and the coronavirus pandemic.

The country was just about to see an uptick after last year’s devastation following the plane crash that killed more than 150 passengers and crew.

READ MORE East Africa’s battle with Coronavirus

Now, the country’s state-run airline is seeing a massive drop in both cargo and passengers, particularly with China being one of its biggest trade partners.

Cargo flights to China and Hong Kong are reportedly down nearly 30%, according to the Ethiopian Custom Commission.

Flights are obviously more empty with tourism and cross border business with the country and the region plummeting.

The outlook will likely be bad longer than one may predict as Asian partners take a while to jumpstart their economies at home let alone restart business and trade with Ethiopia (and the larger Africa).

Lastly, if coronavirus spreads fast in the country, its fragile healthcare system will be overburdened with little respite to come from neighbouring partners.

Prime Minister Abiy Ahmed has closed schools and banned public events, but it is not clear if this can slow the process as testing is still rather low in the country, while it continues flights to and from China after many of its neighbours have already halted such travel.


Nigeria has recovered from the recession that plagued 2016…or more so, this was the view only a few weeks ago.

Now an oil price war and the coronavirus pandemic may completely wipe out the gains in the Nigerian economy.

READ MORE How coronavirus and the global oil price war can impact Nigeria

Oil sits barely above $30 per barrel for a country that only recently adjusted to $60 per barrel and depends on oil for 90% of foreign currency earnings and nearly 70% of the government’s income.

The price drop is coupled with a growing external debt for Nigeria and a Nigerian currency likely to suffer to in the near months.

The Minister of Finance Zainab Shamsuna Ahmed has already called for a review of the budget.

Nigerian stocks accordingly have been plummeting and hit a four-year in early March.

READ MORE Nigeria needs managed depreciation to limit coronavirus, oil double whammy

It is not clear how much testing has been taken in the country (like the rest of the world) thus undercutting any ability for the country to take a true view on the number of cases.

If Nigeria can minimize the spread within the country, then it can stay focused on the oil problem.

But if the country succumbs to the same fate as Europe or the Middle East, then Africa’s most populous country and its roughly 190 million population could overwhelm its hospitals and overall health care system and face a harsh and extended economic downturn.

The latter is speculation…which hopefully stays speculation.


Tunisia had been preparing for a season of revival for its tourism sector with some analysts having predicted record numbers for 2020.

But with coronavirus ravaging holiday bookings, the outlook for tourism globally and in Tunisia is very grim with no visible reprieve for the sector in the near term.

Tunisia is also now requiring that everyone arriving from outside the country to self-quarantine for two weeks, which will only further hurt the tourism sector.

Tunisia, which is a ferry ride away from Italy, is already losing a significant portion of its tourism base via the tragic effects of the virus on Italy.

All this points to a massive downturn swing for a country where tourism is the second biggest employer in the country, a major source of foreign currency, and approximately 10% of the Tunisia economy.

It comes as no surprise that Prime Minister Elyes Fakhfakh stated last week that the economic growth had dropped from 2.7% to 1.0% due to coronavirus.

Prime Minister Fakhfakh outlook may be optimistic as projections on tourism are very much premature with no one ready to predict the curve for the market.

Any further downturn in the market will likely start a rise in unemployment, which has not exactly happened as many businesses across sectors hold out (or wait, depending on choice of words) for better economic news or, at least, more concrete information to underwrite their decisions.

Sadly, as flights get cancelled and markets tumble, tourism (and many other sectors) will feel more pain in the next several months…

It’s not clear if we are now in a 2015 zone when attacks devastated economic growth (bringing it to 0.5%) and battered the currency, but what is clear is that we are not far off.

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