Coronavirus Crushes Africa’s Economic Growth
By Taylor Durham
- Coronavirus has impacted China’s demand for exporting oil from Africa
- Chinese trade with Africa increased 2.2% in 2019 to $208.7B
Coronavirus is the latest widespread viral outbreak to hit the global economy, especially impacting business deals with natural resources between China and Africa. Particularly, oil prices have fallen about 13% in 2020, as falling Chinese demand reflects a slowdown in economic activity, directly impacting Nigeria, Angola and South Sudan. The long term effects have yet to be determined, but with China positioned as the continent’s largest oil buyer, one question remains: what does this mean for Africa’s economy?
Why This Matters: China accounts for 19.2% (almost one-fifth) of global GDP. To put that in perspective, the country accounted for 2.5 trillion dollars worth of exports in 2018, more than India, Mexico, Spain, Canada, and France combined. That number showed no signs of slowing down, until now. The Financial Times reported that a slowing Chinese economy already hit trade between Africa and China, only increasing 2.2% in 2019 to $208.7 billion, compared with a 20% rise a year earlier.
Other countries that will be hit hard by the Coronavirus include South Sudan and Angola where Chinese buyers accounted for 95% and 61% respectively of the crude oil exports
Even though China only buys 1% of Nigeria’s oil, the country is Africa’s largest crude producer. The International Monetary Fund has downgraded Nigeria’s growth from 2.5% to just 2%, as the government receives more than half of its revenues from oil. Other countries that will be hit hard by the Coronavirus include South Sudan and Angola where Chinese buyers accounted for 95% and 61% respectively of the crude oil exports in 2017, according to MIT data.
It’s not just Africa feeling the pressure, developed nations are as well because the Coronavirus has left factories shuttered for weeks. Businesses in the U.S. that rely on cheap production are starting to feel the strain in industries ranging from consumer tech, to transportation have been impacted in varying ways. Apple (AAPL -2.26%) recently announced that it would not be able to meet sales targets for this quarter due to production delays caused by the virus. Luxury auto manufacturer Jaguar Land Rover said in a statement that it only has 2 weeks worth of parts to maintain production.
Situational Awareness: There are zero signs of the viral outbreak slowing down with over 20 countries reporting an outbreak. While countries like the U.S., Canada, and the U.K. have better healthcare systems to mitigate the infection rate, other countries across Africa and Latin America may not fare so well. These countries run greater risks of both an economic and health system collapse.
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