As the new coronavirus, COVID-19, continues to spread, the economic effect is being felt worldwide. As of February 26, there are 81,017 confirmed cases of infection with the virus and 2,765 recorded deaths worldwide. South Korea has more than 1,000 cases and Italy more than 300. In Africa, Egypt and Algeria have one confirmed case each. Despite there currently being no health crisis in Africa, the outbreak has already taken a massive toll on trade and growth forecasts.
On Monday, the International Monetary Fund lowered its projected growth rate for Nigeria, whose economy is still largely dependent on oil exports. Owing to the outbreak, Chinese demand for raw materials from Africa has dropped due to fears that shipping trade could help the virus spread. Even though Nigeria exports just 1 percent of its petroleum production to China, the dropping price of oil on the global market may cost Africa’s largest oil producer US$500 million per month in lost export revenue, according to estimates by John Ashbourne, an economist at the consulting firm Capital Economics.
Other resource-dependent nations will be hit much worse by declining Chinese demand. Of South Sudan’s exports, 95 percent go to China. Eritrea and the Democratic Republic of the Congo export 58 percent and 45 percent, respectively, of their mineral resources to China, largely in the form of zinc, cobalt, and copper.
Why It Matters
The World Health Organization recently declared the COVID-19 outbreak a public health emergency of international concern. The label is a stark warning that the virus must be taken seriously and preventative measures have to be implemented as soon as possible. Viral management has improved since the 2014 Ebola outbreak in West Africa, but mistrust toward public health institutions and between nations makes collaborative efforts to tackle the outbreak difficult, giving time for the virus to spread.
As long as COVID-19 remains a global health concern, the secondary effects on the world’s markets will continue to grow exponentially. Managing the outbreak is thus a concern for the entire world, not just those countries with documented cases of infection. The sudden drop in demand from China also reveals the inherent weakness in almost half of Africa’s economies: they’re overly reliant on raw materials exports that are at the mercy of global price fluctuations and changes in demand from large buyers like China, which reaffirms the need for these countries to diversify their export portfolios.