The Outturn
After posting positive real GDP growth for over 2-decades, Africa’s 2nd largest Copper producer succumbed to a recession sizing 3.0% in line with global growth outturns. This was largely due to the Covid-19 pandemic which exacerbated pre-existing fiscal vulnerabilities (elevated debt service and tight fiscal space) and tight liquidity conditions. Over and above of this came a decline in consumer demand and disruption of supply chains as authorities instituted measures to fight the pandemic. Other challenges included the crowding out effect of public sector borrowing as government relied more on domestic financing to meet revenue shortfalls. Moreover, tight fiscal space meant arrears owed to private entities grew thereby squeezing liquidity among private sector players.

The peak of the pandemic-exacerbated economic woes came in Q2 2020 as growth plunged to -5.9% from -0.3% in Q1 before moderating in the last two quarters. These negative effects were as a result of anxiety and fears exhibited by both firms and consumers manifesting in mobility data which showed heightened home confinements as employers sent people home. In addition, government also stepped in to restrict the scope of business operations while also closing some entities such as bars and nightclubs. Voluntarily, consumers avoided trading/retail corridors, recreation centers, grocery stores/pharmacies and parks thereby sending public transport points quieter. Mobility trends improved in subsequent quarters as did other economic metrics in coincidence with the relaxation in the containment measures by the authorities.

Source: Further Africa