How the Coronavirus will Impact Financial Institutions, Industrials, Manufacturing and Transportation
Africa’s supply chain is intrinsically linked with China’s, and with the decrease in demand for Africa’s raw materials and commodities, has come a decline in access to manufactured goods and industrial components for Africa.
In the beginning of March 2020, the Organisation for Economic Co-operation and Development stated that “the annual global GDP growth is projected to drop to 2.4% in 2020 as a whole, from an already weak 2.9% in 2019, with growth possibly even being negative in the first quarter of 2020,” and global markets plummeting in the days to follow.
Despite this, the Chinese growth is expected to rebound as soon as the second quarter of 2020, but for now, to mitigate the effects of COVID-19 on the economy, the Central Banks have cut interest rates and injected liquidity into the banking systems of some countries.
In addition, the World Bank committed $12 billion to aid developing countries in overcoming, or lessening the blow, of the impact of COVID-19 and contain the spread. The World Bank also announced an addition to the Pandemic Emergency Finance Facility began a pandemic bond in 2017 with the intention of aiding developing countries should a pandemic reach certain conditions and thresholds – however, thus far, these conditions have not been met, and the bond has not been released.
Global financial institutions are evaluating the economic impact of the Coronavirus, developing measures to ensure they are able to adapt to new and unprecedented circumstances. The effects of the exponential impact of the global economic turndown as a result of the decreased output in China on African lenders is yet to be seen, with the possibility of compelling financial institutions on the continent to be more understanding and accommodating towards borrowers.
Industrials, Manufacturing and Transportation
Of course, China’s manufacturing sector has been severely impacted by COVID-19, but this is expected to improve medium to long term. The re-opening of production lines has yet to be announced but predicted that even when they are re-opened, there will be a significant backlog and thus a slow, but almost guaranteed, recovery with exports and imports. As a result, the industrial and manufacturing sectors in Africa will be impacted due to the declined supply of key components from China.
The global supply chain delays will have a resultant effect on construction companies due to a shortage of construction materials. Additionally, there will be a shortage of skilled personnel from affected regions due to self-isolation, travel bans and quarantines.
The epicentre of the virus – Hubei province, is a key player in the production and supply of automotive parts, and because of the shutdowns and closures, the production and supply process will be halted, effecting the African automotive sector as well as other countries relying on Hubei province. Furthermore, because of the decline of the general economy, demand for automotive parts will decline.
This article is part of a two-part series; the second article title is: How the Coronavirus will Impact Infrastructure, Healthcare and Pharmaceuticals
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