IMF WEO: How the World will Grow in the Great Lock Down of 2020

Introduction

No thanks to the COVID-19 (declared as a pandemic by the WHO on March 11, 2020), the world is expected to experience recession worse than the great depression majorly due to how countries are flattening the covid-19 curve. The demand for crude oil is down by 29 million barrels per day according to the International Energy Association, global supply chain is also disrupted as well as tourism, hospitality, and aviation being the worst hit from the pandemic. All these have made global economy to slow and as such, the IMF expects the world to experience a contraction of -3.0% after which a partial recovery of 5.8% is expected in 2021.

Related: In their Numbers: How Coronavirus is Hurting the Global Economy

This article gives a brief summary of how the IMF expects the world to grow in 2020, highlight the top 10 countries to grow in 2020 (with special focus on Guyana), highlight countries that will fall the most in 2020, as well as give a special case study of selected African countries.

23 (59%) of the 39 Countries Expected to grow in 2020 are in Africa
Of the 194 countries of the world, the only country without real GDP growth data is Syria. As such, the real GDP figure of the IMF covers 193 countries. Of this number, the IMF expects 39 countries to experience growth in 2020 while the remaining 154 will experience decline in economic activities in 2020. The countries that will experience a growth represent 20% of the countries of the world while the remaining 80% will experience decline, with Libya experiencing the worst decline of -58.66%.

There are 54 countries in Africa, and based on the data obtained from the IMF, approximately 43% will experience growth in real terms in 2020 compared to 0% (all advanced economies will experience decline in 2020) and 29% in Asia. Of the 39 countries to experience growth in 2020, 23 are in Africa, 14 are in Asia and the remaining two are Kiribati (Oceania) and Guyana (South America).
Overall, the advanced economies are expected to contract by -6.1%, emerging markets and developing economies will contract by -1.0%, while Sub-Saharan Africa in isolation will contract by -1.6%.

How well do you know Guyana?

Often nicknamed the “Land of Many Waters” due to the abundance of fresh water in the country, Guyana is the only English speaking country in South America, bordering Venezuela, Brazil and Suriname. The country has a population of less than one million (39% of which uses the internet) as 90% of this population lives on the coast while the rest are scattered around the interior. Apart from being the only English speaking country in South America, Guyana has a diverse population, has a Caribbean vibe, great religious diversity, is a land of cricket as major game (unlike the rest of South America where football reigns), and has a lot of wild life including 6 wild cat species.

Related: 14 Reasons why Guyana is South America’s Best Secret

As at April 17 2020, Guyana has a total number of 63 confirmed cases of Coronavirus, with 6 deaths recorded so far.
The country is majorly covered by the tropical rain forest and it is rich in gold, sugarcane, bauxite, and timber. Guyana’s most important mineral resources are the extensive bauxite deposits between the Demerara and Berbice rivers that contribute to making the country one of the world’s largest producers of bauxite. Both sugarcane and rice are cultivated through a combination of mechanization and manual labour. The country also cultivates coffee, cacao (the source of cocoa beans), corn, vegetables, bananas and citrus fruits.

With the discovery and pumping of crude oil in the country, the IMF calculated that the oil sector will represent about 40% of the economy within five years. The government expects the initial $300M a year in revenue from profit-sharing and royalties to more than double after a second offshore well starts production around 2022.

With real GDP growth projection of 52.77%, Guyana will record the fastest economic growth in the world in 2020. In comparison, Guyana’s projected economic expansion would be 29 times that of what is expected from China- the second largest economy in the world. A major reason for the IMF projecting this expansion for Guyana is because the country started oil production in December 2019- a prospect which is believed will transform the economy of the country. According to the IMF, The commencement of oil production in Guyana in 2020 presents an opportunity to scale-up capital and current spending at a measured pace over the medium term to address infrastructure gaps and human development needs, while attenuating debt sustainability concerns at the same time. Furthermore, Guyana has the highest amount of crude oil for each person more than any other country in the world with its 3,900 barrels of offshore reserves per person (compared to 1,900 barrels for Saudi Arabia).

IMF however warns Guyana that the pace of scaling-up public spending needs to be gradual to reduce bottlenecks from absorptive capacity constraints, avoid waste, and minimize macroeconomic distortions related to ‘Dutch disease’ that has often inflicted economies experiencing sizable increases in resource-based income. Overall, while the economy will expand by 52.77% in 2020, economic growth in the country is expected to moderate to 6.25% in 2021 since even small changes to the projected oil output in 2020 would result in significant swings in the overall economic performance.

Libya Leads the Pack of 80% of the Countries in the World to Experience Decline in 2020

As noted earlier, 154 countries of the world will experience real GDP decline in 2020 based on the data obtained from the IMF. Libya will be the country to decline the most, thus being the fastest declining country of the world in 2020. Growth in Libya slows from a growth of 9.89% in 2019 to -58.66% in 2020 majorly due to the ongoing civil war in the country which disrupts the economy in addition to the devastating effects of covid-19.

Other countries in the top 10 to decline in 2020 are Macao (-29.62%), Venezuela (-15%), Aruba (-13.7%), San Marino (-12.17%), Lebanon (-12.02%), Belize (-11.99%), Palau (-11.95%), Seychelles (-10.84%) and Greece (-10.04%).

Among the selected countries above, only China will record a modest growth in 2020 even as it recorded decline of -6.8% in the first quarter of 2020. With the country ramping up production and coming back to live ahead of other countries of the world, it is expected to record a modest growth for full year 2020. Italy however is the hardest hit of the countries under review as the IMF expects the economy to contract by -9.13% in real terms in 2020. The Italian economy was already a fragile economy before the global pandemic as it recorded decline in Q4 2020 while the economy only grew by 0.3% in full year 2019. Furthermore, the measures put forward by the euro-zone finance ministers to combat COVID-19 fails to solve the excessive public debt profile in the most fragile countries. With no progress to on the mutualization of debt between member countries, significant political difficulties is expected to arise in Italy. As such, it is not surprising that seven of the 10 countries under review are European countries.

It should also be known that Europe is the epicenter of the Coronavirus with Italy recording 175,925 cases as at April 18, while Spain recorded 191,726 number of cases, France with 151,793 cases, Germany with 142,872 cases and the United Kingdom recording 114,217 number of cases as at April 18, 2020.

The Big Economies in Africa Drag the Continent’s Growth

Nigeria, South Africa and Algeria are the first, second and fourth biggest economies in Africa as they control approximately 41% of the entire GDP of Africa ($2.34 trillion in 2018). The three countries will record a fall in their real GDP in 2020. While South Africa will have its real GDP contract by -5.80%, the real GDP of Algeria will contract by -5.16% while that of Nigeria will fall by -3.41% in 2020.

Related: The World, Africa, West Africa and Nigeria’s Economy in 2018

Of the ten selected countries, Benin republic will record the largest real growth in 2020 as it is projected to grow at 4.52% which is 188bps less than 6.40% growth recorded in 2019. Furthermore, the IMF expects real GDP of Benin republic to improve to 5.97% in 2021. Egypt is also among those expected to experience growth in 2020 even though the growth will be moderate.

Conclusion

With Sub-Saharan Africa expected to contract by -1.6% while 23 countries in Africa will experience growth, it shows how strong the smaller and developing economies are but big countries dragging down their growth. It also explains the much opportunities available in the developing economies as they are relatively immune to downturns. Furthermore, the developing economies theoretically have the tendency to grow more than the developed economies because they still have excess capacity and with increased capital investment, they tend to grow rapidly, other things being equal.

However, due to how the big and developed countries are being dependent on by the smaller countries, slower growth in those developed countries tend to have an impact on the smaller countries. As such, growth in the big economies is a mirror image of growth in the entire world.

This writer can be contacted on twitter @K2ice_JR

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