The African Development Bank has raised an exceptional $3 billion in a three-year bond to help alleviate the economic and social impact the Covid-19 pandemic will have on livelihoods and Africa’s economies.
The Fight Covid-19 Social bond, with a three-year maturity, garnered interest from central banks and official institutions, bank treasuries, and asset managers including Socially Responsible Investors, with bids exceeding $4.6 billion. This is the largest dollar denominated Social Bond ever launched in international capital markets to date, and the largest US Dollar benchmark ever issued by the Bank. It will pay an interest rate of 0.75%.
Landmark transaction, largest US dollar denominated Social bond transaction to date in capital markets
The African Development Bank Group is moving to provide flexible responses aimed at lessening the severe economic and social impact of this pandemic on its regional member countries and Africa’s private sector.
“These are critical times for Africa as it addresses the challenges resulting from the Coronavirus. The African Development Bank is taking bold measures to support African countries. This $3 billion Covid-19 bond issuance is the first part of our comprehensive response that will soon be announced. This is indeed the largest dollar social bond transaction to date in capital markets. We are here for Africa, and we will provide significant rapid support for countries,” said Dr. Akinwumi Adesina, President of the African Development Bank Group.
The order book for this record-breaking bond highlights the scale of investor support, which the African Development Bank enjoys, said the arrangers.
“As the Covid-19 outbreak is dangerously threatening Africa, the African Development Bank lives up to its huge responsibilities and deploys funds to assist and prepare the African population, through the financing of access to health and to all other essential goods, services and infrastructure,” said Tanguy Claquin, Head of Sustainable Banking, Crédit Agricole CIB.
Coronavirus cases were slow to arrive in Africa, but the virus is spreading quickly and has infected nearly 3,000 people across 45 countries, placing strain on already fragile health systems.
It is estimated that the continent will require many billions of dollars to cushion the impact of the disease as many countries scrambled contingency measures, including commercial lockdowns in desperate efforts to contain it. Globally, factories have been closed and workers sent home, disrupting supply chains, trade, travel, and driving many economies toward recession.
Commenting on the landmark transaction, George Sager, Executive Director, SSA Syndicate, Goldman Sachs said: “In a time of unprecedented market volatility, the African Development Bank has been able to brave the capital markets in order to secure invaluable funding to help the efforts of the African continent's fight against Covid-19. Not only that, but in the process, delivering their largest ever USD benchmark. A truly remarkable outcome both in terms of its purpose but also in terms of a USD financing”.
The Bank established its Social Bond framework in 2017 and raised the equivalent of $2 billion through issuances denominated in Euro and Norwegian krone. In 2018 the Bank was designated by financial markets, ‘Second most impressive social or sustainability bond issuer” at the Global Capital SRI Awards.
“We are thankful for the exceptional level of interest the Fight Covid-19 Social Bond has raised across the world, as the African Development Bank moves towards lessening the social and economic impact of the pandemic on a continent already severely constrained. Our Social bond program enables us to highlight our strong development mandate to the investor community, allowing them to play a part in improving the lives of the people of Africa. This was an exceptional outcome for an exceptional cause,” said Hassatou Diop N’Sele, Treasurer, African Development Bank.
Fight Covid-19 was allocated to central banks and official institutions (53%), bank treasuries (27%) and asset managers (20%). Final bond distribution statistics were as follows: Europe (37%), Americas (36%), Asia (17%) Africa (8%,) and Middle-East (1%).
Customs officials at Zimbabwe's biggest airport stopped reporting for work on Wednesday, fearing exposure to coronavirus and a lack of measures to prevent its spread, their union said.
Zimbabwe has recorded one death from three confirmed cases of coronavirus, but the opposition and critics of President Emmerson Mnangagwa accuse his government of under-reporting the number of cases. The government denies this.
The Zimbabwe Revenue Authority Trade Union said its members at the main airport in the capital Harare came into contact while dealing with the man who died from coronavirus, but they were not tested or put into mandatory isolation.
"There is very high exposure of all staff at the referred airport due to lack of proper stop-gap facilities to mitigate the possible spread of the deadly virus," said Lovemore Ngwarati, the union's secretary-general.
"The workers shall not report for duty until proper measures are taken to substantially mitigate the danger."
Faith Mazani, commissioner-general of Zimbabwe Revenue Authority, did not respond to calls for comment.
Facing its worst economic crisis in a decade, Zimbabwe is grappling with soaring inflation and shortages of foreign currency and medicines that has crippled its hospitals.
Doctors at state hospitals who ended a three-month strike in January say the medical facilities still face a critical shortage of equipment and medicine.
The Zimbabwe Doctors Hospital Association (ZDHA) said its members at Harare Central Hospital had on Wednesday withdrawn their services due to lack of protective clothing to handle coronavirus patients.
"This is not a strike. We will go back once they make available personal protective equipment," Tawanda Zvakada, the ZHDA secretary-general, told Reuters. He declined to say how many doctors were absent from work.
The African Export-Import Bank (Afreximbank) has announced a $3-billion facility, named Pandemic Trade Impact Mitigation Facility (PATIMFA), to help African countries deal with the economic and health impacts of the COVID-19 pandemic.
PATIMFA, approved by the Bank’s Board of Directors during its sitting on 20 March, will provide financing to assist Afreximbank member countries to adjust in an orderly manner to the financial, economic and health services shocks caused by the COVID-19 pandemic, according to information released by the Bank.
It will support member country central banks, and other financial institutions to meet trade debt payments that fall due and to avert trade payment defaults, said Afreximbank. It will also be available to support and stabilize the foreign exchange resources of central banks of member countries, enabling them to support critical imports under emergency conditions.
In addition, PATIMFA will assist member countries whose fiscal revenues are tied to specific export revenues, such as mineral royalties, to manage any sudden fiscal revenue declines as a result of reduced export earnings. It will also provide emergency trade finance facilities for import of urgent needs to combat the pandemic, including medicine, medical equipment, hospital refitting, etc.
The facility will be available through direct funding, lines of credit, guarantees, cross-currency swaps and other similar instruments, according to Afreximbank.
Explaining the rationale for the facility, Prof. Benedict Oramah, President of Afreximbank, noted that the COVID-19 pandemic brought with it considerable suffering and major economic disruptions.
“Besides its worrying effect on human life, the pandemic is projected to cost the global economy up to $1 trillion and to result in a significant 0.4 per cent decline in global GDP growth, which is expected to drop from 2.9 per cent in 2019 to 2.5 per cent in 2020,” he said.
“A rapid and impactful financial response is required to avert a major crisis in Africa,” he said, pointing out that “Africa is exposed in many fronts, including significant declines in tourism earnings, migrant remittances, commodity prices and disruption of manufacturing supply chains.”
Afreximbank had already seen sharp pandemic-induced declines in commodity prices, a sudden significant drop in tourism earnings, disruptions in supply chains, and closure of export manufacturing facilities, said the President. The impact on medical supplies and medical systems in many markets had also been unprecedented.
He said that Afreximbank would work with multilateral development banks that had put in place financial assistance programmes in order to secure support to help African countries deal with adverse external shocks and crises arising from the pandemic.
Afreximbank has a history of providing support to African economies in times of economic crisis.
During the 2015 economic crisis, it introduced a Counter-Cyclical Trade Liquidity Facility under which it disbursed more than $10 billion on a revolving basis to enable member countries adjust to the adverse economic shocks. That facility helped key African economies to manage that crisis and recover swiftly.
German customs officials are attempting to track down about 6 million face masks ordered to protect health workers from the coronavirus which went missing at an airport in Kenya.
“The authorities are trying to find out what happened,” said a defence ministry spokeswoman, confirming a report first published by Spiegel Online.
The FFP2 masks, which filter out more than 90% of particles, were ordered by German customs authorities. They and the armed forces procurement office have been helping the health ministry to get hold of urgently needed protective gear.
The shipment was due in Germany on March 20 but never arrived after disappearing at the end of last week at an airport in Kenya. It was unclear why the masks, produced by a German firm, had been in Kenya.
“What exactly happened, whether this a matter of theft or a provider who isn’t serious, is being cleared up by customs,” said a government source.
Kenya’s health ministry declined to comment and a Kenyan Airports Authority (KAA) spokeswoman said the company was still assessing the situation.
Spiegel Online reported that Germany has placed orders worth 241 million euros with suppliers for protective and sanitary equipment to fight the coronavirus.
The defence ministry spokeswoman said there was no financial impact from the loss of the masks as no money had been paid.
Germany is preparing its hospitals and health workers for a big increase in admissions of patients with the virus. It has 27,436 confirmed coronavirus cases and 114 people have died, the Robert Koch Institute for infectious diseases said.
Tuberculosis (TB) and HIV pose a significant burden on South Africa’s health system. There’s a close relationship between the two. About 60% of TB patients are also HIV-positive. The novel coronavirus (Sars-CoV-2) is likely to be of particular concern for communities with high rates of TB and HIV. Sars-CoV-2 and its resulting disease (COVID-19) haven’t been fully researched and understood yet. But speculation based on the behaviour of other viruses and chronic illnesses raises concerns that HIV and TB patients may have a higher risk of developing severe disease. Emily Wong answers some questions.
Are people with TB more susceptible to infection with SARS-COV-2?
SARS-COV-2’s primary target is the lungs where it causes inflammation in the delicate tissues that usually allow oxygen to transfer into blood. In mild cases, COVID-19 can just cause a cough, but in severe cases the lungs can fill with inflammation and fluid making it very difficult for them to provide adequate oxygen to the rest of the body. In people who are otherwise healthy, most cases of COVID-19 are mild or moderate.
At this time, I’m not aware of any data that directly address whether TB makes people more susceptible to COVID-19. But from the Chinese experience, we have seen that people with chronic lung disease are more likely to have increased severity of COVID-19. On that basis, we are concerned that people with undiagnosed active TB, or people currently undergoing treatment for TB, may have increased risk of developing more severe COVID-19 disease if they become infected with SARS-COV-2.
There is also increasing recognition that post-TB chronic lung disease can be an important long-term consequence of TB. We are concerned that this could also affect COVID-19 severity. After TB, people can get bronchiectasis – chronic damage to the airways of the lung. This can predispose them to other lung infections. Another lung condition – chronic obstructive pulmonary disease – can be caused by tobacco use or by the changes left in the lung after TB.
Even though there’s no data about the effect of post-TB lung disease on COVID-19 at this point, we are concerned that people who have had TB in the past – and have been left with some lung damage – may have a more difficult and severe time with COVID-19.
What about people infected with HIV?
There is also very little data to guide us here. But we know that in general HIV infection has profound effects on lung health and immunity. This is why HIV infection increases susceptibility to both Mycobacterium Tuberculosis (Mtb) – the bacterium that causes TB – infection and TB disease. We are therefore concerned that HIV infection may also affect SARS-COV-2 infection and COVID-19 severity.
But most experts think that people who are on antiretroviral therapy and whose viral loads are suppressed will probably have a better time with COVID-19 than people who aren’t. It is very important that people keep taking their HIV medications throughout any disruptions caused by the current COVID-19 epidemic.
What will the impact of the SARS-COV-2 epidemic be on TB and HIV services in South Africa?
This is a major concern. Even countries with better resourced national health systems have rapidly become overwhelmed as the COVID-19 epidemic hits.
South Africa has the world’s largest antiretroviral programme. Huge progress has been made. Even in KwaZulu-Natal, the epicentre of the HIV epidemic in South Africa, new HIV infection rates have been dropping. This is because of tremendous efforts to test people and to put people on antiretroviral treatment in a sustained way. Other factors have included national programmes like voluntary medical male circumcision.
The country has also started to see a decline in TB rates. We think this is related to improvements in the HIV treatment coverage. This is good news. But it’s the result of massive public health programmes that have taken a huge amount of time and effort to set up and optimise. And they’re still challenged by shortages of human and system resources.
We are very concerned about the impact that COVID-19 epidemic could have on HIV and TB services.
Thought is already going into how to try to maintain these critical HIV and TB services. In light of an impending health crisis, attention is on how to maintain sustained access to HIV and TB care. The President’s Emergency Plan for AIDS Relief (PEPFAR) and the South African HIV Clinicians Society are trying to address this. For example, they are urging the health system to make six months of antiretrovirals available to people to save them from having to visit their clinics every month.
Are there extra precautions that individuals with TB and TB/HIV can take?
It’s very important that people ensure a supply of their HIV and TB medications and take them regularly.
At this point all South Africans should be heeding the call made by the President to focus on the basic hygiene interventions such as frequent hand-washing as well as implementing social distancing to the maximum extent. That means avoiding contact with groups of people outside of households, and staying home strictly.
All of these measures are extremely important, whether someone is personally at higher risk of severe infection, or for people who may not personally be at risk of more severe disease but may have a family member who’s older or HIV-positive or a neighbour who falls into any of those categories.
At this point the national recommendations apply to everyone. All South Africans need to take them very, very seriously because millions of people are immuno-supressed due to HIV or have some lung compromise due to prior TB infection.
Will any of the research on vaccines in South Africa be useful in the search for a COVID-19 vaccine?
The fact that South Africa has robust vaccine trial infrastructure for both TB and HIV is undoubtedly to its advantage when it comes to thinking about COVID-19 vaccine development. There are already candidate COVID-19 vaccines in human testing. The company Moderna in collaboration with the National Institute of Allergy and Infectious Diseases in the US have started clinical trials of an mRNA vaccine candidate. Other candidates are also under development. When these are ready for larger scale human testing, the global scientific community will almost certainly use existing vaccine trial networks to do this testing. Because of both HIV and TB research efforts to date, South Africa is very well represented.
Angola on Saturday confirmed its first two cases of coronavirus, while Mauritius recorded its first death as the virus spreads across Africa.
The continent has been slower to feel the impact than Asia or Europe, and most of its reported cases have been foreigners or people who have returned from abroad.
But confirmed infections have started to accelerate, with more than 830 across Africa, according to a Reuters tally, and concerns are growing about its ability to handle a surge in cases without the depth of medical facilities available in more developed economies.
Angola’s first cases were two male Angolan residents who flew back from Portugal on March 17 and 18, Health minister Silvia Lutucuta told a briefing.
Zimbabwe reported its first case on Friday, and a second on Saturday, while the island of Mauritius, with 14 cases, reported its first death, a person who had travelled from Belgium via Dubai.
Many African countries have already shut borders, closed schools and universities and barred large public gatherings to curb the spread of the virus, which has infected over 250,000 people around the world and claimed more than 10,000 lives.
South Africa, which has the most cases in sub-Saharan Africa, confirmed 38 news cases, taking its total to 240.
Africa’s most populous country, Nigeria, confirmed 10 new cases including the first three in the capital Abuja, bringing its total to 22.
The coronavirus disease (COVID-19) is spreading across the world. For those who catch it, the vast majority will experience mild symptoms, but for a few it can cause severe disease and death. Some groups - like older people and those with pre-existing health conditions - are more vulnerable when exposed than others.
Because of this, the primary objectives in fighting the outbreak are to contain the virus and help the infected to get well again. In this context, health literacy is a valuable tool because it can affect health outcomes in multiple ways. Health literacy is the degree to which people can get, understand and use basic health information to make decisions about health issues.
A health literate society is one with a population that will be aware of the severity of the situation and is able to understand how to protect themselves, and others, through basic actions. In the case of this new virus, this includes physical distancing and washing hands. It’s also a society in which the systems and services in place can ensure clear, timely and appropriate communication.
In the current situation, well-informed individual behaviour is a key intervention alongside medical and governmental action. It’s crucial that health authorities apply health literacy principles and provide information that is easy-to-understand, easy-to-access, and barrier-free. Health literacy is vital to slowing down the spread of the virus and mitigating the impact and effects of COVID-19.
This isn’t always done well. In Europe, research has shown that health literacy is a neglected public health challenge. More than a third of the population faces difficulties in finding, understanding, evaluating and using information to manage their health.
Another challenge is fake information. Instead of real facts, people’s information channels might be dominated by fake news and fear due to the uncertainties. We’ve seen that during this pandemic – it’s not only the virus that is spreading quickly but “a wildfire of false and unverified information” on WhatsApp, Twitter, Facebook and other social media in the so called “infodemic”.
Along with more than 100 other health literacy experts, we put together a handbook on health literacy. This highlights cutting edge research, policy and practice from the field and is aimed at audiences from education, public health, health care and social science. Readers will learn about health promotion and prevention programmes for school children, patients, and the elderly. They can also learn about government and community policies that improve population health literacy.
Health literacy information must be understandable and it needs to meet the literacy needs of the people it’s directed at. People with reading difficulties, hearing and sight impairments, for example, will need different formats. They’ll need more explanation. For instance, animations help in explaining the virus, the disease, its transmission and protective measures.
Other criteria health authorities must keep in mind include:
Explain the situation transparently and clarify the overriding objectives repeatedly to prepare people for the fact that interventions and recommendations might change based on new evidence and adapt to future scenarios.
Be adaptable: information providers must be able to continuously communicate new evidence and information. Authorities should not be afraid to correct earlier messages and statements if new information is available, especially if it is contradicting yesterday’s news.
Avoid a blame game: blaming false security promises and scandalous over-interpretations of studies and figures are of little help. Rather, the aim should be to strengthen the well-informed responsibility of the individual, solidarity with particularly vulnerable population groups and targeted collaborative action.
Linked to this is the need to prepare people for a barrage of misinformation. Health literacy can apply some basic principles that ensure people get the right information, and know how to distinguish the bad.
Help people cross check the accuracy and credibility of information found on TV, radio, internet, and social media, including aggressive ads for products.
Enable people to ask questions to family members and trusted health professionals about the fake news, misinformation and harmful content and messages.
Guide people to evidence-based messaging. As the Global Working Group on Health Literacy of the International Union for Health Promotion and Education stated, “the dissemination of quality, timely and understandable information is key in slowing down transmission and avoiding overburdening the healthcare system”.
Encourage people to check the source of information (where does it come from, who is behind the information, what is the intention, why was it shared, when was it published)
Encourage people to search a second source verifying the information and to double check with family, friends, colleagues and trusted health professionals
Encourage people to think hard before sharing information and not to share anything they haven’t checked and to visit fact-checking websites. These include credible sites such as the News Literacy Project, their fake news check questionnaire and CUNY’s Graduate School of Journalism’s fake check guide.
If followed, some of the information and guidelines we’ve set out in the handbook can go a long way to building citizens’ health literacy on COVID-19 and contribute to containing the disease.
Orkan Okan, Researcher, Interdisciplinary Centre for Health Literacy Research, Bielefeld University; Kristine Sørensen, Director, Global Health Literacy Academy and Associated Guest Researcher, Freiburg University , and Melanie Messer, External Lecturer, APOLLON University of Applied Sciences
COVID-19, which first emerged in Wuhan, China in December 2019, is relentlessly sweeping across the world. The scale of the epidemic has caused chaos and led to the World Health Organisation declaring it a pandemic in early February 2020.
Understanding the virus is the preoccupation of scientists who are trying to unravel its mysteries as a first step to finding ways to stop the disease spreading, and to finding a vaccine. On a daily basis scientists are finding out new things about SARS-CoV-2, the virus behind the rapidly spreading disease COVID-19.
An area of inquiry is its relationship to other coronaviruses. For example, it’s been identified as being part of the same family of coronaviruses which caused Severe Acute Respiratory Syndrome (SARS) and Middle East Respiratory Syndrome (MERS). SARS was first identified in 2002. It caused severe respiratory disease which was fatal in approximately 10% of cases. MERS, on the other hand, originated in the Middle East and although less infectious, caused death in around 37% of cases.
Scientists investigating SARS-CoV-2 have found that the structure is very similar to the SARS-CoV. But there are also a number of marked differences. For example, one of the most startling differences of COVID-19 is its rapid spread across the world.
Closing the gap in understanding these differences and similarities is what stands between scientists and a solution to the rapidly spreading disease. One vital line of inquiry into how the body is able to fight and overcome the infection is how blood types – and their associated antibodies – might influence the immune response.
Similarities and differences
SARS-Cov-2 is round in shape and has a number of proteins called spikes on the surface. These spikes attach to the same human cell receptor (angiotensin-converting enzyme 2) as the SARS-CoV. This information is important as it suggests that the virus uses the same mechanism of ensuring that the viral genes enter the host cell, replicate and infect other cells. Scientists can use this to develop drugs which inhibit the spike protein from binding and so slow the ability of the virus to replicate
Another similarity is the structure of the spike protein which is called NSP15. Scientists from a number of universities in the US have studied the structure of this protein and found it to be 89% similar to the NSP15 protein in SARS-CoV.
Like COVID-19, SARS was highly infectious. But there was one quirk: not everyone who was exposed to individuals who were already infected developed the disease.
One area of research was whether blood types and naturally occurring antibodies could influence the spread or severity of infection.
The distribution of the four main blood groups (A, B, AB and O) varies across population groups and geographical regions due to natural selection, the environment and disease. Up until recently, blood groups were commonly known for their role in blood transfusion. If patients received incompatible blood, powerful naturally occurring anti-A or anti-B antibodies could cause a blood transfusion reaction.
But research has shown that blood types could also play a role in infection and how the body’s immune system responds. One theory is that blood group antigens can act as binding receptors which will allow viruses or bacteria to attach and enter the body’s cells.
An example of this is the norovirus which causes severe vomiting and diarrhoea. This virus is able to bind to ABO antigens on mucosal surfaces of the gut, and once this happens, it is able to gain entry into the host cell and then replicate. On the other hand, anti-A and anti-B antibodies may be part of the body’s natural defence and could limit or even prevent infection.
What about coronaviruses?
Doctors at a Hong Kong hospital studied this phenomenon and reported that individuals who were blood group O appeared to be less susceptible to SARS-CoV than those who were group A, B or AB. Researchers showed that the virus could express antigens on its surface similar to those found in the ABH blood group. They also reported that naturally occurring anti-A antibodies were able to inhibit or even block the binding of the virus to the host cell.
This led to the theory that group O individuals, which have both anti-A and anti-B antibodies, may have some protection against infection.
The fact that blood types and their associated antibodies influence the immune response is one of the lines of inquiry into how the body is able to fight and overcome the infection.
How this occurs in COVID-19 still requires more study to build on the work already being done.
Another discovery is that the SARS-CoV-2 spike protein is unique and is 10-20 times more likely to attach to human cells. This could explain the increased and more rapid spread across populations.
The structure of these unique spike proteins matter enormously because they will form the basis for the development of a vaccine.
The ABO blood group has evolved in response to disease over thousands of years. The antigens and antibodies which form part of this system interact with cells of the immune system and are able to influence the way they react. As we get to know more about SARS-CoV-2 the role of blood types, if any, may become clearer.
While there is a lot of uncertainty around the economic impact of the novel coronavirus 2019 (COVID-19) outbreak, one thing that is certain is that it will change the way we do business in the long-term.
People are moving from offline shopping to online, and the habit is unlikely to disappear when the pandemic is over. Implementing ecommerce technology could be the key to retaining customers and leveraging changing consumer behaviour moving forward.
“Over the past few years, South Africans have come to rely on the convenience of online shopping; and now with the onset of the COVID-19 outbreak, it’s to be expected that the reliance on online shopping will be intensified,” says Jonathan Smit, Managing Director of PayFast, South Africa’s leading online payment gateway. “Self-isolation and consumer worry about public places means that local businesses are being forced to find quick and innovative ways to adapt to the current crisis.”
The use of online payments and home delivery for day-to-day consumables have already been established as the new norm by companies such as Mr D Food and Pick n Pay. In response to COVID-19, these retailers have upped their game by implementing ‘no contact’ deliveries to minimise human-to-human contact and maximise sales opportunities. This is a useful model to follow for other South African businesses, who are grappling with ideas on how to best manage COVID-19.
Although it’s impossible to know exactly to what extent South African businesses will be impacted by COVID-19, it is likely that consumers who start making online purchases now during the outbreak will continue to do so going forward.
“People will spend more time shopping online because they are avoiding public spaces. The long-term effect is that they will become accustomed to browsing and buying online, and not visiting physical stores as often,” says Smit. “If businesses can provide customers with a positive online experience, the short-term losses that brands may experience now could lead to their long-term gain.”
For example, older people who are the most susceptible to COVID-19 have been advised to avoid public spaces, including shopping centres and malls; “This could mean wider adoption of ecommerce, an area that older individuals have historically avoided, mainly due to mistrust of online platforms,” says Smit.
Smit has assured PayFast merchants and buyers that they will remain a top priority during the COVID-19 outbreak. “While undoubtedly a great challenge for the world at large, and a test of the viability of many businesses, we need to continue with business as usual. As with any obstacle in the business world, we cannot allow things to grind to a halt. This is the time to adapt, to evolve and to move forward.”
As travellers cancel flights, businesses ask workers to stay home, and stocks fall, a global health crisis becomes a global economic crisis. In any health crisis, our first concern is (and should be) with the health of those affected. More than 6,400 people have died worldwide and more than 164,000 cases have been confirmed in 146 countries or territories.
The economic impacts have dramatic effects on the well-being of families and communities. For vulnerable families, lost income due to an outbreak can translate to spikes in poverty, missed meals for children, and reduced access to healthcare far beyond COVID-19. With cases confirmed in many low- and middle-income countries, these impacts may affect the world’s most vulnerable populations.
What are the channels of economic impact we can expect from COVID-19? Beyond the human tragedy, there is a direct economic impact from lives lost in an outbreak. Families and loved ones lose that income and their in-kind contributions to household income such as childcare.
Though less likely to pass away from COVID-19, many working age adults still fall ill and their families will feel the financial burden as they miss work for days or weeks.
Most of the economic impact of the virus will be from “aversion behaviour.” That is, actions people take to avoid catching the virus. Aversion behaviour comes from three sources:
Firms and institutions (including private schools and private companies) take proactive measures to avoid infection. Business closures – whether through government bans or business decisions – result in lost wages for workers, especially in the informal economy, where there is no paid leave.
Individuals reduce travel – to the market, for tourism, on business, and going out for social and other activities.
These actions affect all sectors of the economy. These in turn translate into reduced income both through the supply side (reduced production drives up prices for consumers) and the demand side (reduced demand from consumers hurts business owners and their employees).
These short-term economic impacts can translate into reductions in long-term growth. As the health sector soaks up more resources and as people reduce social activities, countries invest less in physical infrastructure. As schools close, students lose opportunities to learn (hopefully only briefly) but more vulnerable students may not return to the education system, translating to lower long-term earning trajectories for them and their families, and reduced overall human capital for their economies.
For example, unplanned pregnancies rose sharply in Sierra Leone during the Ebola epidemic, likely in part a result of school closures. Adolescent mothers are less likely to return to school, and their children will likely have fewer health and educational investments.
Further, the infection and death of health workers in the front lines of epidemics can lead to worsening health conditions in the long-term, such as maternal and infant mortality. These all have poverty implications well beyond their humanitarian implications.
What we know so far and what to expect
Economic estimates of the likely global impact vary dramatically. Tom Orlik and others at Bloomberg hypothesise $2.7 trillion in lost output. The Asian Development Bank projects losses ranging from $77 billion to $347 billion, and an OECD report talks about a halving of global economic growth.
Some recent analysis of the actual and potential economic impacts of the crisis provides a snapshot. Across sectors in African countries, the economic impact stems from the slowing down of the Chinese economy, with reduced Chinese demand for raw materials. This analysis projects reduced investments in energy, mining, and other sectors, and a fall in travel and tourism.
Another analysis reports that Chinese factory closings have adversely affected consumers in Africa. In Zimbabwe and Angola, exports to China have crashed.
About a fourth of Ugandan imports come from China. Supply chains have been interrupted for weeks because many Chinese factories shut down production. Small traders selling textiles, electronics or household goods are in trouble … In Niger, stocks of certain goods, including groceries, from China have already been significantly decimated, leading to higher prices.
Most of the data and observed impacts in the developing world so far stem from production and export stoppages from China, and those estimates pre-date the worsening economic conditions in Europe and the US. But as the economies of other countries slow down with the spread of the disease, these impacts will show up more clearly in economic data and likely grow over time.
What should be done
Beyond three stimulus and liquidity recommendations from the International Monetary Fund, we add three recommendations.
First, contain the pandemic. As our colleague Jeremy Konyndyk puts it,
To assuage market reactions to the outbreak, you have to present a viable plan to defeat the outbreak.
As long as the outbreak is actively spreading, many aversion behaviours are rational and wise. Containing the disease is the first step to mitigating not only the health impacts but also the economic impacts.
Second, strengthen the safety net. The most vulnerable households are those most likely to be affected economically. Low-wage workers are often those most likely to lose their jobs if they miss work due to an extended illness. They are often the least able to work remotely to avoid contracting the virus. And they are the least likely to have savings to survive an economic downturn.
Making sure there is an economic safety net in place – cash transfers, sick leave, subsidised health coverage – helps the most vulnerable survive and provides support to enterprises that serve those populations.
Third, measure the impact. Systematic data on which populations are experiencing the greatest hardships and which industries are failing is essential to providing assistance. During the Ebola epidemic of 2014-2015, researchers used phone surveys in Sierra Leone and Liberia – building on the sample frames from existing surveys – to gather information on the impacts of both ill health and aversion behaviour on households and enterprises across the countries.