COVID-19 response in Africa: RMB’s fiscal outlook for African economies beyond the pandemic
As economies struggle amid the COVID-19 pandemic, gold has been making history. Investors are flocking to the safe-haven investment, as volatility rises in the markets. The price of the yellow metal broke the $2000 mark last week. The question is, what impact will this gold bubble have on African economies? Neville Mandimika, Sub-Saharan Africa Economist at Rand Merchant Bank joins CNBC Africa for more.
Thu, 13 Aug 2020 15:40:58 GMT
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AI Generated Summary
- Diversified winners and losers post-COVID in African economies based on their initial fiscal positions
- Varying policy responses to the crisis across African countries influencing economic recovery trajectories
- Gold market surge contributing to economic resilience in countries like Ghana through increased export earnings
Amidst the global turmoil caused by the COVID-19 pandemic, gold has emerged as a shining star in the investment world. The price of the precious metal soared past the $2000 mark, attracting investors seeking a safe haven amidst market volatility. The key question arises: how will this gold bubble affect African economies? Neville Mandimika, Sub-Saharan Africa Economist at Rand Merchant Bank, recently offered insights on this matter in an interview with CNBC Africa. Mandimika discussed winners and losers in the post-COVID era, the policy responses of African countries, and the outlook for economic recovery. The conversation revolved around the fiscal and growth perspectives of various African nations. Mandimika highlighted that the response to the crisis differed based on the initial economic footing of each country. Countries like Egypt and Ghana, which entered the crisis with a strong fiscal position, are expected to weather the storm better than others facing challenges like Zambia. These varying circumstances will shape the winners and losers in the continent's economic landscape. Senegal, Egypt, Ghana, and Kenya were identified as potential winners due to their relatively stable pre-crisis conditions, whereas countries like Zambia are facing uncertainties. Mandimika emphasized the importance of credible and sustainable policy measures to aid recovery. Vulnerable economies, like Nigeria, are urged to focus on fiscal consolidation to mitigate risks and stimulate growth. Additionally, the discussion dissected the policy responses of African governments to combat the economic fallout of the pandemic. Mandimika noted that while some countries had implemented monetary and fiscal stimulus measures, the extent varied across the continent. South Africa's substantial stimulus package was contrasted with other nations' more subdued responses, reflecting the differing severity of the pandemic's impact on each country. Mandimika highlighted the significance of high-frequency indicators like PMI readings, suggesting a gradual return to economic activity across the region. Despite the bleak outlook of a looming recession in Africa after 25 years, signs of economic recovery are slowly emerging. The conversation also touched on the prospects for post-pandemic growth in different regions of Africa. Mandimika predicted that countries like Senegal, Ivory Coast, and Egypt would continue to drive economic growth in the post-COVID era. The discussion then shifted to the gold market, where the surge in gold prices was analyzed. Mandimika attributed the rise in gold prices to global monetary stimulus measures and inflation concerns. As long as these conditions persist, the momentum for gold is expected to remain strong. Countries like Ghana were highlighted as beneficiaries of the gold price surge due to their significant gold exports. The revenue from gold exports could help stabilize their currencies and boost economic resilience. In conclusion, Mandimika addressed inflation concerns in Africa, noting that current economic slowdowns were keeping inflation in check. However, as economic activities pick up post-pandemic, inflation could become a pressing issue. The interview provided valuable insights into the complex interplay between the gold market, policy responses, and economic recovery in Africa, shedding light on the challenges and opportunities facing the continent amidst the ongoing pandemic.