■ Timo Shihepo
Windhoek - The Southern African Development Community (SADC) Secretariat has drafted policy interventions and recommendations to help member states keep their economies afloat in the face of the worst global economic downturn.
The global economy before COVID-19 outbreak was struggling to regain a broad-based recovery due to the lingering impact of growing trade protectionism, trade disputes among major trading partners, falling commodity prices and economic uncertainties in Europe over the impact of the United Kingdom withdrawal from the European Union.
The spread of COVID-19 around the whole has brought the global trade to halt affecting a lot of economies including that of the countries in the region.
SADC regional 2020 economic growth rate was initially forecasted at 3.3% in October 2019, has been revised downwards to a contraction of about 3%.
Disruptions of economic activity and the elevated expenditures by governments coupled with economic packages in response to the pandemic is expected to affect the fiscal positions for SADC member states.
Consequently, fiscal deficit is forecasted to widen to 5.7% of Gross Domestic Product (GDP) in 2020 compared to the previous estimate of 3.0% of GDP. Additionally, debt levels are forecasted to increase beyond the regional threshold of 60 % of GDP to 69.8% of GDP in 2020.
A SADC Economy Report states that as the pressure mounts, industries are moving swiftly to build resilience, while governments are mobilizing to safeguard citizens and manage the social and economic fallout.
The report adds that as of December 2019, prospects in terms of fiscal deficit and public debt were mixed.
While some member states had made commendable improvements in their fiscal positions, a majority were already grappling to manage their increasing public debt, which was on the brink of breaching the regional threshold of 60% of GDP.
The Fiscal Monitor released by the International Monetary Fund (IMF) in April 2020 highlighted that since the COVID-19 outbreak they are financial and economic consequences which will cause a major increase in fiscal deficits and public debt load in 2020.
Fiscal policy measures that are implemented include government-funded paid sick and family leave, transfers, unemployment benefits, wage subsidies and deferral of tax payments.
The increasing public debt levels will put additional burden to the member states resources as debt service costs increase.
Combining these factors with the on-going lockdowns around the globe, the platform to trade fairly is slowly being skewed with some players losing while others winning.
It is because of this reason that the SADC Secretariat has urged its member states to do policy interventions and recommendations to keep economies afloat in the face of the worst global pandemic.
The report states that, “While the focus should be on health and humanitarian sectors due to the damage caused by the virus, there is need also to strengthen early warning systems, response and mitigation of pandemics and disasters that have proved to be major threats to education, tourism, informal sector and other sectors.
“Member states should consider developing Roadmaps and Action Plans that prioritize investments and channel scarce resources to identified economic sectors to resuscitate their economies, strengthen resilience and improve competitiveness.
Relaunching strategies should be premised on the existing SADC macroeconomic convergence programme.”