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Africa Set to Continue Growth – Except in Ebola-Infected Areas

  • William Eagle

A health worker examines a man suffering from Ebola at a treatment center in Monrovia, Liberia, Oct. 15, 2014.

A health worker examines a man suffering from Ebola at a treatment center in Monrovia, Liberia, Oct. 15, 2014.

World Bank figures are beginning to confirm the impact of the crisis on the economies of Guinea, Liberia and Sierra Leone.

New data shows the service sectors of the three countries have been especially hard hit. The Bank’s latest report, called Africa’s Pulse: Decades of Growth is Transforming Africa’s Economies, says wholesale and retail traders in Liberia report drops in business of up to 75 percent from the same period last year. It says gasoline and diesel sales in the country are down by 21 and 35 percent, respectively. And, since the on-set of the crisis, hotel occupancy across the three countries is down by 13 to 40 percent.

In Guinea, the exodus of people from farming areas has affected the production of exports such as coffee, cocoa and palm oil. The Food and Agriculture Organization says up to 40 percent of farmers in Kailahun, Sierra Leone, have moved or died. The World Bank says in total, the economic impact could mean the loss of potentially tens of billions of dollars in revenues for West Africa over two years (2014-2015).

Aversion behavior

Economists say the public and political response to Ebola is affecting economic activity in the three countries.

The FAO says about 90 percent of Sierra Leone’s most productive plots are not being farmed – due in part, it says, to the fear among farmers of sharing tools, and government restrictions on movement aimed at preventing the spread of the disease.

Some airports are closed as are the borders – which are crucial to merchants. Many people are afraid to go to West Africa’s hot and crowded markets, for fear of getting the virus. Ebola can be spread by bodily fluids from an infected person.

Sierra Leone and Liberia are recovering from long civil wars, and were bouncing back with growth rates approaching 10 percent.

Francisco Ferreira, the World Bank’s chief economist for Africa, says response to the virus has put an end to the optimism, at least for now.

"The fear it creates, the aversion behavior toward others, on farmers, miners, workers, consumers," he said, "that’s reducing GDP by two percent in Guinea, and 3.3 percent in Sierra Leone and Liberia -- which adds up to around $359 million this year."

Next year, he says, could be worse. If the outbreak is not controlled, affected countries could lose over $800 million.

In response, the World Bank is mobilizing a $400 million finance package for the three countries. The money will go toward providing emergency response equipment and building field hospitals and treatment centers. It will also help strengthen heath care systems, including monitoring of the outbreak. And the funding will provide general budgetary support for the Ebola-stricken countries which are redirecting scarce resources to fight the virus.

Projections of growth

The economic forecast for the rest of Africa stands in stark contrast to that of Guinea, Liberia and Sierra Leone.

Growth is projected for most African states – despite a drop in commodity prices and slow global economic growth.

The World Bank attributes economic expansion to public spending on infrastructure, a buoyant services sector and a rebound in agricultural production for both export and domestic markets.

Punam Chuhan-Pole, the World Bank’s lead economist for Africa, mentions two low-income countries where growth has remained robust.

"In Ivory Coast," she said, "it’s cocoa production, which is mostly for export, and also rice production [for domestic markets]. In Ethiopia, agricultural production has gone up…it is also supported in Ethiopia with spending in infrastructure. There’s a range of factors, but agriculture is a strong impetus to growth."

Chuhan-Pole said Africa is by-passing industrialization as a means of promoting growth and jobs.

Propelling the continent forward are services --- like tourism, transport, financing and telecommunications – and extractive industries, like the mining of oil, gas, metals and minerals.

"Extractive sector growth is something that has the potential to provide benefits to the rest of the economy, because it is a source of income," she said. "The important thing is how is income from extractives distributed?"

"To the extent that governments are able to get revenues from this and are able to redistribute it in terms of spending on health, education, and social programs to help poor people -- there are obviously benefits that can be derived from the extractive sector."

Those revenues could help Africa meet the UN’s ambitious Millennium Development Goals, which aim in part to improve child and maternal health and reduce poverty. The Bank says Sub-Saharan Africa has met only about a third of the target of cutting poverty in half for those with incomes below $1.25 per day. It says the continent has met only about half of the target set for improving nourishment and about a third on guaranteeing the completion of primary school.

The World Bank says the manufacturing sector in Africa is lagging, but can contribute to growth. Its economists say for the continent that means improving the business climate curbing fiscal deficits, guaranteeing affordable energy, lowering transport costs and building a skilled labor force.