The global spread of the novel coronavirus has crushed hopes for stronger growth prospects this year and will hold 2020 global output gains to their slowest pace since the 2008 – 2009 financial crisis, International Monetary Fund managing director Kristalina Georgieva said on Wednesday.
The IMF now expects 2020 world growth to be below the 2,9 percent rate for 2019 and revised forecasts will be issued in the coming weeks, Georgieva told a news briefing in Saudi Arabia.
Coming closer to home, the global lender’s representative in Zimbabwe, Patrick Imam, also spelt out some of the areas that could be affected by coronavirus.
Imam told Business Weekly this week that while it’s still early to quantify the impact of coronavirus on the Zimbabwe economy, there is need to start thinking about the channels through which this shock may impact the country.
He said the risk is that the coronavirus outbreak has all the ingredients to be another exogenous shock, like the drought, which is not of Zimbabwe’s making, yet has a significant negative impact on the economy.
Some of the key pillars of the economy that could be impacted significantly include but not limited to tourism, mining, and tobacco sector.
“Tourism will be impacted negatively. This is both because Chinese tourists will stop coming in large numbers for the coming months, and given the current uncertainty, tourists from all around the world will be scared to travel,” said Imam.
The International Air Transport Association (IATA) has already said coronavirus disruption could cost African airlines $40 million in revenue this year as the continent’s airlines often count on lucrative Chinese routes.
On the mining sector, Imam said assuming global economic growth is temporarily reduced, Zimbabwe should expect commodity prices to reverse from their recent upward trajectory resulting in lower than what was assumed until now.
“In addition to the price effect, there is some anecdotal evidence emerging that even production of minerals may be impacted in Zimbabwe. Miners need spare parts and equipment, much of it from China, and as production in China has come to a temporary halt and the shipping industry is impacted by delays, this may have temporarily rippled effects on mining production here.”
He said authorities should be watchful of the tobacco sector as the main buyers of Zimbabwean tobacco are the Chinese, “and the coronavirus outbreak may impact both prices and shipment of tobacco for this coming season”.
“Besides these direct effects, there are likely to be indirect ones. Think about remittances for instance. Let’s assume you have Zimbabweans working in South Africa in the tourism sector, and that they are laid off because tourism arrivals are down there. The result could be lower remittances coming into Zimbabwe,” Imam said.
Tobacco deliveries are expected to start in April.
Besides these measurable effects, there are psychological ones that are harder to establish but that may matter even more.
“The economy may slow down not simply because of the contagion effect caused by the coronavirus, but from the fear of the unknown, leading to panic and herd behaviour among companies and consumers, who stop producing or buying for instance. But at this stage, one cannot yet quantify the effect.”
Chinese businesses in Zimbabwe also alert
The Chamber of Chinese Enterprises in Zimbabwe (CCEZ) — a representative body of Chinese businesspeople operating locally — said it was co-operating with authorities.
Measures put in place to prevent the spread of the deadly virus to Zimbabwe include avoiding continued importation of machinery and consumables from China that can otherwise be procured locally or regionally.
The import substitution measures have been extended to technical skills where the Chinese are now relying on Zimbabwe’s vast human resource base.
In circumstances where technical expertise has to come from China, the 75-member chamber said expatriates have to undergo a mandatory two- week quarantine period in China and a further three weeks in Zimbabwe before they can start work.
“There are big projects like the airport (RG Mugabe) and Hwange, which need a lot of people, technicians and engineers, coming from China and also they need to bring in some machinery from China but this is being delayed,” said CCEZ chairman Ye Hai through a translator.
With the tobacco marketing season beckoning, fears are that Chinese buyers will not have the dominance they have had over the last few years. Most of Zimbabwe’s tobacco has found its way to China with buyers from the Asian giant snapping up about half of the country’s overall produce annually.
“So far in agriculture, tobacco in particular, there is not much negative impact,” said Ye.
“Even if you check on the farms and everywhere everything is very normal. As you know, China is purchasing almost half of Zimbabwe’s tobacco every year, that is about US$500 million, so normally we have delegations coming to Zimbabwe to take samples and do the purchasing. But this year, if they can’t come still we have enough manpower already in Zimbabwe to purchase tobacco in Zimbabwe. We won’t stop,” he said.