Report points African nations and investors to windows of opportunity in the global economic crisis
Sponsored by Platform Capital
By Evans Ongwae
Just as the world thought it was overcoming the Covid-19 storm, the Russia-Ukraine conflict happened, throwing economies into a new tailspin.
An analysis by investment and advisory firm, Platform Capital, paints the possible scenarios these global events are likely to lead to, and recommends what nations should consider to keep their economies afloat and prepare them for recovery. It also offers investment ideas amidst the crisis.
The analytical study, titled Global Macroeconomic Report: Impact, Implications & Recommendations, highlights how the war and its disruption of supply chains, just like the residual Covid-19 in China, have fuelled increases in prices of food and energy in recent months, driving up inflation and pushing economies towards recession.
Further, the analysis observes that accelerated global prices have led to the adoption of contractionary monetary policies, majorly through increased cost of credit (interest rate) by various countries. Economies across the globe are grappling with inflationary pressures.
The Platform Capital analysis further observes that as governments and monetary policy authorities across the world work towards counteracting the negative impacts of global inflation, an increase in key monetary policy rates – the conventional method of tackling inflation – has been widespread. Higher rates are powerful tools for fighting rising prices as they make borrowing money more expensive, which weighs on consumer demand and business expansions, in turn cooling economic growth and slowing hiring.
Consequently, the global economic outlook appears dimmer than in 2021 when it hit a recovery path after the Covid-19 onslaught of 2020.
In its 2022-2023 forecast, the World Trade Organisation (WTO) says prospects for the global economy have darkened since the Russia-Ukraine war started in February 24, 2022.
WTO economists have now downgraded their expectations for 2022 growth of merchandise trade volumes from 4.7 percent to 3 percent.
Furthermore, the world has seen increased prices of food and energy, as influenced by the war. The World Bank projects that energy prices are expected to rise more than 50 percent in 2022, before easing in 2023 and 2024. Non-energy prices, including agriculture and metals, are projected to increase almost 20 percent in 2022, and will also moderate in the following years.
Currently, the global economy appears to be headed towards a downturn. For example, whereas reports had predicted a fall in global inflation rates, they instead hit a new high in August.
The Platform Capital report states that it is incumbent upon investors, savers, traders, and nations, to understand how these global events are affecting economies, so as to respond appropriately.
In the report, Platform Capital cites a forecast by the World Bank, which noted that the war in Ukraine, 2022 lockdowns in China, supply-chain disruptions, and the risk of stagflation were hampering growth, and formed the reasons behind its downward revision of the global GDP forecast.
In January 2022, the World Bank forecast the global GDP to continue its growth trend in 2022, with an average growth of 4.1 percent. However, in June 2022, the institution revised this growth forecast downwards to 2.9 percent, as indicated in its latest Global Economic Prospects report.
The Platform Capital report further observes that elections tend to impact African economies negatively. This is especially because of the related insecurity and attendant investment risks usually associated with election cycles on the continent. Additionally, Europe’s quest to replace Russia gas might see the emergence of Africa gas as a viable alternative, given the vast economically viable gas reserves in a number of African countries. How best should African countries with gas and oil reserves take advantage of this scenario? What other opportunities is the scenario opening up for Africa if only certain policies were committedly implemented? Which industries should investors with an eye for Africa consider at this point in time?
The Global Macroeconomic Report: Impact, Implications & Recommendations,gives nations, policy makers, and entrepreneurs, some economic food for thought around these queries and more. For details, download your copy here.
