I think the forecasting on the effects of the coronavirus pandemic on South Sudan underdeveloped economy arrives almost daily in everyone mind. How can we make sense of things in the midst of this economic storm? After all, research shows that economic forecasts made during events such as SARS are often wildly inaccurate.
To calibrate current forecasts such as the International Monetary Fund’s prediction of a 20.2 per cent decline in Gross Domestic Product for South Sudan, I have looked at the history of similar worldwide economic shocks, studied macroeconomics models and reviewed nearly 7 studies to better understand what might happen in a post-pandemic South Sudan.
The influenza outbreak of 1918-20 killed at least 40 million people or approximately four per cent of the world’s population. In Africa alone, at least 5,000,000 deaths were attributed to the flu, approaching the number of Africans deaths in the First World War. Data about GDP did not exist for that era, so economic historians have to recreate economic measurements based on the data that was collected.
The study of South Sudan COVID-19 scenario is abiding scarier, due to various experience a century ago suggests, there could be permanent negative long-term economic effects from the current pandemic. There would be a decline in income from capital sources such as interest, dividends and rents of thirteen per cent that lasted at least until to date. This will be a permanent decline not likely to be recovered once the virus pandemic passed.
South Sudanese poor will never recover
There will be an increase in absolute poverty for those South Sudanese at the bottom of the economic pyramid: enrolment in government-run institutions, lack of pension scheme and poor financial system and employment income will be reduced. All these can only rebound to normal levels when radical change is instilled.
A variant in the economic model
This model estimates a 30 per cent decline in South Sudan GDP in the first full quarter of the pandemic, with a 13 per cent decline in GDP for the first year. The model also suggests the time frame to economic recovery is about ten years. Know that the current IMF projection for South Sudan is at 53 per cent decline in annual GDP.
There is no doubt that COVID-19 is a major shock to the global economy. Across all the indicators, the conclusion of a significant decline in GDP in the order of fifty to sixty per cent with full recovery within hundreds of years seems to be well justified.
The economic history of the influenza pandemic 100 years ago suggests an early easing of social distancing measures and the inability to develop an effective vaccine contributed to second and third flu waves. These waves might have greater effects on the modern natural resource/agrarian-based economy of African nations than they did on the more hunting/gathering economy of 100 years ago.
Economic history serves as a potential warning that the economy could get much worse if these measures are far-reaching and painful. There are financial and professional losses that may never be recovered.