Covid-19: its economic impact on the world and on the city of Goma (DRC)
Thomas Budida Fathos, Samuel Mbuluku, Mbusa Mathe, Rachel Kaningu
Centre de Recherche en Economie et Finance/Goma
Since January 2020, the international community has been facing an unprecedented disease that is spreading all over the world. This disease has been named “coronavirus, known as Covid-19”. Having already killed thousands of people around the world, this disease has become a global health emergency involving all countries. In view of the travel restrictions it has created, the disease is beginning to have an impact on the economy and on the freedoms of individuals around the world, as no continent is spared to date, given the interconnection of different states as a result of globalisation.
According to the latest statistics of 28 March 2020 reported by the INRB (Institut National de Recherches Biomédicales), DRCongo has 54 confirmed cases including 6 deaths on Congolese soil, the first four cases having been imported from abroad, mainly from Europe.
In an effort to limit the spread, the Head of State, Félix Antoine Tshisekedi, has decided to suspend all flights from Friday, 20 March, from all countries at risk and transit countries. Only aircraft and cargo ships and other means of transport are allowed to enter the national territory. Several other measures along the same lines have been announced, including the isolation of the province of Kinshasa from the other provinces of the country.
As with most developing countries, the Congolese economy is largely in the informal sector. And the food market is largely run by foreigners accused of price speculation. Such measures deal a heavy blow to this economy, which was already reputed to be fragile. The purpose of this paper is to take a look at the global health crisis and its impact on the economy; it will also review the Congolese context and the city of Goma in particular, while suggesting some ways to contain the fallout from the crisis.
Likely consequences of the coronavirus
Violations of human rights.
When a man becomes a danger to other men, it is an obligation of governments to be able to restrict his individual freedoms in order to safeguard public order and public health.
In combating this coronavirus, several inherent human rights may be affected, in this case the right to travel or freedom of movement, the right to work, the right to education and the right to health. This is proving to be a lesser evil than the spread of the coronavirus.
Economic recession and job losses
The British airline Flybe has gone bankrupt, and thousands of employees have been affected by this epidemic.
By restricting the movement of individuals between various countries, the coronavirus will lead to a decline in the wealth produced globally and will eventually lead to an economic recession.
For example, the British airline Flybe has gone bankrupt, and thousands of employees have been affected by this epidemic. It should be noted that many businesses in tourism, airline and hotel sectors are beginning to show signs of running out of steam. There is a risk of even temporary layoffs in these sectors of economic activity.
All the world’s stock markets are experiencing bearish trends. Moreover, the world’s main central banks and major states have taken financial measures to limit the economic and social damage caused by the coronavirus.
The economic impact will be felt through multiple channels. Firstly, the closures imposed, in order to contain the spread of the virus, have strongly affected many sectors, including retail, leisure, tourism, transport and events capable of bringing more people together. Added to this, regardless of the sector, is the closure of companies that cannot offer telework or comply with the required social distancing measures.
In the labour market, companies face several challenges: on the one hand, telework is becoming the norm, if possible. Companies that are not able to allow telework must respect the rules of social distancing, otherwise they must close down. So far, the economic impact is mainly felt in China and is the result of a supply and demand shock. Like the SARS epidemic (which had a negative impact on GDP of 1.05 percentage points in 2003), the coronavirus will have a downward impact on the expansion of the Chinese economy in the short term.
It goes without saying that private consumer spending (transport, leisure and retail trade) will be affected in the first quarter of 2020. In addition, industrial activity, especially the production of cars and their components (many international car manufacturers are based in Wuhan), machinery, electrical equipment, etc., will be affected.
Current situation
Africa is experiencing a slowdown in the supply of imported products.
Currently the core of the virus has migrated to New York City in the United States of America following an increased number of confirmed cases and those under investigation (quarantine), Europe remains affected despite the restrictive measures taken by various governments and more particularly the containment measures. The most affected countries are among others Italy, France and Spain with the highest world record of deaths following covid-19.
Africa, despite the reduced number of deaths, must remain vigilant in terms of hygiene and compliance with measures taken to limit the spread of the virus until adequate treatment is found to end the virus once and for all at the global level.
Africa is experiencing a slowdown in the supply of imported products. Especially in the DRC where most food have experienced an upward price fluctuation (rice, maize flour, palm oil to name but a few).
Measurement of the Congolese state
The president decided to suspend all flights from countries at risk such as China. In the city of Goma where rice and beans are among the main staple foods, there is a drop in the level of production and therefore exports.
Gatherings of more than 20 people are forbidden.
These measures are of a sanitary nature (to limit the spread of the virus) but we are witnessing economic consequences.
Effects of the presidential measure
In the city of Goma a measure of beans used to cost 1500 frc, but now costs 3000 frc.
There is already a rise in food prices in some markets of the national territory, in Lubumbashi city for example where a sack of flour once costed 32,000 but now costs 80,000 francs. In the city of Goma a measure of beans used to cost 1500 frc, but now costs 3000 frc.
The Congolese state recommends intervening in the functioning of the economy to face this crisis and some organizations (Fally Ipupa Foundation, etc.) recommend solidarity funds to accompany the presidential measures especially to the most destitute population.
Expected effects
A higher contamination and a significant mortality rate if the population does not apply the required preventive health measures;
A high unemployment rate due to the technical leave for suspension of certain activities;
A fall in the level of national production;
Inflation through demand and through the currency (the measures taken by the central banks to mitigate the crisis) and inflation resulting from agents’ speculation and uncertainty;
A drop in the level of purchasing power due to technical unemployment (demand being higher than supply because the country is dependent on the outside);
A low budget implementation rate because there will be adjustments finally to finance the fight against the spread of the crisis.
Possible solutions
The government should initiate other accompanying measures, as was the case in France, China and Italy, where certain costs such as rent, electricity and water are covered by the government during this period of crisis.
Dissociate the affected province from the rest of the country and from other provinces during this period in order to control a province and not a country as was the case in China
Using national production during this period would reduce the risk of recession and could help the country to recover economically once the epidemic is under control
Ensuring the availability of basic necessities under the logic of humanitarian measures to confined populations.
Done in Goma, 28/03/2020
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