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Ebola-Stricken West African Economies Are Crashing

We warned five weeks ago of the potential economic damage that the Ebola virus could do to West African economies, and now it appears The IMF, The World Bank, and the United Nations Food and Agricultural Organization have warned that Liberia and other West African economies, as WaPo reports, begun a frightening descent into economic hell. Fear that "that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised" are no longer scenarios - they are real! Annual inflation rates have doubled, fuel sales are down 35%, Liberia's productivity is down 50-75%, and "micro-trade" financing is "completely depleted."

The IMF warns “In addition to exacting a heavy human toll, the Ebola outbreak is having a severe economic and social impact, and could jeopardize the gains from a decade of peace.”

With WHO and CDC expecting a worst case scenario now, the $809 million collapse in GDP across Sierra Leone, Guinea, and Liberia is stunning...

 

As The Washington Post reports,

Three recent reports from international organizations that seem to bear out the worst-case scenarios of months ago: that people would abandon the fields and factories, that food and fuel would become scarce and unaffordable, and that the government’s already meager capacity to help, along with the nation’s prospects for a better future, would be severely compromised.

 

They are no longer scenarios. They are real. While these trends have been noted anecdotally, the cumulative toll is horrific.

 

The basic necessities of survival in Liberia — food, transportation, work, money, help from the government — are rapidly being depleted, according to recent reports by the United Nations Food and Agricultural Organization, the International Monetary Fund and the World Bank.

 

...

 

The International Monetary Fund said in a separate report that restrictions on public transport, internal travel and trade are burdening the country’s ability to distribute the food that is available.

 

The combination is driving up food prices rapidly, said the IMF even as “panic buying” is boosting demand, according to the World Bank. The IMF is projecting an inflation rate of 13.1 percent by year’s end, compared with 7.7 percent before the Ebola epidemic started taking its toll.

 

Transportation has been badly disrupted, one indicator being a drop of between 20 and 35 percent in fuel sales.

 

The services sector, about half of Liberia’s economy, employing about 45 percent of the work force, has experienced a drop in turnover of 50 to 75 percent, the World Bank says.

 

Savings and loan programs, called “susu,” that finance “micro-trade” and small businesses — especially those run by women — have been “completely depleted,” with participants no longer able to pay their debts, said the FAO.

 

Projections for short-term and long-term economic growth are getting ratcheted downward, with the worst-case estimates nothing short of catastrophic. The World Bank, looking at 2014 alone, projected a reduction in growth in Liberia from 5.9 percent to 2.5 percent, a plunge that would be considered calamitous in any country. In 2015, under its most dire but altogether realistic scenario, Liberia’s output could decrease by nearly 12 percent in 2015.

 

Projections for inflation are moving upward, with the IMF estimating an inflation rate of 13.1 percent by year’s end, compared with 7.7 percent the year before.

 

On top of it all, the revenue coming in to the Liberian government has dropped sharply, by 20 percent, Liberia’s foreign minister Augustine Kpehe Ngafuan told the United Nations earlier this week. “Consequently, our ability to provide for basic social services and continue to fund key development projects are significantly diminished.

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“The Ebola epidemic is washing away years of progress and hard work,” said the FAO in its Sept. 23 report.