How Would Liberia Deal With the Economic Shock of The Coronavirus Outbreak?
Monrovia – Liberia has never completely recovered from the economic impact of the Ebola outbreak that also caused the death of nearly 5,000 people. And now, the threat of the Coronavirus, which is already overwhelming the world’s most powerful economies, is also lurking in one of the poorest nations on the planet.
Between 2014 and 2016, as the Ebola epidemic ravaged Liberia’s health sector there was also a drastic decline in the prices of the country’s major commodities – iron ore and rubber. This forced major foreign direct investments like ArcelorMittal, Firestone and China Union to scale down operations. Consequently, jobs were lost and the government’s revenue generation was ghastly reduced.
The impact was far-reaching, leaving economists to predict that it would take Liberia several years to recuperate. The economic scar of the Ebola virus is still palpable and now Liberia has to once again brace itself for an outbreak that has forced the government hands to take a costly decision.
The ‘Greatest Threat’
As the government of Liberia announced the first confirmed case of the Coronavirus on Monday, March 16, President George Weah also declared couple of new measures to help curb further spread of the virus.
Declaring the outbreak as the “greatest threat to the wellbeing of the people of Liberia since the Ebola epidemic,” President Weah banned all flights from countries with over 200 Coronavirus cases and “non-essential travel” by all officials of government amongst several other measures.
The Economic Fears
The statement by the President technically means flights are banned from China (80,984 cases), Italy (31,506 cases), Spain (13,716 cases), South Korea (8,413 cases), Germany (8,198 cases), France (7,730 cases), the United States (7,048 cases), Switzerland (2,772 cases) and the United Kingdom (2, 626 cases) as well as other countries. All figures are provided by the United States Center for Disease Control, CDC.
Already the economies of several of the countries affected by the outbreak are feeling the pinch. Global tourism, technology industry and the stock markets have all suffered setbacks.
China, Europe and the United States are also struggling to deal with the economic shock and economists have warned that if the number of cases continues to grow and spread, the global economic damage will increase drastically.
“The outbreak has the potential to cause severe economic and market dislocation. But the scale of the impact will ultimately be determined by how the virus spreads and evolves, which is almost impossible to predict, as well as how governments respond,” Neil Shearing, group chief economist at Capital Economics, told CNN in late February.
Flight Ban Could Rattle Liberia
In Liberia, following the Liberian government’s decision to ban travels from worst-affected countries, Royal Air Maroc and SN Brussels – two of the most essential international flights that come to the country – then decided to stop making international trips to the Roberts International Airport.
Stated SN Brussels in a recent release: “Given the extraordinary circumstances caused by the worldwide Coronavirus crisis, Brussels Airlines has decided to temporarily suspend its flight operations from 21 March 2020. Between now and then, Brussels Airlines’ flight operations will be reduced gradually in a controlled and structured manner in order to bring passengers and crews home,” the airline stated in a release.
Economists are predicting that with the cancellation of flights from countries that have more than 200 cases of the Coronavirus, Liberia’s hospitality industry – hotels and restaurants – will be gravely affected and this may lead to cut in jobs and a further reduction in purchasing power.
Samuel Jackson, a Liberian Economists and former government advisor warned about the possible economic impact of the current outbreak, stressing that “there will be a serious contraction of economic activities” due to the ban on flights.
Mr. Jackson predicts that expats of international NGOs and business travelers will not come to Liberia, a situation that will affect the hospitality industry including big hotels and restaurants.
“This will be very crippling to the hospitality industry including the big hotels, which will lead to the reduction in workforce that might affect the economy,” Jackson said Wednesday in his regular Facebook live stream.
He also predicts that once restaurants and hotels that rely on foreign customers become constrained by the situation, they will reduce their purchasing power. This means the procurement of vegetables and other local produce sold by locals will be impacted.
“Those people who are selling plantains and vegetable income will also be decreased because the restaurants will have to cut down their purchases,” he added.
It is unclear how much revenue the hospitality and travel industries contribute to the Liberian economy but with predictions of a trickle-down-effect, the ramifications would obviously disrupt the government’s revenue intake and increase hardship.
Also, with the impact of the outbreak affecting the global economy, smaller countries like Liberia that are import-dependent would obviously face some turbulent times.
And former Finance Minister Amara Konneh is also worried that the Coronavirus would further affect global trade.
“There seems to be some type of relationship between pandemics and commodity prices,” Konneh, who now works with the World Bank, posted on social media on March 14 – two days before Liberia announced its first case.
“Just like the prices of iron ore and rubber plummeted during the Ebola pandemic in 2014, a Saudi-Russian oil war sent the Brent Crude Price crashing by 30% last week exacerbating the impacts of COVID-19 and slashing global growth to as little as 1.5% from 2.9%, according to the OECD. How will this affect African oil exports and exploration bid rounds?”
Konneh’s concerns are relevant for a country that recently suffered acute shortage of gasoline, and with increasing fears over the gravity of the global outbreak, many were jittery when long queues begin forming at petroleum stations in Monrovia early this week.
Meanwhile, Economists are also predicting that for an import-dependent country like Liberia, the current crisis may decrease the inflow of taxes at the Freeport, thereby impacting the government’s liquidity capacity.
“When import to the country decreases, government revenue decrease because you’re not getting money on GSD, you are not getting custom duty, you are getting tariff… It means the revenue for the port will also come down,” added Mr. Jackson.
Preparing For Shock?
Amid these looming economic challenges, experts have warned that the government should consider several preemptive steps to avert what might be a more devastating impact.
Popular Liberian businessman, Amin Modad suggests in a social media post that the government should initiate a forum with the business community to draw-up plans in order to prepare for the aftershock.
Modad mentioned how he suggested same to former President Ellen Johnson Sirleaf during the beginning of the Ebola outbreak in 2014, adding that that forum “develop[ed] a paper that informed Liberia’s post epidemic recovery” plan.
“I would like to suggest similar to the current administration and offer my support. Other countries are already developing strategies to stimulate the economy and support key businesses that are impacted by the pandemic. Let’s be proactive, let’s begin to plan together,” said Modad, who runs several hospitality businesses in Liberia.
Additionally, there are calls for the government to also shut all the borders for 30 days, conduct inventory of essential commodities, and concentrate mainly on the payment of salaries.
For Economist Jackson, he wants the government to halt all major projects for 90 days and exert unswerving efforts to cut wasteful spending and work with commercial banks to be more innovative.
“Do an inventory of drugs and ventilators in the country, encourage banks to improve payment system by using mobile money and do an inventory of farm production,” he suggested.
“Demand export proceeds surrender of at least 30 percent on gold, diamond and iron ore exports. Create a model for exporters to repatriate 50 percent of profits and immediately call a meeting of major companies including mining companies, exporters and importers.”
Jackson’s and others’ suggestions might be outside the government’s plans, but what is definitely certain is that there will be economic turbulent as a result of this raging virus.