Ebola Will Weigh On Growth
BMI View: Liberia and Sierra Leone's economies are facing significant challenges as a result of the Ebola crisis that continues to claim lives in the West Africa region. The two countries are struggling to contain the disease, and we have adjusted our real GDP growth forecasts as a result.
The outbreak of the Ebola virus that has been ravaging West Africa has serious implications for regional economies. Liberia and Sierra Leone, the two worst-afflicted countries (Guinea and, to a far lesser extent, Nigeria, have also been struck by the disease) are facing the greatest challenge to their macroeconomic - and, indeed, political and social - stability since the end of their respective civil wars, in 2003 and 2002, and we have revised our 2014 real GDP growth forecasts for the two countries as a result. We now forecast real GDP growth of 4.8% in Liberia and 9.3% in Sierra Leone - far less than the estimated 8.2% and 12.6% recorded in 2013, and markedly below the 5.9% and 14.0% government targets for 2014.
The Ebola outbreak is impeding trade, draining government resources and forestalling investment, most notably into the iron ore mining sector. While our real GDP expansion projections for the two states are still relatively robust - especially when compared to the sluggish outlook for developed economies in 2014 - risks to our outlook are weighted to the downside, especially given that at the time of writing the death toll was continuing to rise. Further, we believe that the spread of the disease highlights some of the risks involved with investing in such frontier markets where investor companies must contend not only with the challenges of grossly underdeveloped transport infrastructure, but also with the potentially lethal effects of an overburdened, undersupplied, healthcare system. According to Augustine Kpehe Ngafuan, Liberia's minister of foreign affairs, the country entered the outbreak with just 50 doctors for a population of 4mn people.
|Liberia & Sierra Leone - Real GDP Growth, y-o-y|