AFD - 2019 Universal registration document

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PRESENTATION OF AFD

Activities of the Agence Française de Développement Group in 2019

developing countries that had had recessions or a pronounced slowdown in 2019. (A baseline effect, particularly in Argentina and Turkey.) The slowdown in the advanced economies was assumed to continue. This mixed outlook was based on the continuation of trade uncertainties and geopolitical tensions. The appearance of the Covid-19 virus in Hubei Province and its spread to other provinces had great repercussions on the Chinese economy, which felt a recession in the first two months of the year, an unwonted trade deficit and falling stock market indicators. The spread of the virus to the European countries and the United States in March changed the dimension of the health crisis, leading the WHO to declare a worldwide pandemic. The world’s major economies will therefore be highly impacted, at least in the first half of 2020, to an extent difficult to foresee given the many factors for uncertainty, particularly related to the end of the health crisis and the public policy decisions that will be made. It appears likely, nonetheless, given the lockdowns in place, that the global economy will go into a recession in 2020 for the first time since the international financial crisis. Asset prices were also hit heavily during March, with scant probability of regaining their prior levels once the health crisis has diminished. The emerging and developing countries will be impacted in 2020 by the Covid-19 crisis. Apart from the possible health- related developments that could occur, the principal contagion factors are (i) price movements in commodities, particularly oil, (ii) lower international demand due to the various confinement measures taken, particularly the drop in tourist revenues, and (iii) withdrawals of capital from the emerging and developing countries, due to a “flight to quality” phenomenon traditional in times of crisis.

momentum of private consumption due to high unemployment and credit constraints, the decrease in investment linked notably to the deterioration of the business climate and load shedding due to the precarious nature of the public electricity company (Eskom) have weighed heavily on the the growth rate, which is practically zero (0.4%). Ethiopia , the third-largest economy in the region, experienced a slight slowdown but rode a high growth curve in 2019 of 7.4% . The authorities presented a new economic development programme in the summer that should enable it to resolve the structural problems of the Ethiopian economy. The African countries are vulnerable to weather shocks , as shown by the serious drought episodes caused by El Niño which affected Angola, Botswana, Ethiopia, Kenya, Lesotho, Namibia, Zambia and Zimbabwe . These weather events have heavy economic and social consequences: food insecurity, migrations, inflationary trends, budgetary tension, electricity shortages and reduced trade balances. The Idai and Kenneth cyclones affected millions of people in Mozambique and other Southern African countries in March and April, causing over $2 billion in damage. They also weakened economic activity by affecting the functioning of major ports. In the Sahel , security problems worsened, with the main targets being Burkina Faso, Mali and Niger . Insecurity had considerable budgetary repercussions in these three countries, where it took the form of lost revenues and increased expenses for the army and security. These expenses doubled in 2019, representing around 4% of GDP and absorbing 20% of budgetary revenue. OUTLOOK FOR 2020 The International Monetary Fund projections of January 2020 counted on a shaky resumption of global growth at 3.3% , driven primarily by a rebound in the growth of a few emerging and

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UNIVERSAL REGISTRATION DOCUMENT 2019

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