SSA – The economic output of economies in Sub-Sahara Africa declined by 2.4% in 2020 due to the COVID-19 pandemic, the region’s first economic contraction in a generation and the deepest recession since the 1960s, latest World Bank reports indicates.
However, the recession was milder than previously projected as the virus spread more slowly than anticipated and agricultural activity was unexpectedly intense in some countries such as Benin, Ethiopia, Kenya, Nigeria.
According to the June 2021 issue of the Global Economic Prospects Reportby the World Bank, growth in the Sub-Sahara region has gradually resumed this year, reflecting positive spill overs from strengthening global economic activity, including higher oil and metal prices.
Performance Management Indicator (PMI) readings for manufacturing and services suggest that activity in these sectors continued to expand in 2021, albeit at still modest rates and the pandemic has contributed to a widening of budget deficits and a sharp increase in government debt.
The debt-to-GDP ratio in the region jumped on average eight percentage points to 70% of GDP last year, raising the risk of debt distress in some countries.
Many industrial and agricultural commodity exporters suffered deep contractions last year from depressed external demand and localized COVID-related disruptions, including Angola, Cabo Verde, Mali and the Democratic Republic of Congo.
In tourism-reliant countries, international arrivals have been at a near -halt. They are likely to remain anaemic until widescale vaccinations allow for a safe reopening of borders to international travel.
The World Bank report says that although conditions have improved in the region, COVID-19 and related control measures have continued to disrupt schooling, damage health, inhibit investment, and weigh on growth.
In countries with policy space, accommodative monetary and fiscal policies, combined with currency depreciation and rising energy and food prices, have fueled inflationary pressures in some.
Remittances to the region, a lifeline for household consumption have held up better than expected, partly reflecting a shift from informal or traditional non-digital cash payments to cheaper digital transfers and improving job opportunities.
Growth is expected to resume in Sub Sahara Africa this year, reaching 2.8% and firm to 3.3% in 2022 and this pickup is underpinned by stronger external demand from the region’s trading partners, mainly China and the United States, higher commodity prices and better containment of COVID-19.
However, World Bank pointed out that this growth remains subject to fairly uncertain factors both internally and externally including the full implementation of immunization campaigns, the easing of political and security tensions in some countries, debt relief for others, the stabilization of inflationary trends, the reduction of food insecurity, the rise in prices of products such as oil and iron, and the return of a relationship of trust conducive to consumption.
Although some countries have secured vaccine doses through the COVAX facility, procurement and logistical challenges are envisioned to delay the already slow pace of vaccination in the region.
Despite the projected growth, per capita income levels in 2022 are expected to be 4% lower on average than in 2019 and the situation will be particularly difficult in fragile or conflict-affected countries, with output forecasts for 2022 down by an average of 5.3% compared to 2019.
IMF also warns that SSA’s economic growth will be the slowest in the world.