- Says counterbalancing forces will keep inflation muted over the medium term as it moderates by 9% in 2021
- Africa’s growth performance will vary across the country-groups and depends on structural characteristics
In its recently released economic outlook for Africa, the African Development Bank (AfDB) has forecast that Nigeria’s GDP will grow by 1.5 per cent in real terms in 2021 and 2.9 per cent in 2022 while the West African region is also projected to grow by 2.8 per cent in real terms in 2021 and 3.9 per cent in 2022 as lockdowns continues to ease and prices of commodity begin to return to normal.
The developmental financial institution in its 2021 African Economic Outlook projected that the continent’s GDP is expected to grow by 3.4 per cent in 2021 after shrinking by 2.1 per cent in 2020 because of the coronavirus pandemic. This recovery, it said, will mark the end of the worst recession in more than half a century and will be underpinned and largely driven by an expected resumption of tourism, a return to normal in commodity price levels and the rollback of the pandemic induced restrictions.
Recall that Africa suffered its worst recession in more than 50 years last year due to the COVID–19 pandemic, as it recorded a declined by 2.1 per cent in its output growth and its GDP per capita was estimated to have contracted by 10 per cent in nominal terms in 2020. Because of the pandemic’s lower-than-expected impact in Africa, the recession around the continent in 2020 was not as severe as the Bank had earlier projected.
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More revelation from the international lender on the economic impact of the pandemic across African countries revealed that tourism-dependent nations will from an 11.5 per cent dip in 2020 to 6.2 per cent real year in 2021 in its projections. Also, it said that oil-exporting economies will record a 3.1 per cent real growth from the 1.5 per cent decline in the prior year; other resource-intensive economies, from a 4.7 per cent decline to grow 3.1 per cent; and non-resource-intensive countries, from a 0.9 per cent decline to grow by 4.1 per cent. Though, the bank opined that the growth performance of the continent will vary across country groups and it also depends on the structural characteristics.
Meanwhile, across the African regions, eastern African is projected by the bank to grow at 3 per cent in real terms in 2021, and 5.6 per cent in 2022. Consequently, the South African region which was worse hit by the pandemic and contracting by 7 per cent last year is projected to grow by 3.2 per cent in 2021 and 2.4 per cent in 2022. While in the Central African region’s real GDP is expected by the AfDB to recover to 3.2 per cent in 2021 and 4 per cent in 2022 and economies in the North Africa region is projected to experience a robust recovery of 4 per cent in 2021 and 6 per cent in 2022.
The bank also stated that debt burdens of various economies are likely to rise by 10 to 15 percentage points in the short to medium term as Africa’s macroeconomic fundamentals have been weakened by the pandemic. The AfDB also projected that as a result of the weakened macroeconomic fundamentals, the exchange rate fluctuations are elevated as well as inflation which has risen unpalatably while the external reserves have continued to experience heavy disruption. However, the rate of inflation on the continent according to the bank is projected to moderate to 9 per cent in 2021 from the 2020 and 2091 projections of 10.4 per cent and 9.8 per cent respectively while counterbalancing forces will keep inflation muted over the medium term.
AfDB identify ways to build resilience and accelerate growth on the continent
Focusing on resilience building and the acceleration of recovery for the continent, the AfDB suggested that the focus of national governments should be on improving its ability to reallocate resources and recover from shock as some highly vulnerable nations have managed to use appropriate policies to boost the economic resilience. Also, governments should increase their capacity to absorb shocks through the identification of the size, development of the financial sector and the concentration of export.
However, the Abidjan-based international financial institution further in its economic outlook highlighted some policy priorities which could help nations accelerate Africa’s transformation into achieving more resilient, inclusive, and sustainability post-pandemic recovery. In its publication, the bank stated that governments should continue supporting r the health sector to consolidate gains in the fight against the pandemic. Secondly, it says the effective use of monetary and fiscal supports to accelerate recovery where policy space remains unavailable. Furthermore, the expansion of social safety nets and making growth more equitable to address the issue of increasing poverty; Address increasing poverty by expanding social safety nets and making growth more equitable; The Scaling up active labour market policies to retool the workforce for the future of work; Intensifying structural transformation through digitalization and economic diversification to build resilience; and fostering regional and multinational cooperation to ensure sustained and widespread recovery across regions and the continent at large.
It also stated that some tailwinds could play on the growth recovery process if:
- Universal access to safe and effective COVID– 19 therapeutics and vaccines occurs and if the vaccine availability permits activity to return to pre-pandemic levels, boosting consumer and business confidence, consumption, and investments.
- The modest fiscal stimulus packages deployed by African governments can be sustained through 2021, so additional aggregate demand could help crowd in private investments and consumption.
- The accelerated digitalization in Africa resulting from pandemic-related containment measures continues to boost the productivity of human and physical capital in the private and public sectors.