Africa’s economy snails behind galloping others

As the global economy rebounds, sub-Saharan Africa will be the world’s slowest growing region in 2021, the International Monetary Fund has projected.

The projection was contained in its latest ‘Regional Economic Outlook: Sub-Saharan Africa,’ the IMF said in a statement on Thursday.

According to the statement that was made available to Financial Street, sub-Saharan Africa risks falling further behind, as the gap between its growth and the rest of the world is expected to widen further over the next five years.

Currently, the region as a whole requires international support to the tune of $425bn in additional external funding needs over the next five years. However, the IMF in its outlook said the observations below show the challenges faced by sub-Saharan Africa.

A growing income gap

The income gap between sub-Saharan Africa and the rest of the world, based on real gross domestic product per capita, is expected to grow wider.

According to projection, sub-Saharan Africa will be the world’s slowest growing region in 2021, growing by 3.4 per cent, buoyed by the global recovery, increased trade, higher commodity prices, and a resumption of capital inflows.

However, the recovery in the region is expected to lag behind the rest of the world with a cumulative per capita GDP growth over the 2020-25 period projected at 3.6 per cent, substantially lower than 14 per cent in the rest of the world.

Limited vaccine access

Expected vaccine deliveries to sub-Saharan Africa by the end of 2021 are below the needed doses to cover 60 per cent of adult population.

As a result, lower access to vaccines, slower vaccine rollout, and potentially high cost of vaccinations are holding back the recovery in the region, against some advanced economies which have secured enough vaccine doses to cover their own populations many times over.

Although, the region accounts for 15 per cent of the global population. As of April 5, 2021, only 0.5 per cent of all administered doses globally were in sub-Saharan African countries.

Extreme poverty spikes

The pandemic has pushed more that 32 million people into extreme poverty, and it is expected to undo years of economic and social progress and leave lasting scars on the region’s economies.

The number of people in the region living in extreme poverty is projected to have increased by more than 32 million in 2020; the number of missed school days is more than four times the level in advanced economies; and employment fell by around 8.5 per cent in 2020.

In terms of livelihoods, per capita income has returned to 2013 levels. Stronger social safety nets are needed to channel support quickly and efficiently to those most in need to prevent permanent scarring.

Fiscal sustainability

The limited fiscal support provided in 2020 will need to be unwound to put debt back on a sustainable footing. To create space to support the recovery, the health of public and private balance sheets needs to be restored.

Countries in the region entered the crisis with elevated debt vulnerabilities and less room to spend. Pandemic-related fiscal packages in the region averaged only 2.6 per cent of GDP in 2020, markedly less than the 7.2 per cent of GDP advanced economies spent.

Yet, public debt increased in the region to more than 66 per cent of GDP (weighted average of 58 per cent) in 2020, the highest level in almost 15 years, owing largely to declining revenues and output.

Thus, 17 countries, representing around one-quarter of the region’s GDP, or 17 percent of the region’s debt stock, are now either at high risk of debt distress or are already in distress.

Private sector balance sheets were also hit hard by the pandemic. Firms’ monthly sales plummeted by 40-80 per cent in 2020 compared to the pre-crisis levels.

Advancing transformative reforms

In the last 10 years, the value of mobile money transactions grew faster in sub-Saharan Africa compared to other regions. Unleashing sub-Saharan Africa’s considerable potential requires bold and transformative reforms.

Every day, more than 90,000 new users in sub-Saharan Africa connect to the internet for the first time. Capitalising on the digital revolution would enhance the region’s resilience and efficiency, expand access to global markets, improve public service delivery, boost transparency and accountability, and foster the creation of new jobs.

Implementing the new African Continental Free Trade Area would not only reduce Africa’s vulnerability to global disruptions, but also boost regional competition, improve productivity, attract foreign investment, and promote food security.

Policymakers will need to create more fiscal space to support reforms by mobilising domestic revenue, enhancing the effectiveness and efficiency of spending, and managing public debt vulnerabilities