The International Monetary Fund has projected economic activity in sub-Saharan Africa to recover by 3.1 per cent in 2021 after declining by 3.0 per cent in 2020.
Abebe Selassie, Director of IMF’s African Department said on Thursday at the launch of the ‘Regional Economic Outlook for Sub-Saharan Africa: A Difficult Road to Recovery.’
Selassie, while dissecting the report, said some of the region’s largest economies such as Angola, Nigeria, South Africa, real Gross Domestic Product would not return to pre-crisis levels until 2023 or 2024.
He noted that Nigeria’s economy would contract by –4.3 per cent in 2020 due to low oil prices, reduced production under the Organisation of the Petroleum Exporting Countries and other major oil producers’ agreement, and declining domestic demand from the COVID-19 lockdown.
But, he said, growth was projected to recover to only 1.7 per cent in 2021, responding to firmer oil prices and increasing oil production.
In South Africa, he said growth would contract by –8.0 per cent in 2020, driven mainly by the impact of containment measures.
“Output will recover modestly during 2021, growing by 3.0 per cent, and will maintain momentum thereafter as business confidence responds to growth-enhancing reforms,” he said.
“Sub-Saharan Africa is contending with an unprecedented health and economic crisis. In just a few months, this crisis has jeopardised years of hard-won region’s development gains and upended the lives and livelihoods of millions.
“The onset of the pandemic was delayed in sub-Saharan Africa, and infection rates have been relatively low compared to other parts of the world.
“However, the resurgence of new cases in many advanced economies and the specter of repeated outbreaks across the region suggest that the pandemic will likely remain a very real concern for some time to come,” Selassie explained further.
Pointing to a number of policy priorities, he said, “Looking forward, regional growth is forecast at 3.1 per cent in 2021. This is a smaller expansion than expected in much of the rest of the world, partly reflecting sub-Saharan Africa’s relatively limited policy space within which to sustain a fiscal expansion.
“Key drivers of next year’s growth will include an improvement in exports and commodity prices as the world economy recovers along with a recovery in both private consumption and investment,” the IMF director noted.
He stressed that both fiscal and monetary policy would have to balance the need to boost the economy against the need for debt sustainability, external stability and longer-term credibility.
According to him, financial regulations and supervisions will have to help crisis-affected banks and firms without compromising the financial system’s ability to support longer-term growth.
He said, “These efforts must also be balanced against the need to maintain social stability while simultaneously preparing the ground for sustained and inclusive growth over the long term.
“Navigating such a complex policy challenge will not be easy and will require continued external support.
“Indeed, without significant assistance, many countries will struggle to simply maintain macroeconomic stability while meeting the basic needs of their population.”
He disclosed that the IMF had disbursed about $17bn so far, which is about 12 times more than what it typically disbursed each year. However, he feared the region faced significant financing gaps.
He said also that if private financial inflows remained below their pre-crisis levels, sub-Saharan Africa could face a gap in the order of $290bn over 2020 to 2023.
“This is important as a higher financing gap could force countries to adopt a more abrupt fiscal adjustment, which in turn would result in a weaker recovery.
“Countries must also play their part; governance reforms will not only improve trust in the rule of law and improve business conditions but also encourage external support,” he said.
