Via IMF (Den Internationale Valutafond)

Sub-Saharan Africa: A Difficult Road to Recovery







October 22, 2020











  • The regional outlook is broadly unchanged since the June 2020 Regional Economic Outlook Update. In 2020, economic activity is expected to contract by 3.0 percent, but then recover by 3.1 percent in 2021. This represents a drop in real per capita income of 4.6 percent over 2020-21, which is larger than in other regions.
  • This outlook is subject to significant downside risks, particularly regarding the path of the pandemic, the resilience of the region’s health systems, and the availability of external financing.
  • Policy makers aiming to rekindle their economies have limited resources at their disposal and will face some difficult choices. The region faces a significant financing gap. Without significant additional external financial assistance, many countries will struggle to maintain macroeconomic stability and meet the basic needs of their people.
  • The need for transformative reforms to promote resilience—including revenue mobilization, digitalization, and fostering better transparency and governance—is more urgent than ever.

Washington, DC: With difficult recovery ahead, policy
makers have fewer resources at their disposal as they cautiously lift
restrictions and reopen economies. Transformative reforms are urgently needed for
rekindling resilient growth, which will be difficult without external support,
the International Monetary Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa.

 

“Sub-Saharan Africa is contending with an unprecedented health and
economic crisis,” stressed Abebe Aemro Selassie, Director of the IMF’s African
Department. “In just a few months, this crisis has jeopardized 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.

 

“Nonetheless, amid high economic and social costs, African countries are
now cautiously starting to reopen their economies and are looking for policies
to restart growth. With the imposition of lockdowns, regional activity dropped
sharply during the second quarter of 2020, but with a loosening of containment
measures, higher commodity prices, and easing financial conditions, there have
been some tentative signs of a recovery in the second half of the year.

 

“Overall, the region is projected to contract by 3.0 percent in 2020, the
worst outlook on record. Tourism-dependent economies faced the largest impact,
while commodity exporting countries have also been hit hard. Growth in more
diversified economies will slow significantly, but in many cases will still be
positive in 2020.

 

“Looking forward, regional growth is forecast at 3.1 percent 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 current outlook is subject to greater-than-usual uncertainty with
regard to the persistence of the COVID-19 shock, the availability of external
financial support, and the development of an effective, affordable, and trusted
vaccine.”

 

Against this backdrop, Mr. Selassie pointed to a number of policy
priorities going forward.

 

“Where the pandemic continues to linger, the priority remains to save
lives and protect livelihoods. For countries where the pandemic is under
greater control, limited resources will mean that policy makers aiming to
rekindle their economies will face some difficult choices. Both fiscal and
monetary policy will have to balance the need to boost the economy against the
need for debt sustainability, external stability, and longer-term credibility.
Financial regulation and supervision will have to help crisis-affected banks
and firms, without compromising the financial system’s ability to support
longer-term growth. And 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. In this context, the IMF has moved
swiftly and disbursed about US$17 billion so far in 2020—which is about 12
times more than we typically disburse each year—to help cover a significant
portion of the region’s needs and to catalyze additional support from the
international community.

 

“But looking ahead, sub-Saharan Africa faces significant financing gaps.
If private financial inflows remain below their pre-crisis levels—and even
taking into account existing commitments from international financial
institutions and official bilateral creditors—the sub-Saharan Africa could face
a gap in the order of $290 billion over 2020-23. 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.

 

“Despite the lingering effects of the crisis, the potential of the region
and the resourcefulness of its people remain intact, and tapping this potential
will be vital if the region is to find its way back to a path of sustainable
and inclusive development. In this context, the need for transformative reforms
to promote resilience, lift medium-term growth and create the millions of jobs
needed to absorb new entrants into labor markets is more urgent than ever.
Priority reforms are in the areas of revenue mobilization, digitalization,
trade integration, competition, transparency and governance, and climate-change
mitigation.”

IMF Communications Department
MEDIA RELATIONS

PRESS OFFICER: Gediminas Vilkas

Phone: +1 202 623-7100Email: MEDIA@IMF.org

@IMFSpokesperson








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