Africa is expected to recover from its worst recession in half a century and reach 3.4 percent growth in 2021, the African Development Bank has said in its 2021 African Economic Outlook report, launched on Friday.
The bank’s report comes despite the challenging backdrop of a global pandemic and external economic shocks,
The outbreak of the novel coronavirus in December 2019 has taken a massive toll on Africa, hitting tourism-dependent economies, oil-exporting economies and other-resource intensive economies the hardest, as well as deepening inequality.
A statement signed by Amba Mpoke-Bigg, Communication and External Relations Department, African Development Bank noted that the report highlights the impact of Covid-19 and government debt, while offering mitigating measures to governments and policy makers.
The African Economic Outlook, published annually since 2003, provides headline numbers on Africa’s economic performance and outlook. This year’s theme “From Debt Resolution to Growth: The Road Ahead for Africa”.
“The continent-wide projected recovery, following a 2.1% contraction in 2020, does not remove the threat of increasing poverty, the report said. An estimated 39 million Africans could possibly slip into extreme poverty this year, following about 30 million who were pushed into extreme poverty in 2020 as a result of the pandemic. The report finds that populations with lower levels of education, few assets, and working in informal jobs are the most affected and must be protected,” the statement read.
Presenting the report during a virtual launch ceremony, African Development Bank Vice President and Chief Economist Rabah Arezki cautioned that Africa’s predicted growth could be subject to major downside risks arising from both external and domestic factors. He however cautioned that “the cost of inaction will be large”.
The report stated that government’s spendings across Africa skyrocketed in 2020 as countries strived to support their populations through the pandemic.
The spendings according to the report “has had a direct negative impact on budgetary balances and debt burdens, with the average debt-to-GDP ratio for Africa expected to climb by 10 to 15 percentage points in the short to medium term, fueled by the surge in government spending and the contraction of fiscal revenues as a result of Covid–19.
“This will result in fast-paced debt accumulation in the near to medium term. Although the average debt to-GDP ratio had stabilized around 60 percent of GDP, recent debt restructuring experiences in Africa have been costly and lengthy because information asymmetries, creditor coordination problems, and the use of more complicated debt instruments, the report said.
By Abel Ejikeme