| World Bank IMF and Dev Agencies |    1965 VIEWS  |
| World Bank IMF and Dev Agencies | |
| 1965 VIEWS | |
 |
Thursday,
October 22, 2020 / 03:03 PM / By IMF / Header Image Credit: IMF
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".
Download Here - Regional Economic Outlook October 2020
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