Regional Economic Outlook - Sub-Saharan Africa: One Planet, Two Worlds, Three Stories


Thursday, October 21, 2021 / 6:00 PM / by IMF/ Header Image Credit: IMF

  • Sub-Saharan Africa is projected to grow by 3.7 percent in 2021 and 3.8 percent in 2022 - a welcome but relatively modest recovery, suggesting that divergence with the rest of the world will persist over the medium term.
  • The crisis has highlighted key disparities in resilience between countries in sub-Saharan Africa and has also exacerbated preexisting vulnerabilities and inequality within each country. Moreover, food price inflation threatens to jeopardize previous gains in food security and exacerbate social and political instability.
  • As the pandemic continues, authorities face an increasingly difficult policy environment, with rising needs, limited resources, and difficult tradeoffs. Saving lives remains the top priority, but there is also an urgent need for spending prioritization, revenue mobilization, enhanced credibility, and an improved business environment.
  • International solidarity and cooperation remain vital, not only on vaccination but also on addressing other critical global issues, such as climate change.

Sub-Saharan Africa's economy is set to recover in 2021 - a marked improvement over the extraordinary contraction of 2020. This rebound is most welcome and primarily results from a favorable external environment, including a sharp improvement in trade and commodity prices. In addition, improved harvests have lifted agricultural production. Yet, the outlook remains highly uncertain as the recovery depends on the progress in the fight against COVID-19 and is vulnerable to disruptions in global activity and financial markets, the International Monetary Fund (IMF) said in its latest Regional Economic Outlook for Sub-Saharan Africa.

"As sub-Saharan Africa navigates through a persistent pandemic with repeated waves of infection, a return to normal will be far from easy," stressed Abebe Aemro Selassie, Director of the IMF's African Department. "In the absence of vaccines, lockdowns and other containment measures have been the only option for containing the virus.

"At 3.7 percent this year, the recovery in sub-Saharan Africa will be the slowest in the world-as advanced markets grow by more than 5 percent, while other emerging markets and developing countries grow by more than 6 percent. This mismatch reflects sub-Saharan Africa's slow vaccine rollout and stark differences in policy space.

"Real per capita income is expected to remain close to 5½ percent below precrisis trends, with permanent real output losses ranging between -21 percent and -2 percent. The non-resource-intensive countries are growing at a much faster rate than resource-rich countries-a pattern that precedes the crisis and has been amplified by recent events, highlighting fundamental differences in resilience. Non-resource-intensive countries have a more diverse economic structure, which helps them adjust and recover faster. Commodity price increases have also helped some countries, but these windfall gains are often volatile and cannot substitute more enduring sources of growth. Furthermore, differences in fiscal space also help to explain cross-country differences in the current pace of recovery.

"Widening gaps between countries have been accompanied by growing divergence within countries, as the pandemic has had a particularly harsh impact on the region's most vulnerable. With about 30 million people thrown into extreme poverty, the crisis has worsened inequality not only across income groups, but also across subnational geographic regions, which may add to the risk of social tension and political instability. In this context, rising food price inflation, combined with reduced incomes, is threatening past gains in poverty reduction, health, and food security.

"Furthermore, increasing debt vulnerabilities remain a source of concern, and many governments will have to undertake fiscal consolidation. Overall, public debt is predicted to decline slightly in 2021 to 56.6 percent of GDP but remains high compared to a pre-pandemic level of 50.4 percent of GDP. Half of sub-Saharan Africa's low-income countries are either in or at high risk of debt distress. And more countries may find themselves under future pressure as debt-service payments account for an increasing share of government resources.

Against this backdrop, Mr. Selassie pointed to a number of policy priorities. "The difficult policy environment that authorities faced before the crisis has been made more demanding by the crisis. Policymakers face three key fiscal challenges: 1) to tackle the region's pressing development spending needs; 2) to contain public debt; and finally, 3) to mobilize tax revenues in circumstances where additional measures are generally unpopular. Meeting these goals has never been easy and entails a difficult balancing act. For most countries, urgent policy priorities include spending prioritization, revenue mobilization, enhanced credibility, and an improved business climate.

"The recent SDR allocation has boosted the region's reserves, easing some of the burden of authorities as they guide their countries' recovery. And rechanneling SDRs from countries with strong external positions to countries with weaker fundamentals could help to bolster the region's resilience.

"On COVID-19, international cooperation on vaccination is critical to address the threat of repeated waves. This would help prevent the divergent recovery paths of sub-Saharan Africa and the rest of the world from hardening and becoming permanent fault lines, which would jeopardize decades of hard-won social and economic progress.

"Looking further ahead, the region's vast potential remains undiminished. But the threat of climate change-and the global process of energy transition-suggest that sub-Saharan Africa may need to adopt a more innovative and greener growth model. This presents both challenges and opportunities, and it underscores the need for bold transformative reforms and continued external funding. Such measures may not be easy, but they are key prerequisites of the long-promised African century.

Download Full PDF Report Here

Proshare Nigeria Pvt. Ltd.


Related News

  1. Afrexim Bank 5th Babacar Ndiaye Lecture to Discuss Tech, African Transformation and AfCFTA
  2. Global Financial Stability Report October 2021: COVID-19, Crypto, and Climate
  3. WEO October 2021 Report: Downside Risks to a Robust Global Recovery
  4. WEO October 2021: Recovery During a Pandemic - Health Concerns, Supply Disruptions
  5. "Let us Change the Narrative on Africa in the United States" AfDB President
  6. Inflation Scares in an Uncharted Recovery
  7. Sub-Saharan Africa Exits Recession in 2021 but Recovery Still Vulnerable
  8. Africa Resilience Forum 2021: Facing the 'Hydra-head Challenges of COVID-19, Conflict and Climate'
  9. AfDB Adopts New Policy to Strengthen Accountability and Support People Affected by its Operations
  10. UN Regional Commissions Launch Policy Brief on Transforming Food Systems
  11. AfDB Approves a $50m Multinational Trade Finance RPA Facility for Standard Chartered Bank
  12. UN Launches the First Regional Online Portal to Bring Together all African Countries with Data
  13. AfDB President Commends Sahara Group's Commitment to Promoting Electricity Access in Africa
  14. IMF SDR: Enough Respite in the Horizon?
  15. OECD: Business as Usual? Forget About That and Prepare for Novel and Impactful Variations on a Theme
  16. IMF Governors Approve a Historic US$650bn SDR Allocation of Special Drawing Rights
  17. For Every Two COVID-19 Deaths, One Child Loses a Caregiver
  18. Better Growth Expectations for 2022 per the IMF
  19. WEO Update, July 2021: Fault Lines Widen in the Global Recovery
  20. Of Roads Less Traveled: Assessing the Potential of Economic Migration to Provide Overseas Jobs
Proshare Nigeria Pvt. Ltd.
Proshare Nigeria Pvt. Ltd.
Related News