HomeRegional NewsAfricaSub-Saharan African economies lagging behind rest of world

Sub-Saharan African economies lagging behind rest of world

The IMF’s latest regional outlook report for Sub-Saharan Africa suggests a positive economic growth trajectory over the next year, but one which lags behind other regions in the world.

The International Monetary Fund’s Regional Economic Outlook for Sub-Saharan Africa estimates the region’s economy will grow by 3.7% in 2021 and 3.8% in 2022. This recovery will be supported by favourable external conditions on trade and commodity prices. Many countries in the region should benefit from improved harvest and agricultural production.

This recovery follows a sharp contraction in 2020, but represents the slowest growth relative to the world’s other regions. While advanced economies are projected to return to their pre-crisis path by 2023, the pandemics seem to have lowered the path of real GDP in Sub-Saharan Africa. This suggests a loss of real per capita output of close to 5.5% relative to the pre-crisis path.

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This divergence reflects two factors influencing the Sub-Saharan economic space – the slow vaccine rollout and stark differences in the policy space.

The world’s population is expected to grow by about 2 billion people over the next three decades, with half of that increase coming from Sub-Saharan Africa. This represents a huge opportunity because the growing pool of human talent and ingenuity will have an effect on the economic, social and political trajectory of the world.

Slow vaccine rollout hampers developing nations’ economic progress

Speaking at a press briefing on the release of the Regional Economic Outlook, Abebe Aemro Selassie, Director: Africa Department at the International Monetary Fund, said the global COVID-19 pandemic has highlighted the deeply interconnected nature of the planet. Global challenges, such as ending the pandemic or addressing climate change, require global solutions. “The path to addressing both of these major challenges on a global scale runs directly through Sub-Saharan Africa,” said Selassie.

He reflected on how the global health crisis has revealed the existence of two different realities – advanced economies are recovering, fueled by plentiful vaccine supply while vulnerable emerging and developed economies with a slower vaccine rollout face slowing progress.

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Sub-Saharan Africa has been hit by a third COVID-19 infection wave and there is little reason to believe there won’t be repeated waves going forward.

“Although recent lockdowns have been less severe than those of early stages of the pandemic, their cumulative impact on economic activity and confidence remains significant,” said Selassie.

Policies across Sub-Saharan Africa need to be improved

He highlighted three areas that need addressing, starting with inequality. “The pandemic has thrown some 30 million people back into extreme poverty and has worsened inequality not only across income groups but also within subnational geographic regions.”

These conditions will be exacerbated by a rise in food and fuel prices. Lower incomes and rising food prices will further erode past gains in poverty reduction, health outcomes and improved food security.

The report suggests policies need to be focused on addressing this challenge. “Left unaddressed it will be a further source of misery to people and indeed rising insecurity,” said Selassie.

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Secondly, policymakers in Sub-Saharan Africa navigate an increasingly difficult and complex policy environment. Three specific pressures they face are:

  • Pressing spending needs to address the social, human capital and infrastructure needs
  • Limited borrowing capacity given already high public debt levels; and
  • Time consuming and politically difficult nature of mobilising tax revenues.

“How deftly countries navigate this trilemma will have a huge bearing on the macroeconomic wellbeing of countries and growth prospects,” said Selassie.

Thirdly, divergent health, poverty and economic outcomes point to the critical importance of international solidarity and support. Specifically, when it comes to the COVID-19 pandemic, the threat of new variants highlights the need for a global response that focuses on unvaccinated people in Africa.

The world needs to help

The IMF has proposed a plan to vaccinate at least 40% of the total population of all countries by the end of 2021 and 70% by the first half of 2022. “For Sub-Saharan Africa, these goals are ambitions and require a marked change in strategy by both advance economies and Sub-Saharan African countries.”

The report suggests significant external concessional financing is needed to limit and eventually close the divergent recovery paths of Sub-Saharan Africa and the rest of the world.

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“Without this financing, the divergent recovery paths could harden into permanent fault lines, jeopardising decades of hard-won progress. International organisations and donors have mobilised swiftly to support the region over the last year. But much more multilateral action still is critical considering the region’s elevated financing needs.

“Action is also needed to ensure that available mechanisms for debt restructuring are nimble and effective to avoid the burden of adjustment falling on the poor and facilitate quicker economic recovery,” said Selassie.

The IMF’s Regional Economic Outlook for Sub-Saharan Africa is available online.

Theresa Smith
Theresa Smith is a Content Specialist for ESI Africa.