04/15/2021 | Press release | Distributed by Public on 04/15/2021 05:44
A sign in Cape Town, South Africa urges people to wear masks in public. The pandemic has slowed sub-Saharan Africa's growth and could undo years of economic and social progress. (photo: heinstirred by Getty Images)
By Abebe Aemro Selassie and Shushanik Hakobyan
IMF African Department
April 15, 2021
The economic cost of the pandemic for sub-Saharan Africa is unprecedented, and the region continues to grapple with the pandemic.
Although the outlook for the region has improved since October 2020, the -1.9 percent contraction in 2020 remains the worst performance on record. Sub-Saharan Africa will be the world's slowest growing region in 2021, and risks falling further behind as the global economy rebounds. Our latest Regional Economic Outlook: Sub-Saharan Africa takes a close look at the issues.
On current forecasts, per capita GDP in many countries is not expected to reach pre-crisis levels until the end of 2025. Limited access to vaccines and the region's lack of fiscal space are expected to weigh on the outlook. As a result, the gap between sub-Saharan Africa's growth and the rest of the world is expected to widen further over the next five years.
To support future growth and transformative reforms, international help will be required to meet the $245 billion in additional external funding needs that sub-Saharan Africa's poorest countries face over the next five years or $425 billion for the region as a whole. The extension of the Group of Twenty debt-service initiative to December 2021 and the new Common Framework on debt can be helpful in this regard. The proposed $650 billion special drawing rights allocation would provide about $23 billion to sub-Saharan African countries to help boost liquidity and fight the pandemic. But meeting these needs will require contributions from all potential sources, including the international financial institutions and private sector, and debt-neutral support from donors.
The crisis is not over anywhere until is over everywhere. A global effort will be required to give sub-Saharan Africa a fair shot at a durable recovery and a prosperous future.
Here are six charts that tell the story:
Within the region, the divergence that existed between resource intensive and non-resource intensive countries will persist. Non-resource dependent countries are forecast to see average per capita incomes rise by 21.6 percent by 2025. Oil exporters, which are some of the more populous countries in the region, will have no gains in per capita income over this period.
The success of the vaccine rollout also depends crucially on the distribution infrastructure (for example, cold chain storage), which many countries in the region lack. At the same time, the cost of vaccinating 60 percent of population could be prohibitively high for some countries, reaching 50 percent of 2018 health expenditures in Democratic Republic of the Congo and The Gambia. Vaccination cost is more than 2 percent of GDP for a quarter of countries in the region. This could double or triple if there is a need for booster shots. The international community could play a crucial role by eliminating restrictions on the dissemination of vaccines or medical equipment, fully funding multilateral facilities such as COVAX, and quickly redistributing excess vaccine doses.
Private sector balance sheets were also hit hard by the pandemic. Firms' monthly sales plummeted by 40-80 percent in 2020 compared to the pre-crisis levels. Between 50 and 80 percent of surveyed households reported income losses at the height of the first wave of the pandemic as containment measures were put in place. The non-performing loan ratio has to date increased only modestly within the region due to the regulatory forbearance measures taken by countries during the crisis.
Every day, more than 90,000 new users in sub-Saharan Africa connect to the internet for the first time. Capitalizing on the digital revolution would enhance sub-Saharan Africa's resilience and efficiency, expand access to global markets, improve public service delivery, boost transparency and accountability, and foster the creation of new jobs.
Every week,economies in sub-Saharan Africa export about $6.5 billion in merchandise goods. But only about one-fifth of those exports are destined for other countries in the region. Implementing the new African Continental Free Trade Area would not only reduce Africa's vulnerability to global disruptions, but also boost regional competition, improve productivity, attract foreign investment, and promote food security.
Every year, 20 million new job seekers enter the labor market in sub-Saharan Africa, one of the region's greatest strengths over the long term. Within the next 10-15 years, nearly one in two new entrants into the global labor force will come from sub-Saharan Africa, and with an increasingly urbanized population, transformative reforms to strengthen social protection systems, promote digitalization, improve transparency and governance, and mitigate climate change would help boost consumption in the region which could also drive the global demand for goods and services. Policymakers will need to create more fiscal space to support these reforms by mobilizing domestic revenue, enhancing the effectiveness and efficiency of spending, and managing public debt vulnerabilities.