African economies to watch in 2021 with Covid, impact of debt – Quartz Africa
Sub-Saharan Africa will experience moderate but positive growth of 2.7% this year, a welcome rebound from the region’s first 25-year recession in 2020, when the region contracted by around -3.7%. %. But 2021 will likely be as difficult for African economies as it is in 2020.
Last year there was a 6.1 percent drop in per capita income in the region, the “deepest contraction on record,” the World Bank says in its latest global outlook. There will be a further decline of 0.2% this year.
Like many observers, the bank fears that despite the first laudable efforts by African governments to lock down their economies in the face of Covid-19, the pandemic has not really started. Several countries are going through a second wave more severe than the first.
These persistent epidemics and the uncertainty they create will hamper economic growth and ultimately set living standards down by a decade, the bank said, reiterating its early pandemic warnings.
One of the many reasons African economies have struggled has been the unprecedented capital outflows needed to help manage their economic bottlenecks even as foreign direct investment has all but disappeared. In 2020, FDI to Africa collapsed by 30-40% and remittances fell 9%, leaving little room for maneuver for African finance ministers.
This is probably why, despite lingering concerns about rising debt levels, the region’s public debt jumped an additional 8 percentage points to around 70 percent of GDP, according to the IMF. The fear now is that increasing interest payment obligations will cause some countries to sacrifice development goals like health and education.
If you’re looking for a few bright spots, there’s the fact that export growth is expected to accelerate this year, alongside the rebound in economic activity in major trading partners like the United States and China. But this growth will not be particularly strong for oil producers and other economies dependent on extraction. The region’s largest economies, Nigeria and South Africa, will experience more timid recoveries, downwardly overweighting the average growth rate of sub-Saharan Africa.
But more diverse economies like Kenya, Cote d’Ivoire and Tanzania will recover better, all things considered. In general, the economic recovery is expected to be slightly stronger among exporters of agricultural products, averaging 4.5% in 2021-2022.
These forecasts are based on the expectation that FDI will increase as uncertainty abates and progress is made towards the full implementation of the African Continental Free Trade Agreement (AfCFTA) alongside progress. other economic and trade reforms underway on the continent.
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