Africa’s economic growth could rebound by 3% in 2021, provided that governments manage the Covid-19 infection rate well, the African Development Bank (AfDB) said on July 7.
In a comprehensive socioeconomic assessment of the pandemic’s impact, the bank said growth was now projected to rebound to 3% in 2021 from a 3.4% contraction in the worst-case scenario for this year.
The predictions are contained in a supplement to the AfDB’s 'African Economic Outlook', which was released on January 30.
At the time, Africa’s growth was forecast at 3.9% for this year and 4.1% in 2021.
However, the supplement cautioned that the growth outlook for 2021 and beyond would depend largely on African governments’ effectiveness in flattening the curve of the Covid-19 outbreak, as well as on the policies adopted to reopen the economy.
AfDB economic governance and knowledge management acting chief economist and VP Charles Leyeka Lufumpa said that, in order to reopen economies, “policymakers need to follow a phased and incremental approach that carefully evaluates the trade-offs between restarting economic activity too quickly and safeguarding the health of the population”.
Economic activities can be restarted incrementally on the basis of the transmission risks of different sectors, he said.
Additionally, the spread of the virus in Africa depends largely on the preparedness of countries to isolate and treat infected patients, the supplement stated, noting that only 21 of 54 African countries are “clinically prepared to deal with epidemics”.
Central Bank of Kenya’s former governor and African Economic Research Consortium executive director Njuguna Ndung’u described the 'African Economic Outlook 2020' supplement as “a very important and useful policy tool for African countries who actually need it at this time”.
According to Ndung’u, the report will be useful “now and in the future” as it gives African countries short-, medium- and long-term strategies to consider.
“Crises like Covid-19 present a good opportunity for innovative reforms,” he stressed.
The supplement further noted that the curve of the pandemic in Africa was “flattening gradually”; however, Covid-19 “remains a serious threat to lives and livelihoods, given weak healthcare systems and limited social protection”.
The continent also remains vulnerable to other regional threats, such as the locust swarms that have struck East Africa, as well as extreme climate events, the supplement said.
Under projected scenarios for an economic contraction, Africa could lose between $145.5-billion and $189.7-billion of gross domestic product (GDP), according to the publication.
AfDB macroeconomic policy, forecasting and research department director Hanan Morsy said the supplement “shows that, for the first time in the last half-century, Africa would be facing an economic recession as a fallout of the Covid-19 pandemic”.
Morsy added that this would affect the gains achieved in poverty reduction as an estimated 49-million Africans could be pushed into poverty, with about 30-million jobs on the verge of being lost.
“Policymakers need to act fast to alleviate the impact of the crisis on vulnerable groups through well targeted social safety net measures.”
It is for this reason that the report called for urgent policy interventions to mitigate the impact of the pandemic, stating that “across Africa, the response must be well-sequenced and multipronged, involving a public health response to contain the spread of the virus and minimise fatalities, a monetary policy response to ease liquidity constraints and solvency risks, and a fiscal response to cushion the economic impacts of the pandemic on livelihoods and to assist businesses”.
Other proposed interventions included labour market policies to protect workers and their jobs, and structural policies to enable African economies to rebuild and enhance their resilience to future shocks.
Labour market policies to protect workers and their jobs, and structural policies to enable African economies to rebuild and enhance their resilience to future shocks were also included as proposed interventions.