Sub Sahara Africa slips into worst recession in 60 years

Sub Sahara Africa slips into worst recession in 60 years

Output for economies in Sub-Sahara Africa collapsed by 2.4% in 2020 due to the COVID-19 pandemic. This was the region’s first economic contraction in a generation and the deepest recession since the 1960s, says the World Bank in its latest bulletin. 

However, the recession was milder than previously projected. The virus spread more slowly than anticipated and agricultural activity was unexpectedly intense in some countries such as Benin, Ethiopia, Kenya, Nigeria.

According to the June 2021 issue of the  Global Economic Prospects Report by the World Bank, growth in the Sub-Sahara region has gradually resumed this year, reflecting positive spillovers from strengthening global economic activity, including higher oil and metal prices.

Some progress has been made at containing COVID-19 outbreaks, especially in Western and Central Africa.

PMI readings for manufacturing and services suggest that activity in these sectors continued to expand in 2021, albeit at still modest rates.

 The pandemic has contributed to a widening of budget deficits and a sharp increase in government debt.

The debt-to-GDP ratio in the region jumped on average eight percentage points to 70% of GDP last year, raising the risk of debt distress in some countries.

The adverse effects of the pandemic, fiscal pressures, and the languid pace of vaccinations have dampened the resumption of growth, particularly in the hospitality and tourism sectors.

Activity in the three largest economies in the region—Angola, Nigeria, and South Africa—has partially recovered after falling by 4.2% in 2020. 

Many industrial and agricultural commodity exporters suffered deep contractions last year from depressed external demand and localized COVID-related disruptions, including Angola, Cabo Verde, Mali and the Democratic Republic of Congo. 

In tourism-reliant countries, international arrivals have been at a near -halt. They are likely to remain anaemic until widescale vaccinations allow for a safe reopening of borders to international travel. 

The worst-hit in this category are Mauritius, Kenya and Seychelles.

The World Bank report says that although conditions have improved in the region, COVID-19 and related control measures have continued to disrupt schooling, damage health, inhibit investment, and weigh on growth.

In countries with policy space, accommodative monetary and fiscal policies, combined with currency depreciation and rising energy and food prices, have fueled inflationary pressures in some.

Remittances to the region—a lifeline for household consumption—have held up better than expected, partly reflecting a shift from informal or traditional non-digital cash payments to cheaper digital transfers and improving job opportunities.

Growth is expected to resume in Sub Sahara Africa this year, reaching 2.8% and firm to 3.3% in 2022. This pickup is underpinned by stronger external demand from the region’s trading partners—mainly China and the United States—higher commodity prices and better containment of COVID-19.

Despite the projected rebound, Sub Sahara Africa will have the second-slowest growth this year among emerging market and developing economy (EMDE) regions.

 Although some countries have secured vaccine doses through the COVAX facility, procurement and logistical challenges are envisioned to delay the already slow pace of vaccination in the region.

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