The African Development Bank (AfDB) has launched a report that shows Africa is expected to recover from the economic recess caused by the global COVID-19 pandemic. The bank predicts that the continent is able to reach a 3.4% growth in 2021, according to its annual African Economic Outlook report.
Numerous sources of income for many Africans were affected since the outbreak of the pandemic. Tourism dependent, oil exporting and other resource intensive economies are the hardest, further deepening inequality in the population.
The African Economic Outlook report provides headline numbers on Africa’s economic performance and outlook. This year’s theme From Debt Resolution to Growth: The Road Ahead for Africa, highlights the impact of COVID-19 and government debt, offering mitigating measures to governments and policy makers.
An estimated 39 million Africans are at risk of extreme poverty this year, following about 30 million in the same position last year, as a result of the pandemic. The report found that populations with lower levels of education, few assets, and working in informal jobs are the most affected, with a need for intervention.
Presenting the report during a virtual launch ceremony, AfDB Vice President and Chief Economist, Rabah Arezki, said, “Africa’s predicted growth could be subject to major downside risks arising from both external and domestic factors. The cost of inaction will be large.”
According to the report, government spending across Africa the continent skyrocketed as countries strived to support their people through the pandemic last year.
However, recent debt restructuring experiences in Africa have been costly and lengthy. This has been attributed to information asymmetries, creditor coordination problems, and the use of more complicated debt instruments.
On COVID-19 response, the AfDB reacted swiftly by putting in place a crisis response facility to financially support countries in mitigating the effects of the pandemic.
The report has highlighted recommendations for a policy approach to addressing the pandemic, including
- Supporting the health sector with resources for health care systems to cope with the virus and other preventable diseases.
- Monetary and fiscal support to underpin economic recovery.
- Expanding social safety nets and making growth more equitable.
- Minimizing the long-term implications of the pandemic on human capital accumulation by opening schools.
- Scaling up active labor market policies through digitalization, industrialization, and diversification.
Hannan Morsy, Director of AfDB’s Macroeconomic Policy, Forecasting and Research Department, said, “We have a once-in-a-century opportunity at building forward better, more equitable, more sustainable and above all more resilient. Prompt and bold measures are needed to make it happen, the report highlights the required actions.”