Africa’s economic growth could rebound in 2021, provided that governments manage the COVID-19 infection rate well, forecasts from the African Development Bank (AfDB) have revealed.
In a comprehensive socio-economic assessment of the pandemic’s impact, the AfDB said growth was now projected to rebound to 3% in 2021 from -3.4% in the worst-case scenario for 2020. The predictions are contained in a supplement to the Bank’s African Economic Outlook, which was released on 30 January. At the time, Africa’s growth was forecast at 3.9% in 2020 and 4.1% in 2021.
The supplement cautioned that the growth outlook for 2021 and beyond would depend largely on African governments’ effectiveness in flattening the curve of the outbreak and policies to reopen economies.
“To reopen economies, policymakers needed 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,” Charles Leyeka Lufumpa, Acting Chief Economist and Vice President for Economic Governance and Knowledge Management, at the AfDB, said
“Economic activities can be restarted incrementally on the basis of the transmission risks of different sectors,” Mr. Lufumpa added.
The supplement 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 to extreme climate events.
Under projected scenarios for contraction of growth, Africa could lose between $145.5 billion and $189.7 billion of GDP in 2020, according to the publication.
“The African Economic Outlook 2020 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. 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 at the verge of disappearing. Policymakers need to act fast to alleviate the impact of the crisis on vulnerable groups through well-targeted social safety net measures.” Hanan Morsy, Director of the Macroeconomic Policy, Forecasting and Research Department at the African Development Bank said.
The report called for urgent policy interventions to mitigate the impact of the pandemic: The response according to the report must be well-sequenced and multipronged, involving a public health response to contain the spread of the virus and minimize 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.