African Economic Outlook 2021 Recommends Regional and Multilateral Cooperation for Recovery
The African Development Bank (AfDB) has published the African Economic Outlook for 2021. After a year, which saw Africa hit by the worst economic recession in more than half a century, the report focusses on the impacts of debt resolution, governance and growth on the road ahead for the continent. In charting a recovery course from the pandemic, the AfDB’s analysis points out that the impacts of the pandemic have varied across economies – but that all have seen a weakening of their macroeconomic fundamentals and that progress in poverty reduction could be reversed by the effects of COVID-19. According to the report, the pandemic has pushed 30 million African’s into extreme poverty and another 39 million could follow in 2021.
Real GDP in Africa declined by 2.1 % in 2020 but is expected to grow again by 3.4% in 2021. The fall in commodity prices affected mostly resource intensive countries, whereas all economies saw a decrease in foreign direct investments and tourism. The pandemic has caused a surge in public financial needs as governments have had to mitigate socio-economic consequences while dealing with a downturn in economic activities and lower government revenues. As a result, Africa’s debt trajectory is projected to accelerate quickly. Consequently, the pandemic weakened macroeconomic fundamentals as fiscal deficits have doubled and financial inflows shrank.
The report suggests African countries can build economic resilience by implementing structural reforms that focus on the development of human capital, promote jobs in high-productivity sectors, advance digitalisation and intensify improvements of the investment climate. Additional policy recommendations include continued resource provision for health care systems to cope with the virus, strengthening macroeconomic stability and improving market flexibility to secure future growth. Countercyclical easy monetary policy and fiscal stimulus packages are expected to support the continent’s economic recovery.
AfDB’s 2021 outlook underlines the benefits of strengthening regional and multinational cooperation on the continent. Cooperation is imperative to fight the spreading of COVID-19. The report urges African countries to work together to secure the availability, storage and distribution of vaccines against the virus. Furthermore, solidarity is called for in order to provide financial support to those African countries experiencing liquidity or debt challenges. By taking these measures the AfDB anticipates a shared and sustainable recovery for Africa.