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Explainer: Why Sub-Saharan Africa’s economy will remain subdued – World Bank

Crippling inflation and insecurity: How Nigeria’s economy is failing its people

Anticipated slowed growth output in the Sub-Saharan Africa region for 2022, would mirror several new headwinds, including the slowdown in the global economy, lingering effects of the coronavirus pandemic, supply disruptions, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, and climate shocks.

These challenges are compounded by Russia’s invasion of Ukraine, which has led to increasing international prices on commodities, particularly food staples, fertilizers, oil and gas.

As global inflationary pressures increase, African economies are also faced with the likelihood that advanced economies will withdraw the policy stimulus deployed at the start of the pandemic.

Growth in Sub-Saharan Africa is now projected to decelerate from 4% to 3.6% in 2022, and estimated at 3.9% and 4.2% in 2023 and 2024 respectively.

These views are contained in the World Bank’s latest Africa’s Pulse – the bank’s biannual analysis of the near-term regional macroeconomic outlook.

Since emerging from its first recession in 25 years, economic growth in Sub-Saharan Africa is estimated at 4% in 2021, up by 0.7 percentage point from the October 2021 projections, and up from -2.0% in 2020.

However, growth recovery in the region slowed in the second half of 2021 due to the impact of the Delta COVID-19 variant, elevated debt levels in many countries, lingering supply bottlenecks, the plateauing of metal and mineral prices, rising inflation and tightening financial conditions.

Here are the top five highlights from the Africa Pulse – April 2022 issue:

1. Economic Outlook
Growth in Sub-Saharan Africa is projected to decelerate from 4% to 3.6% in 2022, and estimated at 3.9% or 4.2% in 2023 and 2024 respectively. The growth deceleration in 2022 reflects several short-term headwinds, the slowdown in the global economy, lingering effects of the coronavirus pandemic, elevated inflation, rising financial risks owing to high public debts reaching unsustainable levels, continued supply disruptions, and the war in Ukraine.

Of the region’s three largest economies, South Africa’s growth is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints, while Angola and Nigeria are projected to continue with the momentum of 2021, up by 2.7 and 0.2 percentage points, respectively, thanks partly to elevated oil prices and good performance of the non-oil sector.

2. COVID-19 Recent Developments
After two years of the pandemic crisis, Sub-Saharan Africa seems to have avoided the catastrophic health scenario predicted by experts, although limited testing capacity may cause an underestimation of the spread of COVID-19.

Around eight million cases of COVID-19 and more than 169,000 deaths were registered, mostly in Eastern and Southern Africa subregion, compared to early predictions that as many as 70 million Africans would be infected by June 2020 and more than three million deaths.

The number of fatalities, hospitalizations, and intensive care unit admissions have remained low on the continent throughout the recent Omicron wave of the pandemic, suggesting a potential end to the emergency phase of the pandemic. However, it is important to continue surveillance of the pandemic as new variants may arise, and the long-term effects of COVID-19 are being assessed.

3. COVID-19 Vaccine Rollout
Sub-Saharan Africa has been disproportionately affected by the inadequate vaccine rollout of coronavirus vaccines, and vaccine hesitancy and logistical challenges have contributed to low vaccine rates.

As at mid-February 2022, the continent had received nearly 669 million doses, nearly 6% of all vaccines, and administered 405 million. According to the African Centers for Disease Control, nearly 10% of the population of SSA is fully vaccinated, compared to 64% in the United States, and 85% in Great Britain.

Only eight countries in SSA exceeded the World Health Organization target of 40% of the population with a first dose of the vaccine by end-2021, and the probability of most countries reaching the 70% target by mid-2022 is very small. As access to vaccines improves, enhancing the logistics associated with getting doses into arms and overcoming vaccine hesitancy among the population are critical.

4. Implications of Ukraine-Russia Conflict for Sub-Saharan Africa
As the conflict in Ukraine continues, it is likely to affect Sub-Saharan economies through a number of direct and indirect channels associated with foreign trade and persistently high commodity prices on food fuel and headline inflation, tightening global financial conditions, and smaller flows of foreign financing into the region.

Given the sources of growth in the region and the nature of economic linkages with Russia and Ukraine, the war in Ukraine might have a marginal impact on economic growth and overall poverty—as it is affecting mostly the urban poor and vulnerable people living just above the poverty line.

Read also: Six forces pulling down Nigeria’s economy

However, its largest impact is on the increasing likelihood of civil strife as a result of food- and energy-fueled inflation amid an environment of heightened political instability.

Despite the low exposure to overall trade with Russia and Ukraine, some countries are highly exposed to the price of cereals, and more specifically wheat, edible oils especially sunflower seed oil, and fertilizers. Although all households will be affected by rising food inflation, poorer households of countries with high shares of national food expenditure will suffer most.

5. Looking Ahead: Strengthening Social Protection in Africa
Sub-Saharan Africa has seen a remarkable expansion in access to social safety net programs over the past two decades. The expansion of social safety accelerated during and in the aftermath of the global food, fuel, and financial crises of the 2000s.

Just prior to the COVID-19 pandemic, 45 countries in Sub-Saharan Africa—three times as many as those at the end of the 1990s—had introduced social safety net programs to tackle chronic poverty by increasing consumption among poor and vulnerable people.

There is strong evidence on the positive impacts and cost-effectiveness of social protection for poverty reduction, human capital formation, job creation, resilience building, and female empowerment. At the same time, the recent pandemic experience has also demonstrated the critical role social protection plays in responding to covariate shocks such as those resulting from epidemics, climate change and natural disasters, or conflict.

Social protection programs should continue building the resilience of poor and vulnerable households by supporting them in investing in productive assets and human capital. Choosing the right mix of social protection instruments (from cash transfers to public works to productive economic inclusion measures) will be paramount.

Such tools can protect and enhance households’ education, nutrition, and health, while allowing communities to make better use of their natural resources and promoting investments in productive assets for income-generating activities.

The COVID-19 experience reinforces the urgency of building on the existing social protection platforms toward achieving greater resilience, more opportunities, and broader equity.

“As African countries face continued uncertainty, supply disruptions and soaring food and fertilizer prices, trade policy can potentially play a key role by ensuring the free flow of food across borders throughout the region.

Amid limited fiscal space, policymakers must look to innovative solutions such as reducing or waving import duties on staple foods temporarily to provide relief to their citizens,” Albert Zeufack, World Bank Chief Economist for the Africa stated.