Africa will experience a severe economic downturn in 2021 if robust measures are not taken, the United Nations has warned.
Though not badly hit by the Covid-19 pandemic compared to other continents in the world, the 3.4 per cent economic contraction in 2020 will leave Africa helpless due to high external debt levels estimated at 64.7 per cent of Africa’s GDP and low internal consumption.
Speaking during a webinar on the World Economic Situation Prospects 2021, UNECA’s Director for Macroeconomics and Governance Division, Bartholomew Amah painted the picture of an Africa that can retake off if Africans lay groundworks for ‘‘strong inclusive development’’, policy actions in technology adoption, climate resilience and domestic mobilisation.
In a press release issued by the UN Department of Global Communications on the World Economic Situation Prospects 2021 today, African economies have during this crisis period ‘‘elevated public debt’’ yet a ‘‘meagre growth prospects mean less capacity to sustain debt levels’’.
Sizing up the recovery prospects for Africa so far, giant African economies are still experiencing a negative balance growth rate. In South Africa, GDP is projected at 3.3 per cent growth in 2021 from a 7.7 contraction in 2020. Nigeria is also wallowing at a 3.5 contraction in 2020 with a projection expansion of 1.2 per cent GDP in 2021.
The economies are generally choking in ‘‘inflationary pressure, tight foreign exchange liquidity and subdued domestic demand’’, the release states.
Looking up to some African countries like Egypt where recovery is rapid, it may lend some inspiration to struggling African economies. In Egypt, GDP is estimated to have grown by 0.2 per cent in 2020 and in 2021, it is projected at 5.4 per cent. This rapid positive turn, UN World Economic Situation and Prospects Report 2021 credits it to a strong domestic demand facilitated by ‘‘the absence of severe balance-of-payments constraints.
More debts for African countries may only make worse the economic situation of the concerned countries.
To turn the tides, the leadership in Africa is challenged to get more intentional, be decisive to redress the economic downturn. ‘‘As countries will emerge from the crisis with higher level of debts, a careful rebalancing of policy priorities will be required to build resilience and boost productivity’’, Chief of the Global Economic Monitoring Branch at the UN Development of Economic and Social Affairs, Hamid Rashid cautions.
Partnering with PIMCO, an asset management corporation on March 23, UNECA has encouraged African governments to increase sovereign bonds which should be obtained at lower costs.
While seeking international aid, exploring the potentials of the African Continental Free Trade Area is also a possible bail out for African economy revival as this would boost trade, charge up creativity and innovation, and bring about a huge leap in the African market.