GDP growth in sub-Saharan Africa this year is ‘worst on record’

The COVID-19 pandemic represents an unprecedented health and economic crisis for sub-Saharan Africa, the Washington DC-based International Monetary Fund (IMF) has warned.

Within months, the spread of the virus has jeopardised years of development and decades-long gains against poverty in the region, while threatening the lives and livelihoods of millions of people, it says.

GDP growth sinks to -3% for 2020

In the latest Regional Economic Outlook, the organisation projects -3% growth in sub-Saharan Africa’s GDP in 2020, representing the worst outcome on record for the region. The drop will be even larger for economies dependent on tourism and commodity exports.

But, on a more positive note, growth in the region should rebound modestly in 2021 to 3.1%. However, for many countries a return to 2019 levels won’t occur until 2022-24.

“Countries in the region acted swiftly to protect their people from the worst of the crisis, but lockdown measures came with high economic and social costs. Policymakers in sub-Saharan Africa now face the added challenge of rekindling their economies with fewer resources and more difficult choices,” says Abebe Aemro Selassie, Director of the African Department at the IMF in a blog post published on Thursday.

Uncertainty at pandemic’s outlook

He adds: “Even with limited funds, policymakers acted swiftly with what they had.”

Selassie warns that even as the region starts to looks towards the future, uncertainty over the way that the pandemic will continue to unfold will loom over the possibility of an enduring economic recovery.

The top priority, he believes, should be saving lives and protecting livelihoods through health spending, as well as income and liquidity support for households and businesses.

SSA countries had less fiscal space

“However, countries in the region entered the crisis with significantly less fiscal space than they had prior to the global financial crisis of 2008-09. COVID-19 related fiscal support in sub-Saharan Africa has averaged 3% of GDP – markedly less than what has been spent in other regions of the world,” Selassie observes.

“Advanced economies have had the space to do ‘whatever it takes’. In sub-Saharan Africa no such luxury exists, as countries struggle to do ‘whatever is possible’ with their scarce resources.”

The IMF says fiscal policies needed to boost the economy will have to be balanced against debt sustainability, which is already a daunting challenge for many countries in the region.

Policy must support region’s growth

The need to support growth through monetary policy will need to be matched against maintaining external stability and longer-term credibility. Financial regulation and supervision measures are needed to address crisis-affected banks and firms, but should not compromise longer-term growth.

While the IMF has provided around $16-billion in financing this year to 33 countries in sub-Saharan Africa, more help is needed.

“[The region] faces additional financing needs of $890-billion through to 2023,” Selassie says.

A $290-billion gap in SSA financing

“Private financial flows are expected to fill less than half of that need, while current commitments from international financial institutions and bilateral donors will cover only one-quarter of the need.

“Under that scenario, the region still faces a projected financing gap of $290-billion through to 2023.”

He adds: “No country should have to choose between paying their debt or providing food and medicine for their people. To prevent the loss of decades-worth of development gains, the region will need access to more grants, concessional credit and debt relief.”