Nigeria, other African states face debt crisis, slow growth

African countries need strong policies and further support from the international community to avert a debt crisis and protracted low growth, says the United Nations (UN).

In a statement issued by the UN Department of Global Communications on Wednesday, the global body warned of the devastating socio-economic impact of COVID-19.

The report was jointly signed by Devi Palanivelu, UN Department of Global Communications; and Helen Rosengren, UN Department of Economic and Social Affairs.

According to the News Agency of Nigeria (NAN), the UN said the impact of the pandemic would be felt for years to come unless smart investments in economic, societal, and climate resilience were made to ensure a robust and sustainable recovery of the global economy.

The UN said despite the relatively few numbers of cases compared to the number of cases in other continents, the COVID-19 pandemic would continue to strongly impact living conditions and development progress in Africa.

It said the crisis was already increasing unemployment, poverty, and inequality, such that most countries were already facing enormous challenges to keep the pandemic under control and mobilize financial resources to support health systems, protect vulnerable groups, and support the recovery.

NAN reported that Nigeria’s Gross Domestic Product (GDP) was projected to expand by 1.5 percent in 2021, after a contraction of 3.5 percent in 2020, according to the report.

Yet, the UN noted that tighter foreign exchange liquidity, mounting inflationary pressures, and subdued domestic demand cloud its medium-term outlook.

In South Africa, GDP is projected to expand by 3.3 percent in 2021, after a contraction of 7.7 percent in 2020.

The UN also projected that a strong and sustained recovery remained uncertain, amid power shortages, elevated public debt, and policy challenges.

Egypt’s GDP was estimated to have grown by 0.2 per cent in 2020; and in 2021.

GDP growth is projected to climb to 5.4 percent, underpinned by a strong recovery of domestic demand and facilitated by the absence of severe balance-of-payments constraints.

Also, after a contraction of 0.5 percent in 2020, the Ethiopian economy is projected to expand by only 2.3 percent in 2021.

The UN noted that while agricultural exports were showing resilience, the tourism sector would remain restrained throughout 2021.

Generally, after a contraction of 3.4 percent in 2020, Africa is projected to achieve a modest recovery, with regional GDP expanding by 3.4 percent in 2021.

However, the UN report said this recovery was predicated on the rise of domestic demand and the pick-up of exports and commodity prices because external financing and high debt levels posed major risks.

The UN said elevated public debt was limiting the capacity to boost spending across the continent.

Also, meagre growth prospects meant less capacity to sustain debt levels, as foreign reserves, remittances and capital flows falter and depreciations constrain the capacity to service foreign currency-denominated debts.

The UN also said that African countries needed further support from the international community and strong national efforts in averting a debt crisis, which would not just cause further economic deterioration, but also force painful fiscal adjustments.

Against such a backdrop, the report warned that social unrest and political tensions may easily escalate, which could, in turn, worsen food insecurity, violence, internal displacement, and migration pressures.

Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, and the lead author of the report, said that Africa was in need of a sustained revival of growth.

“While a focus on the short term is essential, African countries need to lay the groundwork for a strong and inclusive development path in the medium term, which entails the creation of decent jobs at a large scale.

“As countries will emerge from the crisis with higher levels of debt, a careful rebalancing of policy priorities will be required to build resilience and boost productivity.

“This includes unlocking growth opportunities and accelerating technology adoption and bridging digital divides, enhancing climate resilience and boosting domestic revenue mobilization,” Rashid said.

The report also highlighted the need for African countries to prioritize the diffusion of digital technologies; supported by the expansion of affordable and universal digital infrastructure.

It added that an effective framework for the implementation of the African Continental Free Trade Area (AfCFTA) could also become a major tool for promoting intra-African trade, food security, and productivity.

“We are facing the worst health and economic crisis in 90 years. As we mourn the growing death toll, we must remember that the choices we make now will determine our collective future,” said UN Secretary-General António Guterres, who addressed the Davos Agenda on Wednesday.

“Let’s invest in an inclusive and sustainable future driven by smart policies, impactful investments, and a strong and effective multilateral system that places people at the heart of all socio-economic efforts,” Guterres said.

The report, however, underscored that sustained recovery from the pandemic would depend not only on the size of the stimulus measures, and the quick rollout of vaccines, but also on the quality and efficacy of these measures to build resilience against future shocks.

The World Bank said economic growth in Sub-Saharan Africa is expected to rise between 2.3 percent and 3.4 percent in 2021.

It said this in its Africa Pulse, a publication on Africa’s economy titled “The Future of Work in Africa: Emerging Trends in Digital Technology Adoption” released in Washington D. C. on Tuesday.

According to the report, the growth is dependent on the policies adopted by countries and the international community as a second wave of COVID-19 infections was partly dragging down the 2021 growth projections.

It said that while some countries had a significant drop in COVID-19 infections due to containment measures adopted by the government, other countries were facing an upward trend in infections.

It however said that real Gross Domestic Product (GDP) growth for 2022 was estimated at 3.1 percent.

It added that for most countries in the region, the activity would remain well below the pre-COVID-19 projections at the end of 2021, increasing the risk of long-lasting damage from the pandemic on people’s living standards.

The World Bank added that real GDP in the Western and Central Africa sub region was projected to grow at 2.1 per cent in 2021 and 3.0 per cent in 2022.

According to it, growth in the Western and Central Africa sub region contracted by 1.1 per cent in 2020, less than projected in October 2020 partly due to a less severe contraction in Nigeria, the sub region’s largest economy, in the second half of the year.

“Nigeria’s muted growth prospects and slow vaccine rollout will weigh on the sub regional economic outlook.

“Excluding Nigeria, growth in the sub region is projected to rebound to 3.1 per cent in 2021, following a modest contraction in 2020, and strengthen to 4.3 per cent in 2022.

“Metals exporters and non-resource-rich countries are expected to drive the recovery,” it said.

The report said that Sub-Saharan Africa’s recovery was expected to vary across countries.

It said that non-resource-intensive countries, such as Côte d’Ivoire and Kenya, and mining-dependent economies, such as Botswana and Guinea, we’re expected to see robust growth in 2021.

This would be driven by a rebound in private consumption and investment as confidence strengthens and exports increase.

It estimated that in the Eastern and Southern Africa sub-region, the growth contraction for 2020 would be -3.0 percent, mostly driven by South Africa and Angola, the sub-region’s largest economies.

It added that excluding Angola and South Africa, economic activity in the sub-region was projected to expand by 2.6 percent in 2021, and 4.0 percent in 2022.

In a statement issued by the bank, Mr. Albert Zeufack, World Bank Chief Economist for Africa, said African countries have made tremendous investments over the last year to keep their economies afloat and protect the lives and livelihoods of their people.

“Ambitious reforms that support job creation, strengthen equitable growth, protect the vulnerable and contribute to environmental sustainability will be key to bolstering those efforts going forward toward a stronger recovery across the African continent.”

Hafez Ghanem, World Bank Vice President for Eastern and Southern Africa, said he was convinced of the power of digital technology to transform the future of Africa.

“We applaud countries that are already making necessary investments and innovative reforms, as this will not only create new jobs but improve the jobs people already have and allow more people to work, earn and provide for their families and communities.”

The Pulse said that as the region looks ahead to economic recovery, digital technology not only had the potential to create new jobs but could also help boost the productivity of existing ones.

It also pointed to mounting evidence that showed that large employment increases resulted in better employment opportunities for both low-and high-skilled workers and vulnerable groups such as women and young people.

It said that to harness the full potential of digital technologies and to take advantage of the energy and ideas of a young, dynamic population, African governments, development partners and the private sector should prioritize digital infrastructure.

It added that they should invest in science, technology, engineering, and math (STEM) skills and enhance the skills of workers to advance human capital.

Ousmane Diagana, World Bank Vice President for Western and Central Africa, said for the continent to leapfrog and to make the digital economy more inclusive, it would require actionable policies in place to ensure fast, affordable and reliable connectivity.

“This will be key to boost productivity and improve employment and wages for both women and men in the formal and informal sector.

“As countries move forward, jobs, digital connectivity, and skills will need to be at the center of policy action and private sector response.”