Harare – African countries need strong policy actions and further support from the international community in averting a debt crisis and protracted low growth, the United Nations has said.
In its 2020 World Economic Situation and Prospects report, the UN also warned that the devastating socio-economic impact of the COVID-19 pandemic will be felt for years to come unless smart investments in economic, societal and climate resilience ensure a robust and sustainable recovery of the global economy.
In 2020, the world economy shrank by 4,3 percent, over two-and-a-half times more than during the global crisis of 2009. The modest recovery of 4,7 percent expected in 2021 would barely offset the losses of 2020, the inter-governmental organisation further reported.
Developing countries saw a less severe contraction of 2,5 percent, with an expected rebound of 5,6 percent in 2021, according to the estimates presented in the report.
However, economic contraction among developing nations, falling exports and local consumption rates as well as high levels of public debt will significantly increase poverty levels, says the report.
“African countries are experiencing an unprecedented economic downturn with major adverse impacts on development. Lower commodity prices, the collapse of tourism and lower remittances, exacerbated by much-needed domestic lockdowns and other measures to control the spread of the pandemic, have caused a severe and widespread deterioration of the economic situation. Limited fiscal space, challenging financing conditions and rising public debt have increased the risks of debt distress,” the report reads.
“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,” UN Secretary-General António Guterres at the launch of the report virtually 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.”
The report underscores that sustained recovery from the pandemic will 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 report further indicates that despite recoding relatively fewer cases compared to the number of cases in other continents, the pandemic will continue to strongly impact living conditions and development progress in Africa.
The crisis is already increasing unemployment, poverty and inequality. Most countries are facing enormous challenges to keep the pandemic under control and mobilize financial resources to support health systems, protect vulnerable groups, and support the recovery.
“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. This recovery is predicated on the rise of domestic demand and the pick-up of exports and commodity prices,” the report says.
“Elevated public debt is limiting the capacity to boost spending across the continent. Also, meagre growth prospects mean less capacity to sustain debt levels, as foreign reserves, remittances and capital flows falter and depreciations constrain the capacity to service foreign currency-denominated debt. African countries need further support from the international community and strong national efforts in averting a debt crisis. A debt crisis would not just cause a further economic deterioration, but also force painful fiscal adjustments. Against such a backdrop, social unrest and political tensions may easily escalate, which could in turn worsen food insecurity, violence, internal displacement and migration pressures.
“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,” 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.
“This includes unlocking growth opportunities and accelerating technology adoption and bridging digital divides, enhancing climate resilience and boosting domestic revenue mobilization.”
The report highlights the need for African countries to prioritize the diffusion of digital technologies, supported by the expansion of affordable and universal digital infrastructure. An effective framework for the implementation of the African Continental Free Trade Area could also become a major tool for promoting intra-African trade, food security and productivity.
The World Economic Situation and Prospects 2021 is a report produced by the UN Department of Economic and Social Affairs, in partnership with the UN Conference on Trade and Development and the five UN regional commissions.