As the Sub-Saharan African economy struggles to recover from the 2020 recession induced by the COVID-19 (coronavirus) pandemic, the region now faces new economic growth challenges, compounded by the Russian invasion of Ukraine.

The World Bank’s latest Africa’s Pulse, a biannual analysis of the near-term regional macroeconomic outlook, estimates growth at 3.6 percent in 2022, down from 4 percent in 2021 as the region continues to deal with new COVID-19 variants, global inflation, supply disruptions and climate shocks. Adding to the region’s growth challenges are rising global commodity prices, which are increasing at a faster pace since the onset of the conflict between Russia and the Ukraine.

As top world exporters of food staples, Russia—the world’s largest exporter of fertilizers—and Ukraine account for a substantial share of wheat, corn and seed oil imports, all of which may be halted if the conflict persists. While Sub-Saharan economies are also likely to be impacted by tightening of global conditions and reduced foreign financial flows into the region, the analysis notes that the high fuel and food prices will translate into higher inflation across African countries, hurting poor and vulnerable citizens, especially those living in urban areas. One point of concern is the increased likelihood of civil strife as a result of food and energy-fueled inflation, particularly in this current environment of heightened political instability.

“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,” said Albert Zeufack, World Bank Chief Economist for the Africa.

The analysis notes that recovery remains uneven, incomplete and is happening at varied rates of speed across the region. Of the region’s three largest economies—Angola, Nigeria, and South Africa—growth in South Africa is expected to decline by 2.8 percentage points in 2022, dragged by persistent structural constraints. Angola and Nigeria are expected to continue their growth momentum in 2022, up by 2.7 and 0.2 percentage points respectively, in part due to elevated oil prices and good performance in non-oil sector. Resource-rich countries, especially their extractive sectors, will see improved economic performance due to the war in Ukraine, while non-resource rich countries will experience a deceleration in economic activity.

Excluding Angola, Nigeria and South Africa, regional growth is projected at 4.1 in 2022, and 4.9 percent in 2023. The Eastern and Southern Africa subregion shows sustained recovery from the recession, at 4.1 percent in 2021, down to 3.1 percent in 2022 and settle around 3.8 percent in 2024. The DRC and Zambia are expected to benefit from rising metal prices in the short-and medium term and gain from the transition away from fossil fuels in the long term. Rwanda and Seychelles are expected to register the biggest decline in 2022, down by 4.1 percent, and 3.3 percent respectively.

The Western and Central Africa subregion is projected to grow 4.2 percent in 2022, and 4.6 percent in 2023. Excluding Nigeria, the subregion is projected to grow at 4.8 percent in 2022, and 5.6 percent in 2023. The growth trajectory for Cameroon, which has a somewhat diversified economy, shows sustained robust performance, reaching 4.4 percent in 2024. The Ghanaian economy is projected to pick up pace in 2022, growing by 5.5 percent, then slowing gradually to 5 percent in 2024, lower than the 7 percent pre-pandemic growth.

The report also highlights the importance of expanding social protection programs beyond safety nets to strengthen economic resilience and responsiveness to shocks, particularly for poor and vulnerable households. Recommendations include developing social insurance, savings and labor market programs that contribute to economic resilience by protecting urban informal workers and help the population invest in their health and education.

Economies in the Middle East and North Africa (MENA) region are expected to grow by 5.2% in 2022, the fastest rate since 2016, on the back of oil-price windfalls benefitting the region’s oil exporters. But heightened uncertainty surrounds this forecast due to the war in Ukraine and ongoing threats from COVID-19 variants.

Titled “Reality Check: Forecasting Growth in the Middle East and North Africa in Times of Uncertainty“, the World Bank’s latest economic update forecasts an uneven recovery as regional averages mask broad differences. Oil-producers will benefit from higher oil prices and vaccination rates as fragile countries lag. But tighter global monetary policy, the unpredictability of the course of the pandemic, ongoing supply chain disruptions and food price hikes raise inflation risks for the entire region.

“The harsh reality is that no one is out of the woods yet. The threat of COVID-19 variants remains and the war in Ukraine has multiplied risks, particularly for the poor who bear the brunt of the increase in food and energy prices. A good dose of realism about the region’s growth prospects during these times of uncertainty is essential,” said Ferid Belhaj, World Bank Vice President for the MENA region. “Managing this wave of uncertainty is a key challenge for policymakers and the World Bank is committed to working alongside governments across the MENA region during this time of compounding risks,” he added.

Currency depreciation in some countries in MENA is already adding to inflationary pressures. Economies facing fiscal and debt vulnerabilities will likely encounter more challenges as they roll over existing debt, or issue new debt amid tighter financing conditions as global central banks aim to contain inflation expectations.

Inflationary pressures created by the pandemic have been exacerbated by the Ukraine war. Countries in the MENA region rely heavily on food imports, including wheat from Russia and Ukraine. The rise in food prices and the higher risk of food insecurity are likely to hurt poor families the most, because the poor tend to spend more of their household budget on food and energy than do rich households. The full extent of the consequences of the war are yet to be determined, but early signs point to a heightening of the economic difficulties already besetting MENA economies, particularly oil-importing middle-income countries.

Despite the projected growth rate of 5.2%, GDP per capita, an indicator of people’s living standards, will barely exceed pre-pandemic levels due to a generally lackluster performance in 2020-2021, the report said. In Gulf Cooperation Council countries, buoyed by the increase in oil prices, GDP per capita is projected to grow by 4.5% in 2022, but will not recover to pre-pandemic levels until 2023. In contrast, in 2022, GDP per capita of middle-income oil exporters is projected to grow by 3.0%, and by 2.4% for the region’s oil importers, both barely lifting living standards above pre-pandemic levels. Overall, if these forecasts materialize, 11 out of 17 economies in MENA may not recover to pre-pandemic levels by end of 2022.

Adding to pandemic-related uncertainty, only a third of the middle-income MENA countries have higher vaccination rates than their income peers. As of April 4, 2022, Gulf countries, excluding Oman which has a 57.8% vaccination rate, have an average rate of 75.7%, which is far better than their income peers. But countries like Algeria and Iraq have vaccinated around 13 to 17% of their populations and Yemen and Syria have vaccination rates in the single digits, thus leaving them more exposed to the economic and health consequences of Covid-19 in the near future.

Each MENA Economic Update chooses a special focus area and this April’s edition provides a reality check on growth forecasts over the past decade, including those provided by the World Bank, the International Monetary Fund, and the private sector. Economic forecasts are a valuable tool for governments as they prepare for the future, especially during times of uncertainty. The authors found that growth forecasts in the MENA region over the past decade were often inaccurate and overly optimistic when compared to those of other regions. Overly optimistic forecasts can lead to economic contractions down the road. A key driver of forecast uncertainty is the availability and accessibility of quality and timely information, an area where MENA lags behind the rest of the developing world.

“In the current context of global and regional uncertainty, getting the most accurate forecasts possible becomes even more important. Lack of data and limited data openness are risky strategies. Only with better and more transparent data can forecasts, and with them planning and policy formulation, improve,” said Roberta Gatti, World Bank Chief Economist for the MENA region.

Conflict economies such as Libya and Yemen have outdated GDP data, last available for 2014 and 2017 respectively. Only 10 out of the 19 MENA economies covered by the World Bank Group have monthly or quarterly information on industrial production; for the remaining nine, information is not publicly available; and none publish monthly unemployment data. The report provides guidance about how to improve national data systems.

Economies in Latin America and the Caribbean (LAC) are on track to recover from the COVID-19 crisis, but the scars of the pandemic remain and the need for a more dynamic, inclusive and sustainable growth is ever more urgent, according to a new World Bank report, “Consolidating the Recovery, Seizing Green Growth Opportunities”.

Following a 6.9 percent rebound in 2021, regional GDP is expected to grow 2.3 percent this year and a further 2.2 in 2023, with most countries reversing the GDP losses from the pandemic crisis. However, these modest projections place regional performance among the lowest in the world at a time when the region faces important uncertainties as new variants of the virus may appear, inflation pressures mount and the war in Europe threatens the world recovery. In fact, regional growth projections have been revised downward by 0.4 percent after the Russian invasion of Ukraine.

On the positive side, vaccination is widespread across the region, firms are again hiring, and schools are reopening. Nevertheless, long-term scars of the crisis remain and require attention. Poverty rates rose to 27.5 percent in 2021 and are still above their pre-COVID levels of 25.6 percent, while learning losses could lead to a 10 percent decrease in future earnings for millions of school age children. To avoid returning to the low growth rates of the 2010s, countries in the region need to engage long delayed structural reforms and seize the opportunities offered by a greening world economy.   

“We are in a global context of great uncertainty, that could impact the post-pandemic recovery. In the long term, however, the challenges of climate change will be even more pressing, which forces us to urgently move to a growth agenda that is greener, more inclusive and that raises productivity,” said Carlos Felipe Jaramillo, Vice President for Latin America and the Caribbean at the World Bank.

According to the report, growth advancing reforms in infrastructure, education and innovation remain paramount, and key investments should be financed through more efficient spending and revenue mobilization. But these much-needed reforms should respond to major forces shaping the global economy, including climate change.

Over the last two decades, the report stresses, countries in Latin America and the Caribbean lost the equivalent of 1.7 percent of a year’s GDP due to climate related disasters and up to 5.8 million people could be pushed into extreme poverty in the region by 2030. Agriculture is likely to be hit hard, with crop yields decreasing in virtually all countries, and energy generation stability will be undermined by changes in the hydrological cycle.

“LAC has tremendous green comparative advantages, offering opportunities for new industries and exports. It has vast potential in renewable energy, large resources of lithium and copper used in green technologies, and a rich natural capital, all increasingly valued in a world where global warming and energy security are moving center stage”, said William Maloney, Chief Economist for Latin America and the Caribbean at the World Bank. “However, both adapting to climate change and leveraging these opportunities for diversified and sustained growth will require improving the region’s capabilities to identify, adapt and implement new technologies”.

The report suggests a mix of policies that can help seize the green growth opportunities. These include:

• Pricing policies that encourage the adoption of existing low-carbon technologies, for example through reforming fossil fuel subsidies and establishing carbon taxes and emission trading schemes.
• Credible verification mechanisms that facilitate access to green premiums. This allows for exports of carbon credits/offsets, and draws on the green finance market.
• Improved systems for identifying and adopting technologies to mitigate the region’s impact on climate, and to adapt to it, while leveraging its natural advantages for growth.  Climate-smart agriculture, for example, can help countries adapt to changing precipitation patterns.
• Policy commitments, credible long-term plans, complementary investments and de-risking mechanisms, which reduce uncertainty and speed up the adoption of technologies that will promote growth while adapting to and mitigating climate change.