According to the latest economic update for the Central African Republic (CAR), which was published today by the World Bank, the country’s pace of economic growth for 2020 will have slumped to between 0 and −1.2% as a result of the COVID-19 pandemic following five years of robust growth (4.1%, on average). In 2019, although the country’s growth rate slipped to 3.1%, it was still higher than the rates recorded by neighboring countries that are facing a similar situation of fragility, conflict, and violence.
Entitled The Central African Republic in Times of COVID-19: Diversifying the economy to build resilience and foster growth,theupdate notesthat the global slowdown has not spared CAR, where production of its main export products, such as coffee and cotton, has plummeted. The health crisis has weakened public finances and deepened the country’s balance of payments deficit.
The authors observe that the pandemic’s effects may wipe out years of progress in the area of human development and could drive as many as another 140,000 people into extreme poverty, which was already the plight of 71% of the population in 2019. The growth rate should start climbing again once the pandemic is brought under control, however, rising to an average of 3.9% in 2021-2023, although this is still lower than the projected rates for those years before the outbreak of the pandemic.
“Even though the security situation has improved since the peace agreement was signed in February 2019, pre-existing structural problems in the Central African economy have exacerbated the impact of the pandemic,” explained Wilfried A. Kouamé, World Bank Economist and lead author of the report. “The economy’s lack of diversification makes it vulnerable to shocks and limits its participation in global value chains, while its heavy dependence on international assistance reduces its budgetary maneuvering room.”
A number of recommendations are made in the report for spurring the economic recovery and boosting the country’s potential growth rate:
Diversify the economy by capitalizing on existing export opportunities. The country’s major export products, such as timber and cotton, offer opportunities for specializing in a wide range of related products, creating new jobs, and generating additional revenue. CAR could also begin to export a variety of new products in which it has a comparative advantage.
Address the major cross-cutting problems affecting the country by putting an end to the violence, strengthening its institutions, ensuring respect for the law, and investing in sustainable development. These steps would expedite the reconciliation process and promote private enterprise and investment. The transport sector also needs to be developed in order to further cross-border trade and open up access to electricity in a country where just 8% of the population currently has access to a source of electrical power.
Reinforce subregional trade. Asia and Europe are among CAR’s top export markets despite their highly competitive nature and the significant constraints associated with the resulting transport costs. Meanwhile, neighboring countries have the potential to be important markets for the country, since they are currently net importers of products that CAR exports elsewhere. This subregional market represents some $31 billion in imports per year and has a population of over 175 million.
“CAR has an important choice to make,” said Han Fraeters, the World Bank’s Country Manager for CAR. “It can build a strong, diversified, and resilient economy but only if all stakeholders in the country are committed to holding peaceful general and local elections and to implementing the peace accord. Without peace and the prospect of long-term stability, CAR will be unable to realize its strong economic potential.”