How African Countries Can Chart a Path to Recovery

The current state of world affairs continues to weigh heavily on global growth prospects, with new and ongoing crises taking an enormous toll on global economies, particularly those of developing countries. Just as we prepared to emerge from the pandemic and resume life under new normal conditions, COVID variants and the Russian invasion of Ukraine introduced additional shocks across markets. The costs of these persisting crises are absolutely staggering.  

To put orders of magnitude on these costs, compare the January 2020 World Bank Global Economic Prospects projections for global gross domestic product (GDP) growth for 2020 and 2021 (at 2.5 and 2.6 percent respectively) with actual growth, which was -3.3 percent for 2020 and 5.5 percent for 2021. The difference between the projections and actual growth during the pandemic translate to a cumulative global forgone output of $8 trillion, or slightly above one thousand dollars per person living on earth between 2020 and 2021. Moreover, taking into account that the World Bank still expects 2022 global GDP to be 1.8 percent below its pre-pandemic projections, one could also add the projected forgone output for 2022 ($1.7 trillion) for a cumulative loss of $9.7 trillion.

The real costs have distinct variances across global regions. If we were to repeat the exercise comparing projected regional growth rates for Sub-Saharan Africa in January 2020, which had growth at 2.9%, 3.1%, and 3.3% for 2020, 2021, and 2022, with actual growth over the same years resulting in -2.2%, 3.5%, and 3.6%, the foregone output for the region would be $180 billion over 2020-21 and $265 billion over 2020-22. While these numbers are not of the same order of magnitude as the global estimates, it is worth noting that $265 billion represents approximately the combined GDP of Kenya, Angola, and Ethiopia.

Considering these massive economic setbacks and hard times ahead, the most important question governments should be asking themselves is: What combination of policies will enable our economies to rapidly recover while adapting to the evolving and acute challenges brought on by the war in Ukraine – all while charting a long-term path to greener and more resilient growth?

In my view, the first policy recommendation needs to include strategies that increase the rates of COVID vaccination. Currently, only 12 percent of the population of Sub-Saharan Africa is fully vaccinated, far from the continental target of 70% percent. In fact, in order to reach the target, vaccination efforts would need to increase six-fold! Recent analysis by the World Health Organization (WHO) has concluded that assumptions about low COVID numbers in Africa could actually be the result of low testing rates, masking a deeper threat with much higher case numbers. Low vaccination rates not only expose a country to the emergence of new COVID variant waves, as we are seeing today with emerging waves of the Omicron variant, but also creates hospitable breeding environments for new variants.

A second policy recommendation would be to focus on building an enabling environment for the private sector to thrive. Pre-dating the pandemic, debt levels were already on the rise in several countries, reducing the buffers needed to respond to possible shocks. The fiscal response to COVID-19 has further reduced buffers with many countries having to adopt measures that will allow them to regain a sustainable fiscal position, with the consequence of the reduced ability of the public sector to act as an engine of recovery. The private sector has to become the solution for a realistic recovery effort with public policy aimed at improving the investment climate and attracting private investment. Policies that create affordable, reliable access to sustainable energy will be crucial to enabling companies in Sub-Saharan to thrive and compete in the global economy. Currently, the cost of reliable access to electricity is about 50 times higher in Africa than in OECD economies, creating significant barrier to doing business in the region.

The third policy recommendation requires a deepening of regional integration efforts. Prior to the COVID pandemic and the Ukraine crisis, the world had already entered into a phase of deglobalization. This is worrying given the major gains realized from trade and the international exchange of goods, services, and ideas.  Yet, Sub-Saharan Africa has an opportunity thanks to the African Continental Free Trade Area agreement (AfCFTA), now the largest free trade area in the world as measured by the number of countries participating.

A successful implementation of the AfCFTA would boost the region’s income by $450 billion by 2035, raise exports by $560 billion, boost wages by 10.3% for unskilled workers and 9.8% for skilled workers, and lift 30 million people out of extreme poverty while driving wage growth for women. It is estimated that reducing tariffs will boost intra-African trade by 15-25%, and the biggest income gains will come from measures to reduce red tape and simplify customs procedures. This opportunity will only become more important over the coming decades, when Sub-Saharan Africa will become the largest continent in terms of population, based on current projections, from 2060.  

The road ahead is not an easy one, but the cost of inaction risks dire consequences for the region’s economies and people. While there is great uncertainty, one thing does remain certain – the resilience of Africans and their ability to innovate in times of crisis. The World Bank has been and will continue to support Sub-Saharan Africa to build back resilient economies that can weather the challenges ahead.  

World Bank