Speech

Opening Remarks at the Press Briefing on the Regional Economic Outlook for Sub-Saharan Africa

October 21, 2021

Good morning! 

Let me begin by thanking you all for joining us today for the release of the October Regional Economic Outlook for sub‑Saharan Africa. 

The pandemic has shown us the deeply interconnected nature of our planet. Global challenges—such as ending the current pandemic or addressing climate change—require global solutions. The path to addressing both of these major challenges on a global scale runs directly through sub-Saharan Africa.

Before taking your questions, I would like to draw on our latest assessment of the economic outlook, challenges, and immediate policy priorities. But before delving into that, I would like to first take a moment to 

… reflect on how the region is contending with the ongoing pandemic. 

The global health crisis has revealed two different realities. What has emerged is two worlds: one in most advance economies where recovery continues apace, fueled by plentiful vaccine supply. The other in vulnerable emerging and developing economies where differences in policy space and slower vaccine rollout is slowing progress.

·      Since our April 2021 Regional Economic Outlook, sub‑Saharan Africa has been hit by a third wave, this time with a more contagious Delta variant, with infection rates often rising to triple or quadruple what they were in January. That wave has eased over the past month, but there is little reason to believe that there won’t be repeated waves going forward.

·      This is also because vaccination efforts in sub-Saharan Africa have been slower than other regions, due mostly to stockpiling by advanced economies, export restrictions by major vaccine manufacturing countries, and demands for booster shots in advanced economies that may compromise supply further.  

·      At the moment, only around 3 percent of the population in sub-Saharan Africa have been fully vaccinated—in sharp contrast to most advanced and many EM countries that are close to the 60 percent or more level of vaccination.

·      Lockdowns have been the main option for containing the virus in the absence of vaccinations. Although recent lockdowns have been less severe than those of early stages of the pandemic, their cumulative impact on economic activity and confidence remains significant.

Turning to the economic outlook in sub-Saharan Africa

·      We estimate that sub-Saharan Africa’s economy will grow by 3.7 percent in 2021 and 3.8 in 2022. The recovery is supported by favorable external conditions on trade and commodity prices. It has also benefited from improved harvests and increased agricultural production in a number of countries.

·      The recovery follows the sharp contraction in 2020 and is of course much welcome. But it still represents the slowest relative to other regions.

·      For example, while advanced economies are projected to return to their precrisis path by 2023, the pandemic looks to have durably lowered the path of real GDP in sub-Saharan Africa, suggesting a loss of real per capita output of close to 5½ percent relative to the pre-crisis path.

·      This divergence reflects sub-Saharan Africa’s two factors: the slow vaccine rollout and stark differences in policy space.

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Against this backdrop, I want to highlight three areas which need concerted action by policymakers in countries and indeed the international community:

The first of these is inequality. The pandemic has thrown some 30 million people back into extreme poverty and has worsened inequality not only across income groups but also across within subnational geographic regions. Moreover, conditions are set to be exacerbated further in many cases by the pronounced rise in food (and fuel) prices that we are seeing now. Lower incomes and rising food prices are a recipe for further erosion of past gains in poverty reduction, health outcomes, and improved food security. Policies need to be squarely focused on addressing this challenge. Left unaddressed it will be a further source of misery to people and indeed rising insecurity.

Second, policy makers in sub-Saharan Africa need to navigate an increasingly difficult and complex policy environment. Against an environment or weaker-than-expected growth, policymakers need to navigate among three formidable pressures:

·      pressing spending needs to address the many social, human capital, and infrastructure needs;

·      limited borrowing capacity given already high public debt levels in most cases; and

·      the time consuming and politically difficult nature of mobilizing tax revenues.

How deftly countries navigate this trilemma will have a huge bearing on the macroeconomic wellbeing of countries and growth prospects.

Third, divergent health, poverty, and economic outcomes we are seeing point to the critical importance of international solidarity and support.

• On COVID-19 the threat of new variants highlights the need for a global response, with a particular focus on the unvaccinated people of Africa. The IMF has proposed a plan to vaccinate at least 40 percent of the total population of all countries by the end of 2021 and 70 percent by the first half of 2022. For sub-Saharan Africa, these goals are ambitious and will require a marked change in strategy by both advanced economies and sub‑Saharan African countries.

• More broadly, significant external concessional financing is needed to limit and eventually close the divergent recovery paths of sub-Saharan Africa and the rest of the world. Without this financing, the divergent recovery paths could harden into permanent fault lines, jeopardizing decades of hard-won progress. International organizations and donors have mobilized swiftly to support the region over the last year. But much more multilateral action still is critical considering the region’s elevated financing needs. Action is also needed to ensure that available mechanisms for debt restructurings are nimble and effective to avoid the burden of adjustment falling on the poor and facilitate quicker economic recovery.

For its part, the IMF, more than ever, remains committed to supporting sub-Saharan Africa tackle the broad array of challenges it faces. The most recent way it has done so is the recent general SDR allocation which has boosted the region’s reserves, easing some of the burden on authorities as they guide their countries’ recovery. And much work is also underway now to re-channel SDRs from countries with strong external positions to countries with weaker fundamentals to further bolster the region’s resilience.

Sub-Saharan Africa’s vast potential remains undiminished. Over the next three decades, the global population is set to grow by about 2 billion people, with half of that increase coming from sub-Saharan Africa. This presents a huge opportunity: a growing pool of human talent and ingenuity that will have a telling effect on the economic, social, and political trajectory of our planet. We need to pay more heed to this phenomenal opportunity.