Africa – ECONIR WEB

Africa’s growth performance and outlook to the COVID-19 pandemic situation

Economic activity in Africa was constrained in 2020 by an unprecedented global pandemic due to COVID–19. Real GDP in Africa grew by 3.4 percent in 2021, after contracting by 2.1 percent in 2020. This projected recovery from the worst recession in more than half a century will be underpinned by a resumption of tourism, a rebound in commodity prices, and the rollback of pandemic-induced restrictions. Nevertheless, the outlook is subject to great uncertainty from both external and domestic risks.

Debt dynamics and consequences

The COVID–19 pandemic has caused a surge in government financing needs in Africa. Since the COVID–19 pandemic began in early 2020, governments have announced fiscal stimulus packages ranging in cost from about 0.02 percent of the GDP in South Sudan to about 10.4 percent of the GDP in South Africa. These fiscal stimulus packages have had immediate and direct implications for budgetary balances, borrowing needs, and debt levels. However, the World Bank estimates that African governments need additional gross financing of about 154 billion dollars in 2020/21 to respond to the crisis.

Debt resolution and the nexus between governance and growth

Debt resolution in Africa has often been disorderly protracted, with bad economic consequences. The economic consequences of sovereign debt restructuring are less severe in countries that act pre-emptively and collaboratively and in those countries where economic governance is stronger. However, recent debt resolution in Africa has been delayed by long-lasting litigation with private and official creditors. The absence of orderly and successful sovereign debt resolution, especially with private creditors, makes the prospects of debt distress worrisome for African economies.

Adapting to climate change and building climate resilience

By 2021 The Next Generation ACBP has set out a blueprint to help Sub-Saharan African economies achieve low carbon and climate-resilient outcomes. The World Bank has used this new Climate Plan to build on a strong track record under the original plan in which the Bank supported 346 projects with more than $33 billion. In East Africa, the World Bank is also helping affected communities and households cope with the worst locust plague in decades.

Accelerating the high-tech and digital economy

The World Bank is supporting Africa’s vision to achieve universal and affordable access to information and communications technology. In Malawi, the Digital Foundations Project complements government efforts on digital transformation by supporting improvements to the legal framework and building human capacity, promoting high-quality internet access for all, and building the government’s ability to deliver services to citizens and conduct business digitally. Across the continent, the Bank has led Digital Economy Country Diagnostics (DE4A) in over 20 countries (completed and FY20 in progress) to assess the current state of the digital economy, with 15 more countries requesting diagnostics in FY20. The World Bank also has 15 active and 29 pipeline investment operations in Africa that contribute to the operationalization of the DE4A initiative that includes a broadband infrastructure component totaling over $5.5 billion in investment.

Harnessing technological developments are key to improve access to clean and reliable energy. The Bank is supporting operations in Africa to increase access through grid extension and expansion of transmission networks, innovative off-grid electrification solutions, expansions of renewable generation capacity, development of regional power pools, and improvement of service efficiency. Across Africa, many World Bank-financed projects, such as the Azito Power Project in Cote d’Ivoire, are crowding in private capital and reducing public debt as well as lowering the overall costs of service for electricity. Furthermore, the World Bank is also supporting the development of new technologies such as solar storage solutions, smart meters, mobile utility payments, satellite mapping, and imaging, high-voltage DC transmission, and solar home systems and mini-grids.

Supporting inclusive governance and transforming economies

It is important to enable efficient and inclusive delivery of services, such as judicial courts, waste management, and safety nets, and to build institutions and systems which are resilient to economic, social, and environmental pressures. These pressures can pose challenges to the World Bank’s work on governance and inclusion in Africa. By creating sound conditions for investment and establishing continuity of state services, businesses can thrive and citizens can access much-needed services, thereby achieving greater stability. Technology has also affected how governments operate and interact with citizens, increasing transparency and service delivery. The region continues to work to connect every African individual, business, and government to the Internet by 2030.

In March 2020, Somalia began receiving debt relief under the enhanced Heavily Indebted Poor Countries (HIPC) Initiative, which will help Somalia reduce its initial debt of $5.2 billion (end of 2018) to $557 million once it reaches the HIPC Completion Point. The Bank played a major role in helping Somalia reduce its debts by providing $140 million in Pre-Arrears Clearance Grants in FY19 and $375 million in development policy financing to strengthen state capacity, financial management, transparency, and promote inclusive private sector-led growth. Additionally, the World Bank has also provided nearly $400 million in financing since March to help tackle the urgent crises facing Somalia while planning for long-term reforms and development goals.