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Dark clouds gather over Africa’s economy (AfDB)

Thursday, 26 May 2022 16:40
Dark clouds gather over Africa’s economy (AfDB)

(Ecofin Agency) - According to the AfDB, Africa needs an additional US$432 billion to finance its recovery at a time when budgetary margins have been severely squeezed and growth prospects jeopardized by the war in Ukraine and ever-pressing climate challenges. For President Akinwumi Adesina, the continent needs to act now. 

Africa “risks sliding into stagflation —a combination of slow growth and high inflation. Real GDP is projected to grow by 4.1 percent in 2022, markedly lower than the near 7 percent in 2021.” Those outlooks are presented by the African Development Bank (AfDB) in its 2022 African Economic Outlook. 

For the development bank’s experts, the Russia-Ukraine conflict exacerbated the already devastating effects of the continuing Covid-19 pandemic, therefore dampening previously promising outlooks. 

"Macroeconomic fundamentals have generally improved, but considerable challenges remain in the medium term, due largely to persistence of the pandemic effects and volatility induced by the impact of the Russia–Ukraine conflict," notes Chief Economist and Acting Vice President Kevin Urama, who presented the report.

On the one hand, although the debt ratio is expected to stabilize, it remains high (above 70%) and more countries are getting into the category of over-indebted nations.  On the other hand, inflation needs to be taken into account, says Kevin Urama. 

"Average inflation is projected to accelerate to 13.5 percent in 2022 from 13.0 percent in 2021, fueled by a sharp rise in commodity prices, especially energy and food, due to escalation of the Russia–Ukraine conflict," the economic outlook stressed. 

“Africa will need at least $432 billion to address the effects of Covid-19 on its economies and on the lives of its people — resources it does not have,” said President Akinwumi Adesina in his opening address during the AfDB 2022 annual meetings. 

The coronavirus pandemic already added more than 30 million Africans to the list of extremely poor individuals. It also pushed 22 million people into unemployment. The lingering impacts of the economic disruption resulting from the Russia-Ukraine conflict could push an additional 1.8 million Africans into extreme poverty this year and 2.1 million in 2023. 

This is a bleak picture, given that the most affected groups are women and men operating in the informal sector. If the Russian-Ukrainian conflict persists, Africa’s growth could stagnate at around 4% in 2023, the AfDB projects. 

During its 2022 annual meetings, the development bank called on the international community to keep up with its commitments like the one to provide US$100 billion to fund climate actions in developing countries. 

"Africa will need more than a decade to catch up to pre-COVID-19 and pre-Russia–Ukraine conflict extreme poverty rates," stressed Akinwumi Adesina pointing at the climate challenges the continent will face. Those challenges could exacerbate social tensions, he added. 

"Climate change is already threatening to derail development gains and impose further economic costs and social disruption," the economic outlook explains.  

Fiacre E. Kakpo

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