African economies generally contracted by 2.1 percent in 2020 as the Covid-19 pandemic disrupted economic activity across the continent forcing the continent to record its worst contraction in half a century.
Africa’s total debt which presently stands at 70 percent of GDP is further expected to climb by 10 to 15 percentage points in the short to medium term due to the enormous fiscal deficits incurred by governments as a result of Covid-19 crisis.
According to African multilateral institution, the African Development Bank (AfDB), uncertainty surrounding the growth outlook for Africa remains high due to the dominance of certain downside factors that could derail the recovery of the continent.
These downsides the Bank pointed out include the resurgence of COVID–19 infections, debt overhang, financial market volatility that impedes capital flows, low commodity prices, low tourism and remittances among others – all fueled by the pandemic.
In view of that, the AfDB in its 2021 Economic Outlook Report has made some policy recommendations to African governments to help support economic recovery as well as build resilience post the pandemic.
The policy recommendations outlined by the Bank in its report centred on the health sector, monetary and fiscal support for economic recovery, structural transformation through digitilisation among others.
The AfDB’s policy recommendations are as follows:
• Continuous support to the health sector to consolidate gains in the fight against the pandemic: It is not yet time for policymakers to be complacent in the fight against the virus. A second wave of the pandemic has occurred in several regions across the world. Countries must continue to make resources available for health care systems to cope with the virus and other preventable diseases.
Routine public health campaigns—such as child vaccination against polio and measles, treatment for malaria, maternity care, and treatment for other chronic diseases should not be disrupted because of an excessive focus on the COVID–19 pandemic.
• Sustain monetary and fiscal support to underpin economic recovery: Where there is still fiscal space or access to liquidity, policymakers should maintain fiscal and monetary support until the expected economic recovery has fully materialized. Once the recovery has been achieved, governments need to commit to a credible path of fiscal consolidation to restore debt and fiscal sustainability. Where there is no fiscal space, policymakers should seek international support through grants and concessional loans to support the recovery.
• Address issues of increasing poverty by expanding social safety nets and making growth more equitable: To avoid reversing more than two decades of progress on poverty reduction, policymakers must step up efforts to lift people from extreme poverty and increase the coverage and scope of social protection to aid the newly impoverished. Policymakers can take advantage of increasing digitalization to boost the effectiveness, reduce the cost, and expand the reach of social protection programs using in-kind support such as free food banks, medical supplies, and free housing.
• Minimize the long-term implications of the pandemic on human capital accumulation: Whenever in-person learning is practical, policymakers should immediately open schools, with the appropriate safety protocols in place. When in-person classes are impractical, learning should continue using traditional print, radio, and TV media, and digital technologies such as smartphones and computers.
• Scale up active labor market policies to retool the labor force for the future of work: Policymakers must scale up efforts to retrain and reskill the labor force as quickly and broadly as possible to facilitate workers’ transition from low productivity, obsolete sectors, and jobs into new and emerging ones.
They should encourage labor reallocation through job search and matching policies and establish public works as a source of training and experience for the
new digital economy. Other active labor market policies include helping in the process of labor reallocation through job search and matching policies.
• Accelerate structural transformation through digitalization, industrialization, and diversification: As the world continues to grapple with the COVID-19 crisis, Africa’s policymakers must look ahead and build a more resilient future. To make Africa’s economies more resilient, countries need to deepen structural reforms and diversify their productive base. Fostering resilience will also require adopting policies that create room to make quick changes and reforms that promote economic flexibility.
Policymakers should accelerate the diversification of their economy’s productive base through human capital development, promoting jobs in high-productivity sectors, intensifying reforms to improve the investment climate, and advancing digitalization. They should adopt policies that promote economic flexibility by strengthening macroeconomic stability, improving market flexibility, and enhancing political, social, and environmental governance.
• Strengthen regional and multinational solidarity to enable shared and sustainable recovery: Africa’s policymakers must continue to call for greater coordination among countries in the fight against the virus and in the provision of financial support to countries experiencing liquidity and debt challenges.