A smaller contraction in 2020 and a sharper growth rebound in 2021 have led to predictions of a global rebound of about 5.6%; however, sub-Saharan Africa will lag behind, with the slowest recovery rate of about 3%, said data research and analytics company Fitch Solutions Country Risk & Industry during its virtual sub-Saharan Africa Macroeconomic update, held in April.
The growth comparison was made between sub-Saharan Africa and other emerging market (EM) regions including Asia, Latin America, the Middle East and North Africa and EM Europe.
The webinar identified three main drivers for growth in sub-Saharan Africa for 2021.
Firstly, the reduction in the Covid-19 caseload through mass vaccinations, increased safety measures and the reopening of economies.
Secondly, policy support, including an increased fiscal stimulus, easy monetary conditions and a slower pace of withdrawal.
Thirdly, base effects, such as mass capacity, a strong comparison with 2020 and room for upside surprises have to be factored in.
Fitch forecasts that, after contracting by 3% in 2020, sub-Saharan Africa’s gross domestic product (GDP) will rise by 2.9% in 2021 – well below the region’s average of 4% from 2010 to 2019.
New waves of Covid-19 cases and the slow roll-out of vaccines are also risk factors.
Moreover, the webinar elaborated on various countries in sub-Saharan Africa, including those that will excel and those that will struggle to recuperate.
Kenya and Côte d'Ivoire remain outperformers in the region, although Kenya will face challenges, particularly government’s unambitious vaccination programme, which will limit its economic recovery.
Côte d'Ivoire’s real GDP growth is likely to accelerate to 6.4% in 2021 on the back of rising consumption, investment and exports.
Additionally, a stable African Financial Community franc exchange rate and low inflation will provide conducive conditions for a robust economic recovery.
East Africa Below Trend
There have been delays in East Africa’s access to Covid-19 vaccines – as with other sub-Saharan African regions – and this will slow vaccine rollouts.
The country-by-country outlook will vary greatly, however, with Rwanda and Tanzania have posted the strongest growth rates compared with the rest of the region.
Fitch expects a tepid economic recovery in Angola in 2021, after five years of recession, with its real GDP rebounding from a 5.2% contraction in 2020 to growth of 1.7% in 2021.
It reports a bleak short-term growth outlook for Ethiopia, owing to security risks remaining elevated following a conflict between the federal government and separatist Tigrayan forces.
Further, an ongoing dispute with Egypt and Sudan over Ethiopia’s Grand Renaissance dam will dampen the country’s investment appeal.
Nigeria is likely to register real GDP growth of only 1.8% in 2021, dragging down West Africa’s growth, which will weigh heavily on the sub-regional average.
The country accounts for about 56.4% of West Africa’s nominal GDP.
The Central Bank of Nigeria (CBN) has made some progress in terms of moving towards a more unified and flexible exchange rate, after adopting the investors and exporters rate for official transactions in March 2021.
The report suggests that improving oil export earnings will help the CBN to continue managing the currency in 2021.
Rising consumer confidence will cause an uptick in private consumption in Ghana, while exports of gold and cocoa will rise; however, the slow roll-out of Covid-19 vaccines will weigh heavily on activity in the first half of 2021.