The pandemic has put a spotlight on the continent’s fragile economy, but there is a path forward to help vulnerable countries climb out of a debt pit.
As COVID-19 rages across the world, African countries are bearing the brunt of the economic fallout from the pandemic.
The continent’s GDP shrank 2.1% in 2020, its first recession in more than half a century, and this is projected to grow by 3.4% in 2021, a lower growth rate than what was achieved in much of the past decade.
“The pandemic shock and ensu¬ing economic crisis have had direct implications for budgetary balances and debt burdens,” the African Development Bank (AfDB) said in its 2021 outlook. “The average debt-to-GDP ratio for Africa is expected to climb by 10 to 15 percentage points in the short to medium term.”
COVID-19 cases in most African countries have not been as severe compared to other parts of the world, yet it exposed the continent’s fragile status. Lack of healthcare infrastructure, meagre government reserves and a precipitous drop in commodity prices hurt revenues and foreign investments.
In addition, more than 85% of African trade is with the rest of the world, which was in lockdown for much of last year. The continent’s tourism sector, which was soaring pre-pandemic, also took a hit as global air travel was suspended for most part of the year, according to AfDB.
Indeed, COVID-19 has arrested Africa’s impressive growth achieved over the past few decades.
The hope is that this is a temporary setback for a continent that holds a lot of promise.