According to the World Bank’s latest
Africa’s Pulse, a biannual analysis of the near-term regional
macroeconomic outlook, economic growth in Sub-Saharan Africa (SSA) is
set to decelerate from 4.1% in 2021 to 3.3% in 2022, a downward revision
of 0.3 percentage points since April’s Pulse forecast, mainly as a
result of a slowdown in global growth, including flagging demand from
China for commodities produced in Africa. The war in Ukraine is
exacerbating already high inflation and weighing on economic
activity by depressing both business investments and household
consumption. As of July 2022, 29 of 33 countries in SSA with available
information had inflation rates over 5% while 17 countries had
double-digit inflation.
“These trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic,” saidAndrew Dabalen, World Bank Chief Economist for Africa. “What is most worrisome is the impact of high food prices on people
struggling to
feed their families, threatening long-term human development. This
calls for urgent action from policymakers to restore macro-economic
stability and support the poorest households while reorienting their
food and agriculture spending to achieve future resilience.”
Elevated food prices are causing
hardships with severe consequences in one of the world’s most
food-insecure regions. Hunger has sharply increased in SSA in recent
years driven by economic shocks, violence and conflict, and extreme
weather.
More than one in five people in Africa suffer from hunger and an
estimated 140 million people faced acute food insecurity in 2022, up
from 120 million people in 2021, according to the Global Report on Food
Crises 2022 Mid-Year Update.
The interconnected crises come at a
time when the fiscal space required to mount effective government
responses is all but gone. In many countries, public savings have been
depleted by earlier programs to counter the economic fallout of
the COVID-19 pandemic, though resource-rich countries in some cases
have benefited from high commodity prices and managed to improve their
balance sheet.
Debt is projected to stay elevated at
58.6% of GDP in 2022 in SSA. African governments spent 16.5% of their
revenues servicing external debt in 2021, up from less than 5% in 2010.
Eight out of 38 IDA-eligible countries in the region are
in debt distress, and 14 are at high risk of joining them. At the same
time, high commercial borrowing costs make it difficult for countries to
borrow on national and international markets, while tightening global
financial conditions are weakening currencies
and increasing African countries’ external borrowing costs.
This challenging environment makes it
essential to improve the efficiency of existing resources and to
optimize taxes. In the agriculture and food sector, for example,
governments have the opportunity to protect human capital and
climate-proof
food production by re-orienting their public spending away from poorly
targeted subsidies toward nutrition-sensitive social protection
programs, irrigation works, and research and development known to have
high returns.
For example, one dollar invested in
agricultural research yields, on average, benefits equivalent to $10,
while gains from investments in irrigation are also potentially high in
SSA. Such reprioritization maintains the level of spending
in a critical sector, while raising productivity, building resilience
to climate change, and achieving food security for all. Creating a
better environment for agribusiness and facilitating intra-regional food
trade could also increase long-term food security
in a region that is highly dependent on food imports.
– The World Bank –
