Sub-Saharan Africa: A Difficult Road to Recovery

IMF News, October 22, 2020

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The regional outlook is broadly unchanged since the June 2020 Regional Economic Outlook Update.
2020 regional activity is expected to contract by 3.0 percent.
2021 regional growth is projected at 3.1 percent.
The two-year outcome implies a drop in real per capita income of 4.6 percent over 2020-21.
Growth outcomes by country type:
- Tourism-dependent economies faced the largest impact.
- Commodity exporting countries have also been hit hard.
- More diversified economies: growth will slow significantly, but in many cases will still be positive in 2020.
Key drivers for 2021 growth include an improvement in exports and commodity prices, and a recovery in private consumption and investment.

The outlook is subject to significant downside risks, particularly:
- The path of the pandemic.
- The resilience of the region’s health systems.
- The availability of external financing.
The IMF highlights greater-than-usual uncertainty regarding:
- The persistence of the COVID-19 shock.
- The availability of external financial support.
- The development of an effective, affordable, and trusted vaccine.
Policy space constraints: sub-Saharan Africa’s relatively limited policy space will restrict the ability to sustain fiscal expansion compared with much of the rest of the world.

IMF disbursements in 2020: about US$17 billion so far in 2020.
- This amount is described as about 12 times more than the IMF typically disburses each year to the region.
Estimated regional financing gap:
- If private financial inflows remain below pre-crisis levels—even accounting for existing commitments from international financial institutions and official bilateral creditors—the sub-Saharan Africa could face a gap in the order of $290 billion over 2020-23.
Consequences of a larger financing gap:
- Could force countries to adopt a more abrupt fiscal adjustment, resulting in a weaker recovery.
Without significant additional external financial assistance, many countries will struggle to maintain macroeconomic stability and meet basic needs.

Immediate priorities where the pandemic persists:
- Save lives and protect livelihoods.
For countries with greater control over the pandemic, policymakers must balance:
- Boosting the economy versus debt sustainability, external stability, and longer-term credibility.
Financial sector actions:
- Financial regulation and supervision should help crisis-affected banks and firms without compromising the financial system’s ability to support longer-term growth.
Structural and transformative reforms recommended to promote resilience and lift medium-term growth:
- Revenue mobilization.
- Digitalization.
- Trade integration.
- Competition.
- Transparency and governance.
- Climate-change mitigation.
Governance reforms are emphasized to:
- Improve trust in the rule of law.
- Improve business conditions.
- Encourage external support.
Social considerations:
- Efforts must be balanced against the need to maintain social stability while preparing for sustained and inclusive long-term growth.

Press Release No. 20/319 — October 22, 2020 — IMF Communications Department.