African countries have been urged to adopt policy measures that encourage green investments to facilitate a durable recovery from the economic brunt of the COVID-19 pandemic and achieve sustainable industrialization.
The urgent call was made by the United Nations Economic Commission for Africa (ECA) during the ongoing Conference of African Ministers of Finance, Planning and Economic Development.
This year’s edition of the ministerial meeting is being held virtually from March 17 to 23 under the theme “Africa’s Sustainable Industrialization and Diversification in the Digital Era in the Context of COVID-19.”
Hopestone Kayiska Chavula, Officer In-Charge of the Macroeconomic Analysis Section at the ECA’s Macroeconomics and Governance Division, said in his presentation focusing on recent economic and social developments in Africa that COVID-19 had significantly affected social and economic development progress on the continent.
“Much of the progress achieved in recent years in education, health and poverty eradication has been halted or reversed by the COVID-19 pandemic,” he said, adding the ECA estimates that between 49-161 million people will fall into deep poverty as a result of the crisis.
Africa’s GDP is estimated to have contracted in 2020 despite a recovery in the 3rd and 4th quarters of 2020 with a positive economic outlook in 2021, according to the ECA.
According to the ECA, fiscal deficits have widened due to increased government expenditure to halt the spread of the pandemic, with many more African countries at risk of debt distress as a result.
Accommodative monetary policies have been maintained to cushion the negative effects of the pandemic on economic activity despite inflationary pressure in some countries, said Chavula.
Real GDP growth remained subdued on the continent mainly due to the downside risks associated with the second wave of infections, lower commodity prices and significant fiscal risks as well as conflicts in some countries, it was noted.
Chavula, however, stressed that 2021 looks positive for African economies, when compared to the devastating impact of the pandemic in 2020, mainly due to the availability of COVID-19 vaccines and improved economic activity in the 4th quarter of 2020, holiday and travel expenditure.
On risks and uncertainties, he said the second wave of infections, expansionary fiscal measures and rising debt levels posed downside risks to many African countries’ growth.
Post-election instability and social unrest, which may in part have emerged from pandemic-related economic hardships and lockdown fatigue, have induced uncertainties in some countries.
Climate change risks, particularly as several countries are at high risk of extreme weather events, could also undermine economic growth, according to Chavula.
He, however, stressed that intra-Africa trade is expected to increase with the implementation of the African Continental Free Trade Area.
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