Lack of vaccines, fiscal stimulus threaten Africa’s economic rebound

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As the coronavirus crisis continues globally, Sub-Saharan Africa (SSA) remains firmly in the grip of a health and economic emergency.

When Covid-19 was announced to have hit the continent a year ago, many African countries were swift in implementing national lockdowns which were meant to contain the virus and try save the region from the deadliest of the crisis.

The lockdown measures no doubt worked in saving lives but brought a recession to the region due to the dramatic impact on local economies. The SSA which was experiencing the first recession in 25 years has been hit hard and the journey ahead remains difficult because of the lack of vaccines and fiscal stimulus which are a threat to Africa’s economic rebound.

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In 2020, the Sub-Saharan Africa’s economy shrunk by an extraordinary –1.9 per cent which was the worst outcome on record.

According to the OECD, 2020 led to Africa facing a dual public health and economic crisis that risked overwhelming healthcare systems, destroying livelihoods, and slowing the region’s growth prospects for years to come.

The OECD notes that prior to the pandemic, the continent had already experienced a slowdown in growth and poverty reduction overall but the worst is that the Covid-19 crisis could erode years of development gains.

In its October 2020 Regional Economic Outlook: Sub-Saharan Africa, the IMF notes that the SSA is still contending with unprecedented health and economic crisis. Since the announcement that the virus had docked on the continent, the region has confronted a second Covid-19 wave that swiftly outpaced the scale and speed of the first.

Even though this episode has eased for now, many countries are bracing for further waves, particularly as access to vaccines remains scant.

The IMF notes that the global recovery in 2021 will be uneven since many advanced economies have secured enough vaccine doses to cover their own populations many times over while Africa remains incapacitated by the limited purchasing power and few options where many countries are struggling to simply vaccinate their essential frontline workers this year. Only a few of these countries will achieve widespread availability and coverage before 2023. While this slow acquisition, availability and vaccination of Africans will slow economic recovery, according to projections, the wealthy nations are looking to the second half of the year with a renewed sense of hope.

Most advanced economies will experience a faster recovery because they are driven largely by extraordinary policy support which includes trillions of dollars in fiscal stimulus and the continued accommodation by central banks.

For many countries in Sub-Saharan Africa, fiscal stimulus and policy are lacking meaning they will suffer from depleted fiscal and monetary buffers.

Projections have shown that the fastest-growing economies are in Africa but the pandemic may change this and bring unexpected outcomes.

However, the IMF notes that despite a more buoyant external environment, Sub-Saharan Africa will be the world’s slowest-growing region in 2021. With the global economy improving more rapidly than expected in the second half of 2020, spill-overs to the region in the form of increased trade, higher commodity prices, and a resumption of capital inflows saw the SSA remain afloat.

The region was expected to see an economic contraction of –3.0 per cent going by October 2020 estimates but the real contraction was –1.9 per cent which is still the worst result on record.

Read: Tanzania: Central Bank issues stimulus, banks increase lending

In 2021, SSA is projected to register a 3.4 per cent growth supported by improved exports and commodity prices, along with a recovery in both private consumption and investment.

The IMF estimates that per capita output is not expected to return to 2019 levels until after 2022 and not many countries will see the return to pre-crisis levels before 2025.

To boost the region’s economic recovery, accelerated vaccine rollout with a swift, cooperative, and equitable global distribution could enhance the near-term prospects.

Cut flowers in Kenya. For many countries in Sub-Saharan Africa, fiscal stimulus and policy are lacking meaning they will suffer from depleted fiscal and monetary buffers. [Photo/xinhuanet.com]
In the height of the crisis, the priority has been to save lives and livelihoods but longer-term measures are required to help build a more resilient and sustainable economy. The challenge for sub-Saharan Africa is that many phases of the pandemic may overlap which will dent the economies even more by slowing progress.

To remain afloat, African countries will have to do whatever is possible to support the economy. The IMF notes that the general challenge for policymakers will be creating more fiscal space which will be through domestic revenue mobilization, prioritization and efficiency gains on spending or undertaking debt measures to improve fiscal frameworks.

In 2020, 17 countries were either in debt distress or at high risk of distress. These countries represent about a quarter of the region’s GDP, or 17 per cent of the region’s debt stock.

To address this, the Group of Twenty (G20) Debt Service Suspension Initiative provided US$1.8 billion in assistance from June–December 2020, offering $4.8 billion in potential savings over January–June 2021.

Despite this, some countries may need further assistance.

In the SSA region, estimates show that employment fell by about 8½ per cent in 2020 which saw more than 32 million people slip into extreme poverty with disruptions to education jeopardizing prospects of a generation of schoolchildren.

There is still hope for the region despite the effects of the crisis.

Sub-Saharan Africa’s potential is still undeniable, and the need for bold and transformative reforms is more urgent than ever—these include revenue mobilization, digitalization, trade integration, competition, transparency and governance, and climate-change mitigation, notes the IMF.

In addition, the institution notes that with limited resources, reforms will need to prioritize those that boost resilience to future shocks, with an emphasis on sectors with the best return on growth and employment.

“In this regard, the experience of different countries during the crisis suggests the need to accelerate the region’s diversification agenda,” adds IMF.

The Bretton Woods Institution adds that for the international community, ensuring vaccine coverage for sub-Saharan Africa is not simply an issue of local livelihoods and local growth. Broad regional coverage is also a global public good.

For every country, everywhere, the most durable recovery requires a global effort that covers everyone. Restrictions on the dissemination of vaccines or medical equipment should be avoided, multilateral facilities such as Covid-19 Vaccines Global Access (COVAX) should be fully funded, and channels should be put in place to ensure that excess doses in wealthy countries are redistributed quickly.

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I have 10 years of experience in multimedia journalism and I use the skills I have gained over this time to meet and ensure goal-surpassing editorial performance. Africa is my business and development on the continent is my heartbeat. Do you have a development story that has to be told? Reach me at njenga.h@theexchange.africa and we can showcase Africa together.

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