Title Page

World Economic and Financial Surveys

Regional Economic Outlook

Sub-Saharan Africa

A Difficult Road to Recovery

OCT 20

INTERNATIONAL MONETARY FUND

Copyright

©2020 Cataloging-in-Publication Data

IMF Library

Names: International Monetary Fund, publisher.

Title: Regional economic outlook. Sub-Saharan Africa : a difficult road to recovery

Other titles: Sub-Saharan Africa : a difficult road to recovery | World economic and financial surveys.

Description: Washington, DC : International Monetary Fund, 2020. | Oct. 20. | Includes bibliographical references.

Identifiers: ISBN 9781513557601 (English Paper)

9781513557991 (English ePub)

9781513558004 (English Web PDF)

Subjects: LCSH: Economic forecasting—Africa, Sub-Saharan| Africa, Sub-Saharan—Economic conditions. | Economic development—Africa, Sub-Saharan.

Classification: LCC HC800.R43 202s

• The Regional Economic Outlook: Sub-Saharan Africa is published twice a year, in the spring and fall, to review developments in sub-Saharan Africa. Both projections and policy considerations are those of the IMF staff and do not necessarily represent the views of the IMF, its Executive Board, or IMF Management.

Publication orders may be placed online, by fax, or through the mail:

International Monetary Fund, Publication Services

P.O. Box 92780, Washington, DC 20090 (USA)

Tel.: (202) 623–7430 Fax: (202) 623–7201

E-mail : publications@imf.org

www.imf.org

www.elibrary.imf.org

Contents

• Acknowledgments

• Executive Summary

• A Difficult Road to Recovery

  • Recent Developments and Outlook

  • Risks to the Outlook

  • The Crisis Response

  • Creating Space to Restart Growth

  • The Importance of External Financing

  • Building a Better Future

• Statistical Appendix

• Boxes

• 1.1. COVID-19-Related Fiscal Developments

• 1.2 COVID-19 and Public Debt in Sub-Saharan Africa

• 1.3 Meeting the Region’s Financing Needs

• Figures

• 1.1. Sub-Saharan Africa: Bond Index Spread vs. US Benchmark

• 1.2. Sub-Saharan Africa: Remittance Inflows by Origin, 2010–20

• 1.3. Selected Economies: New COVID-19 Cases, 2020

• 1.4. Sub-Saharan Africa: Real GDP Growth, Data and Nowcasts, 2018–20

• 1.5. Sub-Saharan Africa: Flight Arrivals in Tourism-Dependent Countries, 2018–20

• 1.6. Sub-Saharan Africa: Real GDP, 2019–24

• 1.7. Selected Sub-Saharan African Countries: Food Price Inflation, 2018–20

• 1.8. Sub-Saharan Africa: Length of Recovery

• 1.9. Sub-Saharan Africa: Debt Risk Status for PRGT-Eligible Low-Income Countries, 2015–20

• 1.10. Selected Economies: Fiscal COVID-19 Response, 2020

• 1.11. Selected Economies: Fiscal Balance and Public Debt, 2018–22

• 1.12. Sub-Saharan Africa: Changes in Monetary Policy Rates since January 2020

• 1.13. Sub-Saharan Africa: Exchange Market Pressure, 2019–20

• 1.14. Sub-Saharan Africa: Human Development Index, 2007–20

• 1.15. Selected Sub-Saharan African Countries: Income Relative to 2019

Acknowledgments

The October 2020 issue of the Regional Economic Outlook: Sub-Saharan Africa (REO) was prepared by a team led by Andrew Tiffin under the supervision of Papa N’Diaye and Catriona Purfield.

The team included Cian Allen, Aqib Aslam, Reda Cherif, Seung Mo Choi, Xiangming Fang, Michael Gorbanyov, Cleary Haines, Shushanik Hakobyan, Franck Ouattara, Henry Rawlings, and Manchun Wang. Specific contributions were made by Ivohasina Razafimahefa.

Charlotte Vazquez was responsible for document production, with assistance from Erick Trejo Guevara.

The editing and production were overseen by Cheryl Toksoz of the Communications Department.

The following conventions are used in this publication:

• In tables, a blank cell indicates “not applicable,” ellipsis points (. . .) indicate “not available,” and 0 or 0.0 indicates “zero” or “negligible.” Minor discrepancies between sums of constituent figures and totals are due to rounding.

• An en dash (–) between years or months (for example, 2019–20 or January–June) indicates the years or months covered, including the beginning and ending years or months; a slash or virgule (/) between years or months (for example, 2005/06) indicates a fiscal or financial year, as does the abbreviation FY (for example, FY2006).

• “Billion” means a thousand million; “trillion” means a thousand billion.

• “Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

Executive Summary

Sub-Saharan Africa is contending with an unprecedented health and economic crisis—one that, in just a few months, has jeopardized years of hard-won development gains and upended the lives and livelihoods of millions. The onset of the pandemic was delayed in sub-Saharan Africa, and infection rates have been relatively low compared with other parts of the world. However, the resurgence of new cases in many advanced economies and the specter of repeated outbreaks across the region suggest that the pandemic will likely remain a very real concern for some time to come.

Nonetheless, amid high economic and social costs, countries are now cautiously starting to reopen their economies and are looking for policies to restart growth. With the imposition of lockdowns, regional activity dropped sharply during the second quarter of 2020, but with a loosening of containment measures, higher commodity prices, and easing financial conditions, there have been some tentative signs of a recovery in the second half of the year.

Overall, the region is projected to contract by –3.0 percent in 2020. The largest impact of the crisis on growth has been for tourism-dependent economies, while commodity-exporting countries have also been hit hard. Growth in more diversified economies will slow significantly, but in many cases will still be positive in 2020.

Looking ahead, regional growth is forecast at 3.1 percent in 2021. This is a smaller expansion than expected in much of the rest of the world, partly reflecting sub-Saharan Africa’s relatively limited policy space within which to sustain a fiscal expansion. Key drivers of next year’s growth will include an improvement in exports and commodity prices as the world economy recovers, along with a recovery in both private consumption and investment.

The current outlook is subject to greater-than-usual uncertainty and hinges on both the persistence of the COVID-19 shock, the availability of external financial support, and the availability of an effective, affordable, and trusted vaccine. Other risks include political instability or the return of climate-related shocks, such as floods or droughts.

On policies, where the pandemic continues to linger, the priority remains to save lives and protect livelihoods. For countries where the pandemic is under greater control, however, an ideal policy mix would include a gradual unwinding of crisis-specific lifelines, a rebalancing of fiscal spending to support aggregate demand, and a continuation of accommodative monetary policy where inflation pressures remain muted. But relatively few sub-Saharan African countries will have the scope to fine-tune policies this easily. Indeed, the region entered the COVID-19 crisis with significantly less fiscal space than it had at the onset of the global financial crisis and has also generally been more constrained than in other parts of the world. Countries have had to adapt their policy response accordingly and develop new and innovative ways of channeling scarce resources to those who need them most. The burden on monetary and prudential policies has also increased, along with the use of temporary emergency measures such as price ceilings on essential items.

Looking ahead, limited resources will mean that policymakers aiming to rekindle their economies will face some difficult choices. Both fiscal and monetary policy will have to balance the need to boost the economy against the need for debt sustainability, external stability, and longer-term credibility. Financial regulation and supervision will have to help crisis-affected banks and firms, without compromising the financial system’s ability to support longer-term growth. And these efforts must also be balanced against the need to maintain social stability while simultaneously preparing the ground for sustained and inclusive growth over the long term.

Navigating such a complex policy challenge will not be easy and will require continued external support. Indeed, without significant assistance, many countries will struggle to simply maintain macroeconomic stability while meeting the basic needs of their population. In this context, the IMF has moved swiftly in 2020 to help cover a significant portion of the region’s needs and to catalyze additional support from the international community. But looking ahead, sub-Saharan Africa faces significant financing gaps. If private financial inflows remain below their precrisis levels—and even taking into account existing commitments from international financial institutions and official bilateral creditors—the region could face a gap in the order of $290 billion. This is important, as a higher financing gap could force countries to adopt a more abrupt fiscal adjustment, which in turn would result in a weaker recovery.

Countries must also play their part—continuing governance reforms will not only improve trust in the rule of law and improve business conditions, but also encourage external support.

Despite the lingering effects of the crisis, the potential of the region and the resourcefulness of its people remain intact, and tapping this potential will be vital if the region is to find its way back to a path of sustainable and inclusive development. In this context, the need for transformative reforms to promote resilience is more urgent than ever, particularly in the areas of revenue mobilization, digitalization, trade integration, competition, transparency and governance, and climate-change mitigation.