Rising oil prices and global demand have generally helped improve Africa’s macroeconomic fundamentals, the report found. But growth could decelerate to 4.1% in 2022, and remain stuck there in 2023, because of the lingering pandemic and inflationary pressures caused by the Russia-Ukraine war.
Africa’s gross domestic product has recovered strongly in the last year, but the lingering effects of the Covid-19 pandemic, Russia’s invasion of Ukraine, and the ensuing war could pose considerable challenges in the medium term. This is according to the 2022 African Economic Outlook, released by the African Development Bank.
Africa’s gross domestic product grew by an estimated 6.9% in 2021. This is after the continent suffered a pandemic-induced contraction of 1.6% in 2020, says the Bank’s flagship publication.
Rising oil prices and global demand have generally helped improve Africa’s macroeconomic fundamentals, the report found. But growth could decelerate to 4.1% in 2022, and remain stuck there in 2023, because of the lingering pandemic and inflationary pressures caused by the Russia-Ukraine war. Both countries are major grain suppliers to Africa.
The African Development Bank Group has responded to the likelihood of a looming food crisis with a $1.5 billion African Emergency Food Production Facility approved by the Group’s executive board last week. Its president, Dr Akinwumi Adesina, said international efforts, including those of the African Development Bank Group, the G20 Common Framework for Debt Treatment, and the $650 billion in Special Drawing Rights issued by the International Monetary Fund, are supporting the continent’s recovery.
However, he said the recovery will still be costly. “Africa will need at least $432 billion to address the effects of Covid-19 on its economies and on the lives of its people — resources it does not have,” Adesina said.
The bank report comes as the head of the World Bank has warned that Russia's invasion of Ukraine could cause a global recession as the price of food, energy, and fertilizer jump.
David Malpass told a US business event on Wednesday that it is difficult to "see how we avoid a recession." He also said that a series of coronavirus lockdowns in China is adding to concerns about a slowdown. His comments are the latest warning over the rising risk that the world economy may be set to contract.
"As we look at the global GDP... it's hard right now to see how we avoid a recession," Malpass said, without giving a specific forecast. The idea of energy prices doubling is enough to trigger a recession by itself."
Last month, the World Bank cut its global economic growth forecast for this year by almost a full percentage point, to 3.2%. GDP, or Gross Domestic Product, is a measure of economic growth. It is one of the most important ways of measuring how well, or badly, an economy is performing and is closely watched by economists and central banks.
It helps businesses to judge when to expand and recruit more workers or invest less and cut their workforces. Governments also use it to guide decisions on everything from tax to spending. It is a key gauge, along with inflation, for central banks when considering whether or not to raise or lower interest rates. Malpass also said that many European countries were still too dependent on Russia for oil and gas. That's even as Western nations push ahead with plans to reduce their dependence on Russian energy.
The theme of the 2022 African Economic Outlook is “Supporting Climate Resilience and a Just Energy Transition in Africa.” It highlights a growing threat to lives and livelihoods in Africa. The Bank launched the report during its Group Annual Meetings in Accra, Ghana. The meetings carry the same theme.
The African Economic Outlook makes it clear that the pandemic and the Russia-Ukraine war could leave a lasting impression over several years, if not as much as a decade. Meanwhile, around 30 million people in Africa were pushed into extreme poverty in 2021 and about 22 million jobs were lost in the same year because of the pandemic. And the trend is expected to continue through the second half of 2022 and on into 2023.
The economic disruptions stemming from the Russia-Ukraine war could push a further 1.8 million people across the African continent into extreme poverty in 2022. That number could swell with another 2.1 million in 2023. The continent’s additional financing needs for 2020-22 are estimated at $432 billion. Financing African countries’ nationally determined contributions—public pledges from countries on how they plan to play a part in post-2020 collective action on climate change—will require up to $1.6 trillion between 2022 by 2030.
The least emitter of climate forcing emissions, Africa is disproportionately affected by climate change. The continent loses between 5% to15% of gross domestic product to climate change. Collectively, African countries received only $18.3 billion in climate finance between 2016 and 2019. This leaves a climate finance gap of up to $127.2 billion annually from 2020 to 2030.
Acting Chief Economist and Vice President Kevin Urama said: “Climate change is the most existential challenge to Africa's development today. Finding policies that address climate adaptation and mitigation of greenhouse gas emissions while ensuring social and economic development is one of the most enduring policy challenges of our time,” says Urama. He adds: “The African Economic Outlook report 2022 provides evidence-based policy options for driving inclusive growth by building climate resilience and a just energy transition in Africa.”
The report estimates that Africa will have a carbon credit of up to $4.8 trillion by 2050, based on the current social cost of carbon. The report underscores Africa’s vulnerability to climate change. In 2020 and 2021, Africa recorded 131 extreme-weather, climate change-related disasters.
The report calls on the international community to meet commitments such as the $100 billion annual financing promised by rich nations to support climate action in developing countries. It records the billions of dollars lost to climate events each year in Africa, as well as the economic prospects of green growth. It suggests, for example, that Africa could gain about 20.5 million more jobs by 2050 if the world adjusts its energy consumption and manages to maintain global warming at 1.5 degrees Celsius above pre-industrial levels.
The 2022 African Economic Outlook proposes a series of policy recommendations to build back better and engender resilient economies in Africa. Proposals include speeding up Covid-19 vaccination and delivering strong support to domestic pharmaceutical industries; reducing reliance on single food sources; and revisiting global debt frameworks.
The 2022 African Economic Outlook theme also ties in with the United Nations Climate Conference, COP 27, also known as the “African COP,” which Egypt will host in November. It will be the first time in five years that the United Nations climate conference will be held in Africa, and it comes as the continent faces an alarming increase in climate-related disasters.
The African Development Bank Group is Africa’s premier development finance institution. It comprises three distinct entities: the African Development Bank (AfDB), the African Development Fund (ADF) and the Nigeria Trust Fund (NTF). On the ground in 41 African countries with an external office in Japan, the Bank contributes to the economic development and the social progress of its 54 regional member states