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The World Bank has said governments in Sub-Saharan Africa (SSA) need to prioritize policy reforms and investments to foster a strong economic recovery from next year following an expected contraction of 3.3% in 2020 – the regional economy's first-ever recession in 25 years. The predicted level of economic activity in SSA in 2020 and policy recommendations are contained in the latest Africa’s Pulse, a World Bank biannual analysis of the macroeconomic outlook for the region, released on Thursday.

After expanding by 2.4% in 2019, the report shows a sharp decline in SSA's economic activity this year due to the COVID-19 pandemic and the related containment measures, which caused a faster decline in imports, lower domestic consumption and investment. Nigeria, the largest economy in Africa is projected to see a gross domestic product (GDP) contraction of 6.1% in 2020, according to the report, titled Africa’s Pulse: Charting the Road to Recovery.

This estimate is higher than the International Monetary Fund's estimate of 5.4% contraction for Nigeria this year. It is also a sharper contraction compared to the –3.2% GDP growth projected in the World Bank Nigeria Development Update (NDU) published earlier in June.

South Africa, the region's second largest economy and the worst hit by the pandemic, is expected to fall by 17.1% in 2020, compared to a GDP growth of 0.15% last year. Nigeria recorded a GDP growth of 2.2% in 2019.

According to the latest Africa’s Pulse, the pandemic could also push up to 40 million more people into extreme poverty in Africa in 2020, thereby erasing at least five years of progress in fighting poverty.      

“There’s no escaping the economic impact that COVID-19 has had on the sub-region, but accelerating reforms is one way to be in the best possible position post-pandemic,” said Hafez Ghanem, World Bank Vice President for Eastern and Southern Africa.  

The report recommends that governments should seize the opportunity within the crisis to develop policies and prioritize investments that build greater resilience, boost productivity and generate jobs. But growth alone is not enough, according to Albert Zeufack, World Bank Chief Economist for the Africa regions. The Cameroonian economist calls for investments to create “better and inclusive jobs.”

To end extreme poverty, particularly post-COVID-19, authors of the report recommend that governments should aim to prioritize and support policies and investments that focus on connecting people to job opportunities.

According to Ousmane Diagana, World Bank Vice President for Western and Central Africa, “The recovery journey will be difficult, but without the advancement of structural reforms, robust growth post-pandemic will be even more challenging.”

The report also recommends effective regulation to expand digital infrastructure and make connectivity affordable, reliable and universal. The authors noted that the SSA region still lags behind other regions of the world in terms of digital technologies.

Other areas highlighted for policy consideration in the report include sectoral reallocation policies, to foster the shift from exporting raw materials to greater value addition and intra-Africa value chains. The African Continental Free Trade Area (AfCFTA) has an important role to play in this regard by reducing production costs associated to tariffs, non-tariff barriers and trade facilitation problems.
     
Other areas for intervention are spatial integration policies to foster agricultural productivity and reallocate resources to more efficient job-creating locations through enhanced rural-urban and inland-coastal connectivity and investing in cities.

The report predicts the SSA region will rebound in 2021, although the pace of recovery would vary for the different sub-regions. Eastern and Southern Africa region is forecast to record average 2.7% GDP growth, while the Western and Central Africa region is expected to post an average growth of 1.4% next year.