ECA’s Economic Report on Africa addresses continent’s vulnerability during Covid-19
The disruptions caused by the Covid-19 pandemic pushed an estimated 55 million Africans into extreme poverty in 2020 and reversed more than two decades of progress in poverty reduction on the continent.
This is according to the Economic Report on Africa 2021(ERA2021) launched Sunday on the margins of the Economic Commission for Africa’s annual Conference of Ministers of Finance, Economic Planning and Development (CoM2022) in Dakar, Senegal.
With a title: “Addressing Poverty and Vulnerability in Africa during the COVID-19 Pandemic”, the report shows that pandemic has caused job losses, reduced income and further limited the ability of households to manage risks. An estimated 12.6 per cent more people are likely to be pushed into poverty in one year alone more than the combined total of the additional poor since 1999.
Furthermore, poor households move into and out of poverty because of exogenous shocks like the COVID-19 pandemic and that their inability to manage uninsured risks only increases their vulnerability. So, achieving sustained poverty reduction requires thoroughly understanding the nexus of poverty, risks and vulnerability.
“Under current projections, the pandemic is likely to increase the number of people living in extreme poverty, in Africa and globally,” says the report.
The report was produced by ECA’s Strategic Planning, Oversight and Results Division; the Gender, Poverty and Social Policy Division; and the Macroeconomic and Governance Division.
Hanan Morsy, ECA’s Deputy Executive Secretary said the report analyses the implication of covid-19 in terms of poverty, but brings a new dimension stressing the vulnerability in Africa. It brings the element of people centric analysis of what has been happening during COVID-19 and what we need to do to ensure that the vulnerable population are protected in terms of social safety net and putting up the right policies.
“This report is particularly relevant given to what we have seen as the implications on the continent. The most critical implication of COVID-19 has been the reversal of the very hard-won gains that the continent had managed to achieve in reducing poverty,” said Ms. Morsy.
While presenting the key findings of the report, Adrian Gauci, an Economic Affairs Officer at ECA said African countries responded to the poverty effects of the Covid-19 pandemic in part through expansionary fiscal and monetary policies to maintain consumption and aggregate demand and prevent firm closures and job losses.
“A major contribution of the report is the emphasis on the centrality of risk and vulnerability to shocks in the design of poverty reduction strategies in Africa,” said Mr. Gauci.
“The report calls for an urgent need to explore innovative and affordable market-led insurance schemes which can insure the poor from future shocks. Collaboration of governments with the private sector is paramount.”
The African Continental Free Trade Area (AfCFTA), the report says is an opportunity to build forward better Most African countries still depend on exports of raw materials and on imports of essential goods such as food items and pharmaceuticals.
“If AfCFTA is effectively implemented, intra-Africa trade is expected to be about 35 percent higher than without the grouping by 2045,” says the report.
“The AfCFTA would help Africa industrialize and diversify, reducing trade dependence on external partners and boosting the share of intra-Africa trade from roughly 15 percent today to over 26 percent.”
The key highlights of the report are on the economic trends, monetary policy performance, exchange rate, fiscal deficit and external debt and Africa’s trade trends.
The Covid-19 pandemic has heavily disrupted the movement of people; goods, services and capital, and its impacts led Africa’s GDP to contract by an estimated 3.2 percent in 2020. The pandemic is expected to weigh further on already slow economic growth.
Monetary policy performance
In 2018 and 2019, before the Covid-19 pandemic, most African countries had accommodative monetary policy as inflation remained stable or declined.
Exchange rate performance
In 2019, many African countries experienced exchange rate volatility as their currencies depreciated, mainly on trade-related uncertainties and capital outflows, as well as country-specific factors such as widening fiscal deficits, declining foreign exchange reserves and lower capital inflows.
Rising fiscal deficits and external debt
Africa’s fiscal deficit narrowed from 5.3 percent of GDP in 2017 to 3.0 percent in 2019, mainly because of government fiscal consolidation efforts.
Africa’s trade trends
The share of global exports decreased from 2010 to 2019 in Africa but increased in other global regions. The continent’s share fell from 2.48 per cent in 2019 to 2.14 per cent in 2020, though Asia and Europe were resilient, owing partly to continued supplies of consumer goods and medical goods during the COVID-19 pandemic.
The report recommends that African governments should adopt targeted social protection; provide short-term social assistance to the most vulnerable people; ensure health protection for all.
Over the longer term, African countries need to build resilience by investing in health protection for all, which also offers high potential for employment creation; build a national and regional health emergency preparedness and response system for future pandemics; build domestic capacity for vaccine production through initiatives such as the Partnerships for African Vaccine Manufacturing; Leverage the African Continental Free Trade Area and other Africa-wide initiatives to create decent jobs and reduce poverty.