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The UN's latest report strikes a more positive note if commodity prices hold up and there is more flexibility on debt
This year's rebound in commodity prices and the fact that Africa's public health systems have experienced far less pressure from the pandemic than initially feared are two glimmers of light for the region's economy according to the report from United Nations Conference on Trade and Development published on 18 March.
However, 'commodity dependence, heavy reliance on capital inflows, and low rates of capital formation continue to make for a fragile growth trajectory', it says.
Data in the UNCTAD research shows Africa's two leading economies – Nigeria and South Africa, which make up all most half the continent's total GDP – will have to wait until 2022 at the earliest to return to pre-pandemic levels. This will have critical regional implications, including on the pace at which the just launched African Continental Free Trade Area (AfCFTA) can develop.
South Africa's economy is expected to grow by 3% in 2021 which will still leave output at the same level as 2015. Its already struggling construction industry bore the brunt of the slowdown with a 20% drop.
Nigeria's output, meanwhile, is expected to grow by 1.5%, against its 1.9% contraction last year. That means heavy losses on a per capita basis for most of the country's 210 million people.
The unresolved matter of the growing debt service burden will prove critical this year, UNCTAD says. The report warns that 'large debt overhangs' pose a 'very serious constraint on sustained recovery, in the absence of appropriate multilateral support.'
Analysts expect the United States to back a $500 billion issuance of International Monetary Fund Special Drawing Rights at the upcoming Group of 20 meeting but UNCTAD believes that this, combined with the G-20's Debt Service Suspension Initiative (DSSI), won't be enough to avoid Angola and Congo-Brazzaville joining Zambia in having government-debt-to-GDP over 100% and facing debt distress by the end of the year.
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