United Nations has warned that Nigeria and other Africa are prone to severe debt crises unless urgent steps are taken to avert the threatening crises. It said that Nigeria’s GDP is projected to expand by just 1.5 per cent in 2021, after a contraction of 3.5 per cent in 2020. Yet, the UN said that tighter foreign exchange liquidity, mounting inflationary pressures and subdued domestic demand cloud Nigeria medium-term outlook. It also said that in South Africa, GDP is projected to expand by 3.3 per cent in 2021, after a contraction of 7.7 per cent in 2020. The UN also projected that a strong and sustained recovery remained uncertain, amid power shortages, elevated public debt and policy challenges. Egypt’s GDP was estimated to have grown by 0.2 per cent in 2020; and in 2021.
GDP growth is projected to climb to 5.4 per cent, underpinned by a strong recovery of domestic demand and facilitated by the absence of severe balance-of-payments constraints.
Also, after a contraction of 0.5 per cent in 2020, the Ethiopian economy is projected to expand by only 2.3 per cent in 2021. The UN said that while agricultural exports were showing resilience, the tourism sector would remain restrained throughout 2021. Generally, after a contraction of 3.4 per cent in 2020, Africa is projected to achieve a modest recovery, with regional GDP expanding by 3.4 per cent in 2021. The UN report said this recovery was predicated on the rise of domestic demand and the pick-up of exports and commodity prices because external financing and high debt levels posed major risks. The UN said elevated public debt was limiting the capacity to boost spending across the continent. Also, meagre growth prospects meant less capacity to sustain debt levels, as foreign reserves, remittances and capital flows falter and depreciations constrain the capacity to service foreign currency-denominated debts.
The UN also said that African countries needed further support from the international community and strong national efforts in averting a debt crisis, which would not just cause a further economic deterioration, but also force painful fiscal adjustments. Against such a backdrop, the report warned that social unrest and political tensions may easily escalate, which could, in turn, worsen food insecurity, violence, internal displacement and migration pressures.
African countries need strong policies and further support from the international community to avert a debt crisis and protracted low growth, says the United Nations. In a statement issued by the UN Department of Global Communications, the global body warned of the devastating socio-economic impact of COVID-19. The report was jointly signed by Devi Palanivelu, UN Department of Global Communications; and Helen Rosengren, UN Department of Economic and Social Affairs. It said that the impact of the pandemic would be felt for years to come, unless smart investments in economic, societal and climate resilience were made to ensure a robust and sustainable recovery of the global economy.
The UN said that despite the relatively few number of cases compared to the number of cases in other continents, the COVID-19 pandemic would continue to strongly impact on living conditions and development progress in Africa. It said the crisis was already increasing unemployment, poverty and inequality, such that most countries were already facing enormous challenges to keep the pandemic under control and mobilise financial resources to support health systems, protect vulnerable groups, and support the recovery. Hamid Rashid, Chief of the Global Economic Monitoring Branch at the UN Department of Economic and Social Affairs, and the lead author of the report, said that Africa was in need of a sustained revival of growth.
“While a focus on the short term is essential, African countries need to lay the groundwork for a strong and inclusive development path in the medium term, which entails the creation of decent jobs at a large scale.
“As countries will emerge from the crisis with higher levels of debt, a careful rebalancing of policy priorities will be required to build resilience and boost productivity. This includes unlocking growth opportunities and accelerating technology adoption and bridging digital divides, enhancing climate resilience and boosting domestic revenue mobilisation,” Rashid said. The report also highlighted the need for African countries to prioritise the diffusion of digital technologies; supported by the expansion of affordable and universal digital infrastructure. It added that an effective framework for the implementation of the African Continental Free Trade Area (AfCFTA) could also become a major tool for promoting intra-African trade, food security and productivity.
“We are facing the worst health and economic crisis in 90 years. As we mourn the growing death toll, we must remember that the choices we make now will determine our collective future,” said UN Secretary-General António Guterres, who addressed the Davos Agenda on Wednesday. Let’s invest in an inclusive and sustainable future driven by smart policies, impactful investments, and a strong and effective multilateral system that places people at the heart of all socio-economic efforts,” Guterres said. The report, however, underscored that sustained recovery from the pandemic would depend not only on the size of the stimulus measures, and the quick rollout of vaccines, but also on the quality and efficacy of these measures to build resilience against future shocks.
