Sub-Saharan Africa’s economy is set to recover in 2021 – a marked improvement over the extraordinary contraction of 2020, the International Monetary Fund’s (IMF) latest Regional Economic Outlook has reported. The outlook maintained projections that the Rwandan Economy will grow by 5.1 per cent in 2021 after a contraction of 3.4 per cent in 2020. IMF noted that the recovery is buoyed by among other things an improving favorable external environment, including a sharp improvement in trade and commodity prices as well as improved harvests have lifted agricultural production. The agency however noted that the outlook remains highly uncertain as the recovery depends on the progress in the fight against COVID-19 and is vulnerable to disruptions in global activity and financial markets. “At 3.7 per cent this year, the recovery in sub-Saharan Africa will be the slowest in the world—as advanced markets grow by more than 5 percent, while other emerging markets and developing countries grow by more than 6 percent. This mismatch reflects sub-Saharan Africa’s slow vaccine rollout and stark differences in policy space,” Abebe Aemro Selassie, Director of the IMF’s African Department said. The non-resource-intensive countries are growing at a much faster rate than resource-rich countries—a pattern that precedes the crisis and has been amplified by recent events, highlighting fundamental differences in resilience. Abebe expressed concern over widening gaps between countries which has been accompanied by growing divergence within countries, as the pandemic has had a particularly harsh impact on the region’s most vulnerable. “With about 30 million people thrown into extreme poverty, the crisis has worsened inequality not only across income groups, but also across subnational geographic regions, which may add to the risk of social tension and political instability. In this context, rising food price inflation, combined with reduced incomes, is threatening past gains in poverty reduction, health, and food security,” the report read in part. Across the region, public debt is predicted to decline slightly in 2021 to 56.6 per cent of GDP but remains high compared to a pre-pandemic level of 50.4 per cent of GDP. “Half of sub-Saharan Africa’s low-income countries are either in or at high risk of debt distress. And more countries may find themselves under future pressure as debt-service payments account for an increasing share of government resources,” the report further noted. Rwanda’s growth projections are buoyed by scaled-up government spending to accommodate additional spending needs due to the more protracted nature of the pandemic and the need to minimize scarring. It will however require more time, up to 2023, for growth to return to its pre-pandemic. “The authorities’ policy response has remained well-designed and targeted. It aims at swiftly procuring and securing financing for vaccines, increasing fiscal support for households and businesses, and providing sufficient liquidity to the banking system given the protracted nature of the pandemic and the need to minimize any lasting socio-economic impact,” IMF noted. Containing financial sector vulnerabilities, the IMF noted, will be key to safeguarding financial stability as well as intensified monitoring of credit risk, prudent restructuring, and timely recognition of problem loans.
