The 2023 Economic Report on Africa themed “Building Africa’s Resilience to Global Economic Shocks” focuses on the impact of multiple and recurring global shocks on African economies. It examines how these shocks undermine Africa’s prospects of reaching the targets set in the Sustainable Development Goals (SDGs) and how to achieve inclusive economic transformation and build resilience.
Over the past few decades, economic performance has been shaped by shocks of varying magnitude, duration, and recurrence. The polycrises that include the climate change induced shocks, the repercussions of the COVID-19 pandemic, and the ripple effects of the Russian invasion of Ukraine have caused Africa to regress or stagnate on the SDGs targets. More than 30 million Africans were forced into extreme destitution in 2021, and 22 million jobs were lost. The ongoing war in the Ukraine prolongs uncertainty and fears of food insecurity in Africa and internal conflicts and risks have left several African countries more vulnerable and less resilient to manage current and future shocks.
The multiple shocks have also had scarring effects that make it difficult for African economies to recover fully even after a short-lived shock such as the global financial crisis. More important, their damage could morph into other domains such as political instability and conflict, thus undermining recovery and the resilience to future shocks.
Given the external nature and depth of these polycrises, growth and fiscal space in many African countries remain constrained. Combined with an overstretched resource envelope to mitigate Covid-19, low productivity in agriculture, persistent trade barriers in the region, financing for recovery has become increasingly difficult. And countries are struggling to find the resources necessary to respond to shocks. The level of debt in developing countries has increased, and the cost of borrowing has risen.
The report therefore calls for new approaches for African countries to address challenges of global economic shocks. The report calls for improving risk management and building resilience strategies through well-designed national development plans and good governance, as well as structural transformation through equitable green growth and smart industrial strategies. Forging a new global cooperation framework and acceleration of the African Continental Free Trade Area (AfCFTA) could enhance collaboration and integration among African countries, enabling risk pooling and management.
The report also proposes the development of robust resource mobilization strategies to finance sustainable development. These strategies include strengthening the tax system, stemming illicit financial flows, establishing verifiable measures to improve debt management, diversifying financial instruments to finance long-term investment and reforming the global financial architecture to ensure a more equitable and representative international system. The continent also needs to implement pandemic prevention and early warning systems to face future shocks and build resilience.