Following the negative effect of COVID-19 on African economies in 2020, the world’s leading data and analytics company, GlobalData, has predicted a healthy 3.8 percent growth rate for the African economy in 2021.
In its latest report, GlobalData said growth in Africa will largely be driven by rising global demand as restrictions are eased and more untapped market opportunities open up.
Morocco, Kenya, Ghana, Egypt and South Africa were predicted to emerge as the fastest-growing economies in the region in 2021. All five economies were predicted to grow at above 4 percent real GDP in 2021.
Speaking on African growth, Gargi Rao, an economic research analyst at GlobalData, said “Morocco has been moving ahead in leaps and bounds in recent years, having provided the world with produce following promising agricultural seasons. The country’s expected growth of 5.19 percent was also influenced by its effective vaccination drive, accommodative monetary policies and fiscal stimuli.”
“Strong banking fundamentals and a rise in external demand for commodities is expected to help recovery in South Africa, which is predicted to see 4.09% growth. However, this has been hampered by recent protests in the country. Private consumption growth is to remain the major driver of economic growth in Egypt.”
On Nigeria’s sluggish recovery, the economy is expected to continue at a slower pace of 2.3 percent when compared to other sub-Saharan African nations. This, the report attributed to insecurity, rising food inflation, rising debt service payments and stalled reforms.
In countries like Nigeria, the Nigerian Naira has been devalued four times in the last two years as COVID-19 and other fiscal challenges eroded the nation’s limited foreign revenue and forced Africa’s largest economy to embrace devaluation to protect its dwindling foreign reserves amid heightening capital flights.
FDI inflows declined by 20% in the African region in 2020 due to subdued commodity prices and pessimistic investor sentiment amid the COVID-19 pandemic. However, untapped markets and structural transformation are likely to speed up the momentum in FDI flows in the coming years. With an increase in energy demand anticipated, resource-seeking investments may increase in H2 2021. The importance of regional value chains and full implementation of African continental free trade agreements will create new opportunities for African economies.
Rao added “Significant currency depreciations have occurred in many African countries due to a fall in external financial flows, portfolio investments and a rise in public debt. This may cast a shadow on recovery. However, governments’ focus on counter-cyclical easy monetary policies and fiscal stimulus packages will aid African region’s economic recovery in 2021.”