Africa risks sliding into stagflation – a cycle of slow growth and high inflation – as it battles the lingering effects of the pandemic and rising fuel and food prices caused by the Ukraine conflict, the African Development Bank (AfDB) said on Wednesday.
Despite experiencing relatively low death rates compared to more developed regions, Africa was dealt a heavy economic blow by the COVID-19 pandemic.
While 2021 saw a continent-wide rebound, with gross domestic product (GDP) growth estimated at 6.9% after a pandemic-induced contraction of 1.6% the previous year, the Bank projects real GDP growth to slow to 4.1% this year.
“The deceleration in growth highlights the severity of the impact of the Russia–Ukraine conflict on Africa’s economy,” the AfDB wrote in its 2022 African Economic Outlook.
“If the conflict persists, Africa’s growth will likely stagnate at around 4 per cent in 2023.”
Inflation is expected to accelerate to 13.5% this year, from 13% in 2021, due to a sharp rise in energy and food prices linked to the war in Ukraine.
The AfDB estimates around 30 million Africans were pushed into extreme poverty, and 22 million lost their jobs last year alone due to the pandemic.
The report said that vulnerable populations, particularly in urban areas, will bear the brunt of rising prices, adding that economic disruptions stemming from the war could tip nearly 4 million more into extreme poverty this year and next.
“In the absence of measures to cushion the impact, this could stoke social tension across the continent,” the report stated. “But in many African countries, fiscal space remains constrained by the effects of the pandemic.”
The AfDB forecasts Africa’s debt-to-GDP ratio to stabilise at around 70%, down slightly from 71.4% in 2020, due to last year’s growth recovery and debt relief measures but will remain above pre-pandemic levels.