Market: Africa at risk of stagflation due to pandemic and war in Ukraine, says AfDB


JOHANNESBURG (Reuters) – Africa risks sliding into stagflation – a cycle of slow growth and high inflation – as it battles the lingering effects of the pandemic and the rise in fuel and food prices caused by the conflict in Ukraine, the African Development Bank (AfDB) said on Wednesday.

While 2021 has seen 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 expects real GDP growth to slow to 4.1% this year.

“The deceleration in growth highlights the severity of the impact of the Russian-Ukrainian conflict on the African economy,” writes the AfDB in the 2022 edition of its annual review, African Economic Outlook.

“If the conflict persists, Africa’s growth is likely to stagnate around 4% 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 that around 30 million Africans have been pushed into extreme poverty and 22 million lost their jobs last year due to the pandemic.

Vulnerable populations, especially in urban areas, will bear the brunt of rising prices, the report says, adding that nearly 4 million more people could be pushed into extreme poverty by the end of next year. .

The report states that, in the absence of measures, social tensions are likely to be stirred up across the continent, but that “fiscal space remains limited by the effects of the pandemic.”

The AfDB expects Africa’s debt-to-GDP ratio to stabilize around 70%, down slightly from 71.4% in 2020, due to renewed growth and debt relief measures from last year, but will remain above pre-pandemic levels.

(Report Joe Bavier; French version Augustin Turpin, edited by Jean-Michel Bélot)

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