Russia-Ukraine presents risk of ‘another recession in Africa’ – UNECA
Omeiza Bilal
The United Nations Economic Commission for Africa (UNECA) has said that the Russia-Ukraine war further increased the debt-service burden of African countries.
In its Economic Report on Africa 2023, titled “Building Africa’s Resilience to Global Economic Shocks”, UNECA added that the situation has also further disrupted global value chains and increased the risk of another recession in many African countries.
The UN agency noted that except for Libya, Niger, Algeria, Côte d’Ivoire, Guinea, Benin, Togo, Zambia, Angola and Ethiopia, where inflation have been stable or declining, others continue to experienced higher inflation since the outbreak of the war in Ukraine, mainly driven by food inflation.
According to the report, other major shocks destabilizing the continent are climate change related with the frequency and severity of climate shocks increasing.
“The impact on GDP growth is large and significant. A 1C rise in temperature above 30C could lead to a 2 percentage point decline in real GDP growth, undermining the gains from positive shocks such as commodity price booms, amplifying the impacts of negative shocks and diminishing domestic resource mobilizations, thus increasing debt,” it said.
UNECA in the report further noted that the economic fundamentals of most African economies have not changed much in the last three decades is a major concern for the continent’s capacity to withstand and recover from shocks.
Accordingly, “Investment, domestic savings, government revenue and economic structure remained unchanged, while urbanization, population density and unemployment are rising.
“Combined with an overstretched resource envelope to mitigate Covid-19, low productivity in agriculture and 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 notes that Covid-19 pandemic had a bigger impact on African economies than the global financial crisis. It is even expected to have long-term effects on the key drivers of growth, trade and capital flows. Thus, per capita GDP declined by about 6 per cent, pushing more than 20 million people into extreme poverty in an unprecedented reversal.
There are fears that a similar trend is expected from the consequences of the war in Ukraine.
“The global economic slowdown, elevated inflationary pressures, climate change and worsening international economic and financial conditions reduced Africa’s growth from 4.6% in 2021 to 3.6% in 2022, but it is projected to rebound to 4.1% in 2023. But the frequency and intensity of multiple shocks could erode economic fundamentals and cause long-term damage that could take years to mend.
“The war in Ukraine indeed hampered recovery from Covid and hit African countries that depend on Russia and Ukraine for imports of oil, fertilizers and grains. It brought soaring inflationary pressure and severe food insecurity and sent many vulnerable people back into poverty. Indeed, in addition to the higher absolute numbers of food insecure people in Africa, the rates of food insecurity are much higher than in other regions: 56% compared with the 28% world average. Food insecurity is most pronounced in Central Africa (72% three-year average over 2019–21) and Eastern Africa (66%),” the report stated.
