The COVID-19 pandemic inflicted high and rising human costs worldwide, and the necessary protection measures severely impacted economic activity. As a result of the pandemic, the global economy was projected to contract sharply by –3% in 2020, much worse than during the 2008/2009 financial crisis.
In a baseline scenario, which assumed that the pandemic would fade in the second half of 2020 and containment efforts be gradually unwound—the global economy was projected to grow by 5.8% in 2021 as economic activity normalizes, helped by policy support. Because the economic fallout was acute in specific sectors, policymakers implemented substantial targeted fiscal, monetary, and financial market measures to support affected households and businesses domestically.
Internationally, strong multilateral cooperation was essential to overcome the effects of the pandemic, including helping financially constrained countries facing twin health and funding shocks, and channeling aid to countries with weak health care systems (IMF, April 2020).
The global economy grew at 2.9% in 2019, 0.6% lower than the growth registered in 2018 (IMF, 2020). In 2019, the USA economy grew at 2.3% in 2019, 0.6% lower than the growth registered in 2018 where the economy of the United Kingdom grew by 1.4% up from 1.3% in 2018, and that of China by 6.1% in 2019, 0.6% lower than the growth registered in 2018.
In contrast, the global economy grew at 3.6% in 2018, 0.2% lower than the growth registered in 2017 and all advanced economies experienced sluggish growth over the year with exception of the United States of America (USA) (IMF, 2019).
In the UK, the sluggish growth in 2018 and 2019 was as a result of the continuing uncertainty over the ‘No Deal Brexit’, which was passed by the UK in 2020.
China experienced slower growth in 2018 and 2019 compared to 2017 mainly as a result of the trade war with the USA and declining manufacturing output. Some of the factors that led to sluggish growth were addressed in 2020 e.g. a Brexit Deal was reached; US, Mexico and Canada signed a new trade deal code-named USMCA replacing the 25-year old NAFTA. USA and China signed phase one trade agreement in January 2020 and there is optimism that USA-China trade war will soon be fully resolved by signing phase two USA-China trade agreement whereas the USA policy on Iran continues to worsen.
The table below provides a summary of global output growth over the period 2014-2019 and projects for 2020 and 2021.
Summary of Global Output Growth 2014-2021 (% change)
|Emerging Markets and Developing Economies
|Middle East and North Africa||2.7||2.3||3.9||2.5||1.0||0.3||-3.3||4.2|
|Sub -Saharan Africa||5.1||3.3||1.4||2.7||3.3||3.1||-1.6||4.1|
Source: IMF, World Economic Outlook, April 2019 and April 2020; 2020 and 2021 are year over year projections.
Since 2014, Africa’s growth has slowed down from a decadal average of 5% to around 3%. This moderate growth continued in 2019, stabilizing at 3.4%, the same as in 2018.
Growth is forecast to pick up to 3.9% in 2020 and 4.1% in 2021(AfDB, 2020). In 2019, East Africa was the fastest growing region, and North Africa continued to make the largest contribution to Africa’s overall GDP growth, due mainly to Egypt’s strong growth momentum. Six African countries were among the world’s 10 fastest-growing economies: Rwanda at 8.7%, Ethiopia 7.4%, Côte d’Ivoire 7.4%, Ghana 7.1%, Tanzania 6.8%, and Benin 6.7%.
For Burundi, the economic recovery strengthened in 2019 (3.3% growth in real GDP) on the back of higher coffee exports, a slight increase in public investment, and a particularly good year for agricultural production. The fiscal deficit rose to 4.2% for 2019, after 3.3% in 2018, mainly due to an increase in recurrent expenditures that was not offset by good performance in tax collection. The deficit has been financed through increased recourse to central bank advances and the accumulation of domestic payment arrears. The risk of debt distress remains high (63.5% of GDP in 2019 compared with 58.4% in 2018) because of increased domestic debt. In inflation, the fall starting in 2018 (from 16.1% in 2017) continued in 2019, with a rate of –3.1% (food prices dropped almost 11%).
Real GDP grew by an estimated 5.9% in 2019, driven by household consumption and investment on the demand side and services on the supply side (such as public administration, information technology, finance and insurance, and transport and storage). GDP was down from 6.5% in 2018, caused mainly by unfavorable weather and reduced government investment. At 5.2%, inflation remains within the central bank’s 5 ± 2.5% target band.
Real GDP of Rwanda was estimated to grow at 8.7% in 2019, higher than the regional average. Growth was mainly in services (7.6%) and industry (18.1%), particularly construction (30%). Investment drove growth, led by public investment in basic services and infrastructure. Real GDP per capita increased 6.1% in 2019. Inflation moved up slightly to 1.6% in 2019, driven by increased domestic demand.
Real GDP growth of South Sudan was an estimated 5.8% in 2019, a large increase from 0.5% in 2018. The 2019 rebound was driven mainly by reopening some oil fields, including those in Upper Nile state, and resuming production, and by the peace agreement signed in September 2018. The oil sector remains the key driver of the economy, followed by services and agriculture. Inflation fell to 24.5% in 2019 from 83.5% in 2018 due to reduced financing of the fiscal deficit.
Real GDP growth of Tanzania was estimated at 6.8% in 2019, down slightly from 7% in 2018. A markedly diversified economy, characterized by robust private consumption, substantial public spending, strong investment growth, and an upturn in exports underpinned the positive outlook. Tourism, mining, services, construction, agriculture, and manufacturing are notable sectors. Growth is projected to be broadly stable at 6.4% in 2020 and 6.6% in 2021, subject to favorable weather, prudent fiscal management, mitigation of financial sector vulnerabilities, and implementation of reforms to improve the business environment. Inflation fell to an estimated 3.3% in 2019 from 3.6% in 2018 due to an improved food supply.
The Ugandan economy reported strong growth in 2019, estimated at 6.3%, largely driven by the expansion of services. Services growth averaged 7.6% in 2019, and industrial growth 6.2%, driven by construction and mining. Agriculture grew at just 3.8%. Retail, construction, and telecommunications were key economic drivers. Inflation is expected to remain below 5%, strengthening the domestic economy.