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

Africa is in danger of slipping into stagnant inflation – 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 war in Ukraine, the African Development Bank said on Wednesday. AfDB), according to Reuters.

Despite experiencing relatively low mortality rates compared to the more developed regions, Africa has been hit hard by the coronavirus pandemic.

While in 2021 there was a recovery across the continent, with GDP growth estimated at 6.9% after a 1.6% contraction caused by the pandemic last year, the Bank predicts that real GDP growth will slow down at 4.1% this year.

“The slowdown in growth highlights the seriousness of the impact of the Russia-Ukraine war on the African economy,” AfDB said in the African Economic Outlook 2022.

“If the war continues, Africa’s growth is likely to remain stagnant at around 4% in 2023,” he added.

Meanwhile, inflation is expected to rise to 13.5% this year, from 13% in 2021, due to the sharp rise in energy and food prices due to the war in Ukraine.

The AfDB estimates that some 30 million Africans have been plunged into extreme poverty and 22 million lost their jobs in the pandemic alone last year.

Vulnerable people, especially in urban areas, will bear the brunt of rising prices, the bank said in a report, adding that the economic turmoil resulting from the war could lead an additional 4 million people to extreme poverty this year and next year.

“In the absence of mitigation measures, this could spark social tensions across the continent,” the report said. “But in many African countries, fiscal space remains limited by the effects of the pandemic.”

AfDB forecasts that Africa’s debt-to-GDP ratio will stabilize 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 .