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SSA Economic Update- Q3'2021

So far, Africa has been under the global radar as the continent battles with health concerns and multiple macroeconomic problems amid limited fiscal and monetary space. Vaccination rate remains low as economies swerve between imposing strict restrictions and relaxing them to douse the socio-economic impact. However, the socio-economic impact of the pandemic has been made glare as social unrest in several economies lead to looting and severe economic losses for the uninsured. While high base effects limited economic expansion in Q1’21, most economies are expected to expand the most in Q2’21 due to underlying favourable base effects. Amid expectations for recovery, a couple of economies have decided to rebase their economies, taking a recount of economic activities to provide better assessment of their economies.

 

In most of these economies, fiscal policy remains constrained by high levels of indebtedness and weak revenue mobilization. While fiscal reforms could have implications for inflation, consumer prices may also be bullied by mounting food pressures and higher transport costs. Higher inflationary pressures may not induce rate hikes yet, unless in economies, where inflation is poorly anchored. However, global developments could warrant rate hikes, should policy normalization begin in the United States.

Health Developments: On the fringes of a fourth wave

 

Africa has seen three waves of the COVID-19 pandemic, with the recent being driven by the contagious Delta variant. According to the World Health Organisation (WHO), cases double every 18 days, a scenario that could deteriorate into a severe humanitarian crisis if proactive steps are not taken. Yet, the continent lags significantly in vaccination as less than 2% of the population has been vaccinated. Worse still, supply challenges have heightened as vaccine nationalism continues to thrive, vaccine donations have been unable to do much in countries with large population sizes. Talks around booster shots in advanced economies could deepen levels of vaccine inequality, as developed nations ramp up demand for vaccines while African economies struggle to inoculate high-priority groups.