While leading economists warn that the looming global recession will impact on the economies of struggling African countries, they are not too pessimistic.
This as African countries are expected to shoulder the greatest impact of a global recession as they are highly depended on foreign investment, international trade and imports, and they have been knocking on doors of multilateral finance institutions more than other regions to survive.
At the World Economic Forum (WEF) Annual Meetings 2023 yesterday, a group of economists discussed the precarious outlook for the global economy in 2023 on the back of a persistent Covid-19 pandemic, the war in Ukraine, and rising costs of living.
The group was unanimous that even though a global recession was forecast for this year, it would be a “shallow recession” instead of a “deeper” one that could be catastrophic for African economies.
ADP Research Institute’s chief economist Nela Richardson, however, warned that though this might be the case, the recession would have widespread crippling economic growth impact.
“I do think that the recession will be shallow in most parts of the world, but what would be persistent is slow growth. And that really, in my mind, is even worse than recession because slow growth can last for a very long time,” Richardson said.
“When I think about the impact on the continent, if you look at the three drivers of what could be recessionary - it’s the war in Ukraine, it’s higher interest rates policy that slows growth in advanced economies, and it’s the Covid-zero policy.
"So, near-term, some of these risks are a spillover [but] long-term, I think there is a positive outlook and encouragement in terms of how the world restructures itself post the pandemic.”
On Monday, the WEF 2023 Chief Economists’ Outlook warned that many aspects of the outlook remained gloomy although there were some grounds for optimism later in the year, such as easing inflationary pressures.
The report said that nearly two-thirds of respondents surveyed considered a global recession to be likely in 2023, including 18% who consider it extremely likely, more than twice as many as in the previous survey in September 2022.
Former Reserve Bank of India’s governor, Raghuram Rajan, yesterday said that highly industrial countries had a duty to assist developing countries to ride the recession wave as they were still struggling to recover from the pandemic and natural disasters caused by severe climate change.
Rajan said the main issues in Africa were fuel, food and interest rates.
“All three are impacting African countries and I think it’s difficult at these times. This is where China with its commodity intensity can help the commodity producers, but it can hurt the commodity users. You have both in Africa,” Rajan said.
“I think it’s going to be a tough time. What is important is for the developed world to pay attention to what is going on elsewhere. I think there are huge forces under play, and we have already talked about climate change.
“Developing countries have had a bad pandemic, add to that the forces of climate change, the impulse then is to migrate, and of course there is very little receptivity to migration in industrial countries. So we are in a very volatile situation and that is why it is important to pay attention to what is going on, and to help where possible perhaps through financial means.”
BUSINESS REPORT