COTE D’LVOIRE, West Africa – Real gross domestic product growth in North Africa was largely negative in 2020, at -1.1 percent with a -5.1 percentage point drop over 2019, the African Development Bank’s 2021 edition of the North Africa Economic Outlook reports.
Released on November 3, the report finds that in 2020, North African economies experienced three shocks: the Covid-19 pandemic, a collapse in oil prices and a steep drop in tourism. Growth was also cut short due, in part, to sharp contractions in the region’s main trading partners. This output loss was found to be less severe than projected on account of prompt interventions by governments to mitigate the impacts of the pandemic.
Egypt managed to achieve positive growth (+3.6%), one of the few countries in the world to do so in 2020. On the other hand, Libya’s economy contracted by -60.3 percent, Tunisia’s by -8.8 percent, Morocco’s by -7.1 percent, Algeria’s by -4.6 percent, and Mauritania’s by 3.6 percent.
Overall, macroeconomic variables of regional countries deteriorated. The average fiscal deficit nearly doubled (from 5.7% of GDP in 2019 to 11.6 % in 2020) and the current account deficit extended from 4.9 to 8.8 percent of GDP.
The report notes that the Covid-19 pandemic has markedly reduced North African countries’ resilience. The crisis has also significantly eroded fiscal space. Amid prospects for a protracted recovery in key sources of income for the region – oil and tourism – oil exporters faced a double impact brought about by lockdowns and severe oil market fluctuations. This was particularly the case for Libya.
The report finds that if the pandemic continues into 2022 and beyond, some countries will likely face liquidity problems in servicing their debt repayments. Over the period 2021-23, North Africa’s financing needs are estimated to exceed $180 billion to adequately respond to the crisis and support the recovery. Strained fiscal positions will limit government support measures in many countries. Much more emphasis will be placed on ambitious reforms to rekindle robust, sustainable, equitable growth while avoiding further deterioration of fiscal and debt.
In the short term, the report proposes various measures for damage management. The African Development Bank recommends, among other things, limiting the spread of Covid-19, providing relief for vulnerable populations, overcoming vaccine-related challenges, and developing capacity for debt sustainability analyses.
Some of the medium-term proposals include investing in digitalization, supporting small and medium enterprises, and enhancing domestic resource mobilization. Economic and export diversification requires attention in the long term, along with investing in public goods to ease regional disparities and foster inclusive growth. The report also calls for the deepening of regional integration in the context of the African Continental Free Trade Area agreement.
