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Here are the key findings of the 2020 North Africa Economic Outlook report

2020 North Africa Economic Outlook report

The North African Bureau of the African Development Bank has launched the 2020 edition of the North Africa Economic Outlook Report, providing an overview of North African economies, based on a regional approach to development.

“Before the spread of the COVID-19 pandemic at the global level, economic growth in North Africa was expected to rebound to 4.4 per cent and 4.5 per cent respectively in 2020 and 2021. However, the uncertain global environment, the COVID-19 pandemic and the projected contraction in advanced economies will negatively impact the growth forecast for the region,” the report said.

Here are the report’s highlights:

• Among all African regions, North Africa had registered the most important number of COVID-19 confirmed cases as of May 2020.

• The latest projections for 2020 indicate a loss of 5.2 points of growth in the region, from a growth rate of 4.4 per cent to -0.8 per cent if the pandemic were to last until June 2020 (baseline scenario) and a loss of 6.7 points with a growth rate of -2.3 per cent if the pandemic were to perdure until December 2020 (worst-case scenario).

• In 2019, for the second year in a row, North Africa was the second-best performing region in Africa with a growth rate estimated at 3.7 per cent.

• Except for Libya, the service sector contributes the most to GDP in North Africa. This sector is significantly impacted by the COVID-19 outbreak through travel bans, disruption to transport, distribution, hotels and restaurants, entertainment and so on.

• Since 2016, macroeconomic performance has been improving. However, the COVID-19 pandemic and its adverse impact on commodity prices and macroeconomic stability are expected to increase fiscal and current account deficits in North African economies.

• In North Africa reduced access to financial resources represents an important transmission channel of the Coronavirus crisis.

• Over the last decade, the general government debt of North African countries increased, except in Libya.

• In all countries, economic growth has not been inclusive and social and regional disparities remain high. Domestic risks to the outlook include social discontent.

• Countries are confronted with the challenge of making growth pro-employment and offer equal access to social and economic opportunities across regions, particularly in remote and rural areas.

Key Policy Recommendations:

• In North Africa, all countries need to improve business environment competitiveness and implement structural reforms for enhancing public efficiency and allow further development of the private sector. In light of the spread of COVID-19, and its projected impact on regional economies, it’s important that governments allocate adequate resources to deal with the pandemic and mitigate its impact on economic agents.

• North African countries could as Egypt did switch from a model of energy and food subsidies to a model of direct cash transfer to the most vulnerable. In Egypt, Takaful and Karama (“Solidarity and Dignity”) programs were instituted in 2016 and further expanded from 200,000 to 2.3 million households currently benefiting 10 million people.

• Implementation of buffers would prove beneficial given the expected dire impact of climate change on the region. As the world’s most water-scarce region, exacerbated by large-scale irrigation in the agricultural sector, climate change is expected to have severe effects on drought, water supply, food security and tourism, which could, in turn, affect the stability and economic prosperity of the region.

• Overall, the World Bank (2017) estimates that the region will have the greatest economic losses from climate-related water scarcity as a share of GDP by 2050. Investment in climate-resilient agricultural practices is critical given the threats from climate change, which are likely to worsen in thenear future.

• The development of the agribusiness should enhance productivity and address some aspect of regional disparities. Countries should also explore opportunities to reinforce regional integration and trade openness vis-a-vis other African regions, in the framework of the African Continental Free Trade Area.

• Investment in human capital is a necessary condition for the acceleration of economic development. Structural reforms for improving national labour markets and upgrading skills would allow to ease the skills shortage and mismatch in deficit countries.

Editorial Desk at Agrigate.Global

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