As the Russia-Ukraine crisis protracts, the odds of a reinforced global economic recovery have been further setback. Intensified global supply-demand imbalances have prompted a shift in global monetary policy stance, as inflationary pressures continue to tick higher. Unfortunately, the tighter monetary stance poses downside risks to economic growth prospects as credit conditions tighten both globally and locally. This has prompted the downward revision of growth projections for a number of economies, especially those hit by twin shocks of delayed economic recovery and blistering inflation. But this is not likely to be the case for commodity exporters.
The economic outlook for commodity exporters in the Middle East and in Africa received a boost from the surge in energy and food prices. While the projection for Sub-Saharan Africa’s (SSA) growth was retained at 3.8% for 2022 in the International Monetary Fund’s April outlook, the projection for the Middle East and Central Asia group – which consists of a number of oil-producing states – was reviewed upwards to 4.6% from their 4.1% projection in October 2021. This reflects the positive knock-on effects the commodities windfall will have on the economies of commodity exporters.
In the SSA, while the sub-region’s 2022 projections have remained relatively flat countries’ economic fortunes have been re-aligned to the prevailing global dynamics. Tourism-intensive economies like Seychelles, Mozambique, Cape Verde, Ghana, South Africa, Tanzania, Kenya, and Rwanda, among others, whose earlier optimistic projections rode on the anticipated recovery in tourism across the continent have seen their projections lowered. While global tourism has recovered from pandemic lows, it remains significantly below pre-pandemic levels and its recovery in Africa lags that of other sub-regions.
The Tourism Barometer of the United Nations World Tourism Organization (UNWTO) noted that while Africa saw a 12% increase in arrivals in 2021 compared to 2020, other sub-regions outperformed – including the Caribbean (+63% above 2020), Southern Mediterranean Europe (+57%), Central America (+54%), North America (+17%) and Central Eastern Europe (+18%). This points to a delayed recovery in African tourism as the region’s COVID-19 vaccination rate remains low relative to other regions. Therefore, Africa’s tourism-intensive economies could see slower growth in 2022.
Besides the dim tourism outlook, downgrades in the economic expectations for some other African economies reflect the impact of natural disasters or political crises in impairing productivity. Mali, Sudan, Guinea, and Burkina Faso – who had experienced coup d’états in the past year – are among the countries that saw the most downgrades. Similarly, political protests in Libya compelling a force majeure on its National Oil Corporation (NOC), and a severe drought that has hit Morocco are constraining the outlook for both countries.
Unlike their bleakened North African counterparts, Egypt and Algeria are riding on the optimism from higher energy prices, thanks to their crude petroleum exporter status. So are Equatorial Guinea, Chad, Nigeria, and Angola. Metal exporters like Zambia (copper), the DRC (copper), Zimbabwe (gold), and Niger (gold) also got a boost in their outlook as the commodities price rally persists. Though a major metals exporter, the lagging recovery in tourism could weigh on South Africa’s economic performance.
As geopolitics continues to take center stage in the global economy, country economic fundamentals will continue to re-align in line with the resulting trends. In Africa, many countries will be facing a stagflation scenario for a long time, especially as the Russian offensive in Ukraine protracts. Although, the commodities windfall bodes well for Africa’s fiscal and external sector the prevalence of energy and food subsidies in some countries will erode some or all of those gains, while the non-subsidizing countries have to contend with high inflation levels.