Sub-Saharan Africa

Macro Poverty Outlook
Country-by-country Analysis and Projections for the Developing World

SpringMeetings
2021

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Sub-SaharanAfricaAngolaBenin
Botswana
Burkina Faso
BurundiCabo Verde
Cameroon
Central African Republic
Chad
Comoros
Congo, Dem. Republic
Congo, RepublicCôte d'Ivoire
Equatorial Guinea
Eritrea
Eswatini
Ethiopia
Gabon
The Gambia
Ghana
GuineaGuinea-Bissau
Kenya
Lesotho

MPO 201 Apr 21

Liberia
Madagascar
MalawiMali
Mauritania
Mauritius
Mozambique
Namibia
Niger
Nigeria
RwandaSão Tomé and Príncipe

Senegal
Seychelles
Sierra Leone
SomaliaSouth Africa
South Sudan
Sudan
Tanzania
Togo
UgandaZambiaZimbabwe

ANGOLAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

Angola’s oil- and public investmentdriven growth model has been exhausted, but inclusive, diversified, private
sector-led growth is yet to emerge. Since
oil prices declined in 2015, Angola’s real
GDP has shrunk by a cumulative 9.5
percent, with GNI per capita (in dollar
terms) cut in half.
Before 2015, Angola’s growth model
resulted in an overvalued exchange
rate, excessive debt, and an economy
dominated by State-owned enterprises.
While growth was high at 8.2 percent
from 2004 to 2014, growth in non-oil
sectors was stunted. As lower oil prices
resulted in a prolonged recession andthe exchange rate depreciated rapidly
after moving to a float in 2018, half ofthe population lived on less than $1.90
per day (2011 PPP) in 2018 (a rate similar to 2008) and debt-to-GDP ballooned
to an estimated 128 percent by the endof 2020.
The current administration (elected inlate 2017) has embarked on an ambitious
reform program. Reforms aimed at macro-economic stabilization included floating of the currency, strengthening tax
revenue, and passage of a fiscal responsibility law. Reforms aimed at shifting theAngolan economy from dependence on
oil and the SOE sector include privatization of state assets, removal of pervasive
price controls, improved regulation and

32.9

GDP , current US$ billio n

62.6

GDP per capita, current US$

1903.05

Internatio nal po verty rate ($ 1.9)

a

49.9
a

71.5

a

88.5

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a51.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

113.5

b

60.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 8), 201 1 PPPs.
(b) WDI for school enrollment (201 5); life expectancy (201 8).

Angola experienced a fifth consecutive
year of recession in 2020, as GDP contracted by an estimated 4 percent.
COVID-19 reduced services activity,
while low oil prices, reduced OPEC quotas, and logistical disruptions took a tollon the oil sector. Reprofiling of external
debt obligations and the oil price recovery
since late 2020 have provided some relief
but debt risks remain elevated. The lagged
effect of exchange rate depreciation is adding to inflation. Rising prices, high unemployment, and limited social safety nets
have resulted in rising poverty.

FIGURE 1 Angola / Budget balance and change in debt

Percent of GDP

oversight of financial institutions andcreation of a competition authority. Finally, to reduce poverty and inequality,
the Kwenda cash transfer program wasintroduced in 2020.
Angola’s transition to a more diversified,private-sector led growth model has become even more urgent in the face of
COVID-19. Sectors ranging from agriculture to financial services have large untapped potential and can generate thejobs crucial for poverty reduction. Continued progress on structural reforms,
including market-based pricing of fuel,and larger and more effective investments in human capital are needed toadvance towards a more productive andinclusive Angola.

Recent developments
GDP is estimated to have contracted by 4
percent in 2020. Although the spread of
COVID-19 in Angola has been limited(124 cases per 100,000 adults as of February 17, compared to 427 cases on averagefor Sub-Saharan Africa), non-oil activity
dropped sharply in the second quarter of2020 as measures to halt the spread of
COVID-19 restricted in- person service
provision. As the pandemic resulted inlower oil prices and restrictive OPEC+
quotas, Angola’s crude oil production
declined 7.1 percent in 2020, standing at
1.28 million barrels per day. Year-onyear, it is estimated that both oil and non-oil activity contracted (by 7.2 and 3.1
percent, respectively).

FIGURE 2 Angola / Actual and projected poverty rates andreal private consumption per capita

Percent of GDP

5

140

3

120

Poverty rate (%)
100

Real private consumption per capita (LCU constant)
24000
23000

80

100

1

22000

80

60

60

40

21000

-1
-3

20000

40
20

-5

19000

20

-7

0
2012

2014

2016

Budget balance (lhs)
Source: World Bank.

2018

2020

0

18000

2018

2022

2019

2020

International poverty rate
Upper middle-income pov. rate

Public debt (rhs)

Source: World Bank. Notes: see Table 2.

MPO 202 Apr 21

2021

2022

2023

Lower middle-income pov. rate
Real priv. cons. pc

Driven by the decline in the volume andvalue of oil, export revenues (in US dollars) declined by 37.3 percent in 2020. Yet
as imports also declined (by 23.3 percent), the current account remained inbalance. In the context of the oil pricedecline and heightened debt vulnerabilities, the currency lost 36.7 percent of its
value vis-à-vis the US dollar in 2020. Net
international reserves stood at US$8.8
billion in January 2021 equivalent to six
months of imports.
With the pass-through from currency
depreciation, inflation accelerated, to25.1 percent in 2020 (from 16.9 percent
in 2019). Prices for food, much of it imported, rose faster (by 31.4 percent).
Though poverty rates are substantiallyhigher in rural areas, urban households
are particularly vulnerable to priceshocks due to high unemployment andlow subsistence production, with purchased food accounting for 44 percent of
their expenditures.
Despite the sharp drop in oil revenues,
the primary fiscal balance remained insurplus, though narrower than in 2019.
The government has prioritized spendingon health (which increased 40 percent)and social protection. Debt reprofilingagreements reached in 2020, including
under the DSSI, have reduced near-term
financing pressures.

Outlook
A partial recovery is expected in 2021,
with GDP projected to grow by 0.9 percent and accelerating to 3.5 percent in
2022, still slower than population growth .
The recovery is conditional on a stronger
oil sector, loosening of OPEC+ production
quotas and resumption of investments tohalt the structural decline in production.
This is consistent with the recent strengthof oil prices and a world economy gradually recovering from COVID-19 as vaccines are rolled out.
Increased competitiveness of local production relative to imports due to currency
depreciation and a stronger macro framework will support the non-oil sector.
Structural reforms, including restructuring of the banking sector and privatizationof unproductive state assets will further
improve growth prospects.
The current account is expected to returnto surplus in 2021, aided by increased oilproceeds. Inflation is expected to retreat
gradually as the lagged impact of rapid
currency depreciation between 2018 and2020 wanes.
Fiscal and debt consolidation is critical toensure a sustainable recovery. The fiscal
deficit is expected to decline to zero in

TABLE 2 Angola / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

2021, with non-oil taxes making up an
increasing share of revenues. Debt is expected to start declining in 2021, reaching
94 percent of GDP by 2023 based on continued fiscal retrenchment and prudent
debt management.
Continued high unemployment and inflation have increased food insecurity andpoverty. Projections, tentative due to limited data, suggest that the share of the
population living on less than $1.90 per
day (2011 PPP) will continue increasing in
2021, reaching about 54 percent, an increase of 2 million people since 2019. Another million may fall into poverty by
2023 before the poverty rate starts to decline modestly. Expanding the Kwenda
program and measures to support job
creation, especially for youth, are criticalto mitigate poverty and negative effects
on human capital.

(annual percent change unless indicated otherwise)
2018
-2.4
-3.4
-1.7
-5.1
1.2
-16.9
-7.5
-7.6
-11.4
-1.7
19.6
7.3
-6.4
2.8
88.6
7.5
49.9
71.5
88.5

2019
-0.6
-1.6
-1.6
-3.1
0.8
0.0
-1.0
-4.4
-2.8
2.0
17.1
5.7
-2.0
0.7
107.3
6.0
51.1
72.3
89.5

2020 e
-4.0
-4.0
-23.9
-5.6
-6.8
-23.3
-4.4
6.9
-8.4
-1.3
22.3
0.1
-1.4
-2.6
128.2
4.8
52.9
73.5
90.9

2021 f
0.9
-0.6
18.0
3.3
-1.7
6.8
0.9
7.4
0.0
0.9
22.7
3.4
-1.3
-0.8
105.3
6.5
53.9
74.1
91.7

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2018-IDREA . A ctual data: 2018. No wcast: 2019-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 0.7 based o n private co nsumptio n per capita in co nstant LCU.

MPO 203 Apr 21

2022 f
3.5
2.4
-3.2
6.9
6.4
6.4
3.6
3.0
7.0
-0.3
17.0
3.4
0.2
0.1
100.4
6.2
54.2
74.2
91.9

2023 f
2.5
4.5
1.1
5.4
-1.4
4.5
2.4
3.7
2.2
2.3
12.3
2.7
1.2
0.7
91.9
6.0
53.8
74.0
91.6

BENINKey conditions andchallenges

Table 12020

P o pulatio n, millio n

12.4

GDP , current US$ billio n

15.2

GDP per capita, current US$

1224.7

Internatio nal po verty rate ($ 1.9)

a

49.6
a

76.2

a

90.6

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

47.8

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

116.7
61.5

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Real GDP growth slowed to 2 percent in
2020, as the COVID-19 crisis affected
global demand, containment measureshindered services and recession hit Benin’s main trading partner, Nigeria. The
fiscal balance deteriorated due to large
counter-cyclical fiscal spending and lower
tax revenues. Growth and poverty reduction are expected to gradually recover
over the medium term, supported by the
re-opening of the border with Nigeria inearly 2021. Uncertainty over the efficacy
and accessibility of vaccines cloud theoutlook.

Benin entered the COVID-19 pandemic
with real GDP growth averaging 6.4 percent in the period 2017-2019 (3.5 percent inper capita terms), driven by cotton exports, and the construction and transport
sectors. The 16-month border closure with
Nigeria has however brought to lightsome of the vulnerabilities of its growthmodel. Despite some domestic manufacturing in cement and textile, the economy
is hampered by its reliance on reexporting imported goods and commodities (e.g. used cars, rice) to Nigeria
through its land border , and the concentration of formal exports in agricultural
products (mainly cotton and cashew).
Eighty five percent of the labor force isworking in the informal economy, whichis costly for firms and workers and has
hampered productivity growth. Domestic
revenue mobilization is low and has remained among the lowest in the WAEMU
despite ambitious tax policy and administration reforms since 2016. While economic gains at the macro level have started to translate into better living standards
and improved human development indicators, the effects of COVID-19 on informal businesses and households, could
reverse recent trends.
The duration of the COVID-19 pandemic,
both regionally and globally, constitutesubstantial downside risks. A prolonged
outbreak would compromise the economic

FIGURE 1 Benin / Budget balance and change in Public andpublicly guaranteed debt

recovery, with new containment measures
undermining poverty reduction by threatening the livelihoods of the large informal
sector and increasing food insecurity, whileraising fiscal and external financing requirements and debt pressures. Diversifying the economy and reducing the fiscal
dependence on trade with Nigeria remain
medium-term challenges to economictransformation that raises productivity andreduces poverty. Increased security threats
spilling over from the Sahel region could
also threaten growth.

Recent developments
Due to the COVID-19 crisis real GDP
growth slowed to 2.0 percent in 2020 (-1.0
percent in per capita terms). H1 2020 experienced the largest slump with quarterly GDP contracting by 2 percent in Q2,
following the imposition of COVID-19
restrictions. GDP grew in Q3 (+1.6 percenty/y) as retail and manufacturing activity
picked up once containment measures
eased. Agriculture was mildly hit by labor
shortages due to restrictions on the regional migrant flows. On the demandside, public expenditure was the main
driver of growth. Inflation ramped up andreached +3.3 percent at end-2020, on theback of higher food prices in a context ofborder closures and trade disruptions.
The current account deficit (CAD), including grants, widened from 4.0 percent of
GDP in 2019 to 4.6 percent in 2020. Despite the strong cotton production (Beninwas the major exporter in West Africa),

FIGURE 2 Benin / Actual and projected poverty rates andreal GDP per capita
Poverty rate (%)
100

Real GDP per capita (LCU constant)
80000080

60000060
40000040
200000

20
0

0
2011

2013

2015

2017

International poverty rate
Upper middle-income pov. rate
Source: World Bank.

Source: World Bank. Notes: see Table 2.

MPO 204 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

exports have been hit by declining commodity prices and lower re-export activities.
The fiscal deficit (including grants) significantly widened, from 0.5 percent of GDP
in 2019 to 5.1 percent in 2020, as authorities turned to counter-cyclical fiscal
spending to counter the crisis. The ambitious health and socio-economic response
plan amounted to 2.7 percent of GDP. In
parallel, subdued demand, combined withthe adverse impact of the border closure
reduced total revenues (driven by lost
customs earnings).
Benin’s monetary and exchange rate policies are managed by the Central Bank ofWest African States (BCEAO), which
maintains a fixed peg between the CFA
Franc and the Euro. Foreign reserves
reached 5.5 months of imports in 2020 (upfrom 4.4 in 2019), due to large donor support and reduced imports during the pandemic. To support regional economy and
COVID-19 related extra spending, theBCEAO announced a set of monetary andmacroprudential measures, since March
2020, including a policy rate cut and extended refinancing operations of the 3month COVID-19 bonds.
Poverty and vulnerability remain high.
National poverty stood at 38.5 percent in
2019, with rural poverty at 44.2 percent(+12.8 ppts higher than urban). WorldBank estimates suggest that $1.9 a day(2011 PPP) poverty declined from 49.6
percent in 2015, to 45. 5 in 2019 increasing
only slightly to 45.9 percent in 2020. Inequality is moderate based on consumption
aggregates, with a Gini index of 34.7 percent in 2019, but the COVID-19 crisis is
expected to reverse some of these achievements in the short and medium terms.

Outlook
Benin is expected to recover gradually.
Growth will rebound to 5.0 percent in
2021, and progressively reach 6.5 percent
in 2023. Private consumption and exports
should drive the recovery, pushed byhigher commodity prices, positive growthin Nigeria and the reopening of its border.
In per capita terms, however, Benin will
not achieve pre-COVID 19 levels in thenext two years given its population
growth and growth remaining below potential. Inflation should slow to 2.0 percent, as labor restrictions linked to COVID-19 expire.
The CAD should improve slightly and stabilize at -4.3 percent in 2023 as formal andinformal trade resumes, even as imports
are expected to remain high on the back ofstrong construction activity. FDI and portfolio flows should increase gradually.

TABLE 2 Benin / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

The fiscal deficit (including grants) is expected to gradually decrease as authorities
revert to fiscal consolidation by reigningin recurrent spending. As revenues also
bounce back, the fiscal deficit will reachthe WAEMU convergence criteria of 3
percent of GDP in 2022. The deficit is expected to be increasingly financed by nonconcessional borrowing. On January 2021,
Benin raised EUR 1 billion (5.7 percent ofGDP) in Eurobonds. Part of the proceeds
will serve to rollover the 2019 debut Eurobond and improve Benin’s debt servicing
capacity. Still, increased exposure to commercial borrowing may raise vulnerabilities linked to low domestic revenue collection. The public debt ratio is projected toreach a peak at 46.4 percent of GDP in
2021, before gradually declining.
Poverty is expected to decline over the
projection period as the country recovers
from the crisis. Despite increasing slightly
in 2020, as a result of the slowdown in percapita growth, the $1.9/day PPP poverty
headcount rate is expected to decrease to
42.5 percent in 2023, while the $3.2/day
PPP poverty rate declines from 72.8 percent in 2020 to 69.8 percent by 2023. The
recent acceleration in the pace of poverty
reduction led by growth in agriculture
could be compromised by any resurgenceof the COVID-19 pandemic or other border shocks.

(annual percent change unless indicated otherwise)
2018
6.7
3.5
6.0
16.3
5.0
4.8
6.7
7.3
6.2
6.7
0.8
-4.5
1.2
-2.9
41.1
-1.3
47.0
74.0
90.1

2019
6.9
3.5
5.8
10.2
8.6
3.4
6.9
7.2
6.2
7.1
-0.9
-4.0
1.3
-0.5
41.2
1.1
45.6
72.4
89.9

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2015-EM ICOV. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021to 2023.
(b) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 205 Apr 21

2020 e
2.0
2.6
19.6
-7.8
-31.4
-26.9
2.0
5.6
-1.9
1.8
3.0
-4.6
0.6
-5.1
46.1
-3.1
45.9
72.8
90.0

2021 f
5.0
5.0
-0.2
5.1
23.2
16.6
5.0
6.5
1.3
6.3
2.0
-4.5
1.0
-4.5
46.4
-2.1
45.1
72.0
89.9

2022 f
6.0
6.0
-5.0
11.8
13.8
12.9
6.0
7.6
1.4
7.8
2.0
-4.5
1.1
-3.0
45.4
-1.0
43.9
70.9
89.6

2023 f
6.5
6.5
-10.3
12.6
5.1
4.6
6.5
8.4
2.2
7.7
2.0
-4.3
1.2
-2.6
44.0
-0.6
42.5
69.8
89.4

BOTSWANA
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio n

2.4

GDP , current US$ billio n

16.1

GDP per capita, current US$

6853.6

Internatio nal po verty rate ($ 1.9)

a

14.5

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)

a

36.5

a

59.1

a

53.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

103.2

b

69.3

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 5); life expectancy (201 8).

Botswana’s economy is estimated to havecontracted by 7.9 percent in 2020 as the
pandemic affected key sectors, notably
diamonds and tourism. Unemployment
edged up to 24.5 percent and the poverty
rate is estimated to have reached 60.2 percent in 2020, up from 57.0 percent in
2019, using the upper-middle-income
country threshold. While a growth recovery is expected in 2021, sustaining the
momentum in the medium-term will require transformation to overcome thestructural limits of the current growthmodel.

The discovery of the world’s largest diamond deposits in the 1960s allowed Botswana to maintain average growth ratesof over 5 percent up until the 2009 global
financial crisis, with real GDP per capita
growing almost five times faster than the
global average. Notably, Botswana has
benefited from buoyant diamond exports– at around 80 percent of total export
earnings- and accompanying significant
revenue inflows (over a third of overall
revenue collection). This led the authorities to establish, in 1994, the Pula Fundwith the aim of preserving part of the income from diamond exports for future
generations. Prudent macroeconomic
management has enabled Botswana toaccumulate substantial savings, in theform of foreign exchange reserves and theGovernment Investment Account (GIA).
However, Botswana has struggled to maintain its growth momentum in recent years
as the diamonds-cum-public sector led
growth model has reached its limits andalternative drivers of growth have not materialized. After averaging at 7 percent between 2010 and 2014, weakening global
demand for diamonds and severe weather
conditions slowed real GDP growth to an
average of 2.6 percent between 2015 and2019. Increased government spending tosupport growth and greater revenue volatility has resulted in consecutive years offiscal deficits since FY2015/16, thus eroding

fiscal buffers. GIA savings fell from 20 percent of GDP in FY2015/16 to 8 percent at
the end of FY2019/20, posing a threat to thesustainability of savings.
COVID-19 has exacerbated existing vulnerabilities, reversing some of the gains
made in living standards over the past
five years. Low capital accumulation andsluggish productivity have affected
growth in the non-resource economy. Unemployment is high and living conditions
have deteriorated. The pandemic has underscored the urgent need for a transformation in the growth model so that Botswana can develop a diversified and robust economy and accelerate job creation.
Successful implementation of structuralreforms under the Economic Recovery
and Transformation Plan (ERTP) would
improve conditions for a diversified andprivate sector-led growth model.

Recent developments
The economy is estimated to have contracted by 7.9 percent in 2020. Diamondproduction is estimated to have declined
by 29 percent as global demand waned.
As a result, merchandise exports fell by an
estimated 26 percent in 2020, weighed
down by a 77 percent drop (y/y) in thesecond quarter. Travel restrictions affected
the private sector, with significant losses
registered in the tourism and hospitality
industry. Unemployment increased slightly from 23.2 percent in the first quarter of2020 to 24.5 percent in the last quarter. An
additional 103,000 people are estimated to

FIGURE 1 Botswana / Evolution of Public Debt and Fiscal
Balance

FIGURE 2 Botswana / Actual and projected poverty rates
and real GDP per capita

Debt, % GDP

Poverty rate (%)
70

Budget balance, % GDP

Real GDP per capita (LCU constant)
50000

35

10

30

5

25

0

40

30000

20

-5

30

20000

15

-10

60

40000

50

20
10000

10

10

-15
2013

2015

2017

2019

2021f

2023f

0

General Government Balance (RHS)
Total Government Debt (LHS)
Source: World Bank staff estimates.

0

2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 206 Apr 21

2017

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

have fallen below the upper-middle income poverty line (US$5.5 per day, 2011
PPP) in 2020, bringing the total to 1.4 million people.
Botswana’s fiscal position has worsened.
The fiscal deficit is set to widen to 11.4
percent of GDP in FY2020/21, from 5.6
percent in FY2019/20, reflecting a sharp
decline in mineral revenues (55 percent), a
rigid and high public sector wage-bill, andthe impact of the COVID-19 Economic
Response package approved in April 2020.
Elevated financing needs have been met
by further GIA drawdowns and increased
domestic bond issuances. Increased borrowing to close the financing gap is expected to push public debt from 19.3 percent in FY2019/20 to an estimated 27.4
percent of GDP at the end of FY2020/21,
although remaining below the 40 percent
of GDP statutory cap.
Muted exports caused the current accountdeficit to widen to an estimated 8.1 percent of GDP in 2020 (from 7.6 percent in2019). Merchandise exports declined by an
estimated 26 percent in 2020 as travel restrictions constrained diamond sales (alsoknown as sights) and year-on-year export
fell by 78 percent in Q2 2020. Coupledwith relatively stable imports and a significant drop in tourism receipts, the trade
deficit increased to 12.5 percent in 2020
from 6.9 percent in 2019. Despite this,increased Southern African Customs Union (SACU) transfers for FY2020/21 helped
to alleviate some pressures. Foreign direct
investment fell 30 percent in the first halfof 2020. International reserves decreased
by 23.3 percent year-on-year to US$5.1
billion (10.9 months of imports) at the endof November 2020.

Outlook
Botswana’s economy could grow by 6.9
percent in 2021, reflecting recovery ofmining production following last year’s
sharp contraction, with results from thefirst diamond sight showing exports are
up by 18 percent (y/y). However, broadbased recovery will be critical to reducepoverty, as most people who lost jobs due
to COVID-19 remain unemployed. Similarly, per capita GDP will not revert to2019 levels until 2023. Over the mediumterm, growth will plateau at around 4.2
percent with private investments in coaland copper mining, along recovering consumption, being the main contributing
factors.
The anticipated diamond-led recovery
will also improve the fiscal position, withthe deficit set to narrow to about 5.4 percent of GDP in FY2021/22 due to higher

TABLE 2 Botswana / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)a
Debt (% of GDP)
Primary Balance (% of GDP) a,b
International poverty rate ($1.9 in 2011 PPP) c,dLower middle-income poverty rate ($3.2 in 2011 PPP) c,dUpper middle-income poverty rate ($5.5 in 2011 PPP) c,dmineral revenues and revenue enhancing
measures including revisions to the VAT
rate, fuel levy and withholding tax. These
will cushion the anticipated impact of
reduced SACU receipts. Expenditures willremain largely unchanged as one-off
COVID-19 emergency spending is replaced by ERTP-linked spending, although efforts to “right-size” the wage bill
will begin with the abolishment of 50 percent of vacant positions. While total debt
is expected to remain sustainable over the
medium-term, it is expected to increase toan estimated 28.0 percent of GDP in
FY2020/21, reflecting depleted fiscal buffers and subsequent increase in externalborrowing.
The outlook is not without substantial
COVID-19-related downside risks, particularly as additional waves and mutationsof the virus provide added uncertainty. A
scenario where waves of infections arefollowed by worldwide lockdowns could
curtail demand in the global diamondindustry, thus resulting in a slower recovery for Botswana. Services, particularly
tourism, trade and transport, would also
be impacted. Lower mineral receipts
would worsen the fiscal position, adding
to pressures from the anticipated declines
in SACU receipts. Both the fiscal and external balance would likely remain in deficit beyond FY2023/24.

(annual percent change unless indicated otherwise)
2018
4.5
4.1
3.7
8.1
7.2
11.8
4.5
2.6
5.5
4.1
3.2
0.6
1.1
-4.7
18.1
-4.1
12.9
33.9
57.2

2019
3.0
4.2
3.3
6.6
-16.7
6.7
3.2
-0.1
0.2
4.5
2.8
-7.6
1.2
-5.6
19.3
-5.0
12.6
33.6
57.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Fiscal balances are repo rted in fiscal years (A pril 1st -M arch 31st).
(b) Refers to P ublic and P ublicly Guaranteed debt.
(c) Calculatio ns based o n 2015-B M THS. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(d) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 207 Apr 21

2020 e
-7.9
-1.8
-0.7
-2.6
-28.6
-8.9
-7.9
3.5
-15.0
-5.5
1.9
-8.1
1.1
-11.4
25.3
-10.5
16.0
38.3
60.2

2021 f
6.9
1.1
3.3
3.3
32.5
9.7
6.9
3.0
14.5
4.4
3.1
-5.2
1.7
-5.4
28.0
-4.4
14.3
36.1
58.7

2022 f
4.3
3.0
-7.5
3.2
16.5
5.0
4.2
3.0
2.7
4.8
4.0
-2.8
1.8
-2.4
32.3
-1.1
13.5
34.9
58.0

2023 f
4.1
4.1
-9.9
8.0
6.2
2.5
4.2
2.5
3.2
4.6
4.0
0.5
1.6
-0.4
29.1
1.1
12.9
33.9
57.2

BURKINA FASO
Table 12020

P o pulatio n, millio n

20.9

GDP , current US$ billio n

16.0

GDP per capita, current US$

765.7

Internatio nal po verty rate ($ 1.9)

a

43.8
a

76.7

a

92.3

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

35.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

94.5

b

61.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Favorable terms-of-trade and good crop
production kept the economy growing in
2020, despite the negative COVID-19
shock and persistent security crisis. However, about 450,000 people joined the extreme poor in 2020. With low oil and highgold prices, real GDP is projected to riseby 3.1 percent in 2021 and the extreme
poverty incidence rate is projected to decrease only from 2022 onwards. Improvements in the efficiency of social safety nets
and public service delivery are critical toresume poverty reduction.

Key conditions andchallenges
The primary sector employs 80 percent of
the adult population, mostly in subsistence agriculture, and contributes a quarterof the country’s GDP. Due to a lack ofirrigation capacity, agriculture has beenhighly exposed to the vagaries of weather
and climate change. Cotton, once the largest export commodity, remains the major
cash crop. The secondary sector contributes a similar share to the economy, almost 75 percent of which is generated by abooming mining industry. Gold now accounts for about 85 percent of export proceeds, placing Burkina Faso among Africa’s top five gold exporters. The mining
sector has, however, limited linkages tothe local economy and generates few jobs.
Services account for about half of GDP,
with retail, transportation, and the public
sector generating most jobs and value
added. Public service delivery has been
facing an increasingly difficult context
with growing violence and conflict, as
evidenced by an unprecedented humanitarian crisis.
COVID-19 has had two major effects. Externally, it has supported the BOP throughhigh gold and low oil prices—fuel imports
accounted for 20 percent of the 2019 import bill. Domestically, however, it has
aggravated the impact of the ongoing security, humanitarian, and social crises.
The fiscal accounts are strained by (i) rising spending on military personnel and

FIGURE 1 Burkina Faso / Sectoral real value added

Real value added (index, 2000-1)

equipment in response to the deteriorating security situation; (ii) additional social assistance to the over 600 thousand
new internally displaced; and (iii) a highand rising wage bill due to strong unionpressure in a tense social context. Additional spending is often financed
through the issuance of relatively expensive (domestic) debt with increasing debt
service payments. Also, low investmentin the non-gold sector along with stagnating labor and land productivity, limited access to credit, and the high cost of
doing business are constraining potential growth.

Recent developments
In the first half of 2020, real GDP growthcollapsed by 5 percent (y/y) on account of
the
early
COVID-19
containment
measures. Exceptionally benign terms oftrade and the implementation of theEmergency Response Plan (ERP) helped
the economy to rebound by 8 percent in
the third quarter (y/y). With booming gold
exports, the current account deficit (CAD)
decreased to 2.6 percent of GDP from 4.8
percent in 2019. The fiscal deficit, as ashare of GDP, increased to 5.6 percent in2020 from 3.2 percent in 2019, largely due
to COVID-19 mitigation measures. Domestic revenue collection (excluding
grants at 4.4 percent of GDP) is estimatedat 18 percent of GDP, down by 1.5 percentage points compared to 2019, mainly
due to temporary tax deferrals or cancellations included in the ERP while tax

FIGURE 2 Burkina Faso / Actual and projected poverty
rates and real GDP per capita
Real GDP per capita (LCU constant)
500000

Poverty rate (%)
100

4.1
3.6

80

4000002.6

603000002.1

4020000020

100000

3.1

1.6
1.1

0

0.6
2000

2003

2006

Agriculture
Source: World Bank.

2009

2012

2015

Services

2018

0

2009

2021

2011

2013

2015

2017

International poverty rate
Upper middle-income pov. rate

Industry

Source: World Bank. Notes: see Table 2.

MPO 208 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

administration measures helped prevent alarger decrease.
Burkina Faso’s monetary and exchange
rate policies are managed by the BCEAO,
which maintains a fixed peg between the
CFA Franc and the Euro. Its reserves
reached an estimated 5.5 months of imports in 2020 (vs 5.9 months in 2019) supported by donor inflows and reduced
imports during the pandemic. Between
March and October 2020, the REER appreciated by 6.4 percent y/y, reflecting
the nominal appreciation of the Euroagainst the US Dollar. Since March 2020,
the BCEAO has supported the regional
economy through a policy rate cut andrefinancing operations of 3-month
COVID-19 bonds.
Simulations suggest that the COVID-19
crisis increased the extreme poverty rateby about a percentage point, to 37.1 percent in 2020, resulting in an additional450,000 extreme poor and reversing two
years of poverty reduction. A direct consequence of the shock is an increase in foodinsecurity: 28 percent of households canno longer meet their dietary needs and thephenomenon is more pronounced in rural
areas (33.5% vs 16.8% in urban areas).
Social protection has been limited and notalways well targeted. Only 8.8% of households declared receiving COVID-19related assistance.

Outlook
Amid continued uncertainty, the economy
is projected to grow by 3.1 percent in 2021,
marginally above the population growthrate. Growth is expected to be driven by agradual recovery in services (1.2 percentage points contribution) as retail, restaurants, hotels, and transportation services
recover. Strong gold production will support the mining sector (0.6 percentage
point contribution). Encouraging rainfalls
recorded toward the end of 2020 mightalso translate into a continuation of strong
agricultural performance. The CAD is
projected to increase by 0.6 percent of
GDP in 2021 due to mining profits repatriations and slowing FDIs and portfolio
investments. With security, humanitarian,and social challenges persisting throughout the year, the fiscal deficit is projected
to remain elevated, at 5.2 percent of GDP,and public debt to rise to 53.1 percent of
GDP. The effects of the COVID-19 shockon poverty will persist with the headcountratio remaining at 37 percent – adding
190,000 new extreme poor – and returning
to pre-COVID-19 levels around end-2022.
This growth and poverty outlook is sensitive to risks. On the downside, social
unrest, insecurity, or political upheaval

TABLE 2 Burkina Faso / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

could destabilize an already fragile situation. Further, given the high dependence
on agriculture and its low level of resilience to natural hazards, the country ishighly exposed to natural disasters, including low rainfall, floods, and locust
invasions. Finally, in case of a rapid recovery of the world economy, terms of trade
could shift quickly to the disadvantage of
Burkina Faso’s exporters and importers.
On the upside, 2021 could bring good
weather conditions and an above-average
harvest; an effective start of the COVID-19
vaccination campaign by mid-2021 could
help prevent another lockdown; and more
efficient social safety nets and public service delivery would help enhance the paceof poverty reduction.

(annual percent change unless indicated otherwise)
2018
6.8
1.5
8.1
18.0
6.0
3.5
6.5
9.9
3.6
6.6
2.0
-4.1
1.2
-4.2
37.7
-3.2
37.4
73.5
91.0

2019
5.7
7.2
19.6
-6.4
-2.3
-1.6
5.7
4.6
1.9
8.2
-3.2
-4.8
1.3
-3.2
42.7
-1.9
36.0
72.7
90.7

2020 e
0.6
0.9
8.0
-7.2
0.2
-1.0
0.6
4.1
1.3
-1.4
3.2
-2.6
1.1
-5.6
47.6
-4.3
37.1
73.3
91.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2009-ECVM and 2014-EM C. A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using annualized elasticity (2009-2014) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 209 Apr 21

2021 f
3.1
4.2
1.3
2.9
3.2
4.5
3.1
4.6
2.4
2.8
2.1
-3.2
0.9
-5.2
53.1
-3.6
37.0
73.2
90.9

2022 f
5.0
6.5
1.4
6.4
4.9
7.2
5.0
3.7
3.2
6.6
2.4
-3.7
0.7
-4.6
55.4
-2.6
35.8
72.6
90.7

2023 f
5.7
6.3
2.1
10.2
5.2
7.9
5.7
4.5
3.9
7.2
2.5
-4.0
0.7
-3.2
56.3
-1.4
34.4
71.8
90.4

BURUNDI

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

11.9

GDP , current US$ billio n

3.3

GDP per capita, current US$

274.0

Internatio nal po verty rate ($ 1.9)

a

72.8

a

38.6

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

119.0

b

61.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 3), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Economic growth is estimated to decelerate to 0.3 percent in 2020 from 1.8 percent in 2019, with poor performance inservices and agriculture, partially offset
by COVID-19 induced importsubstitution in industry. Macroeconomic
challenges include large external imbalances, fiscal pressures and high publicindebtedness. With rapid population
growth, per capita GDP is contracting
while poverty is expected to reach 87.5
percent in 2023. The medium-term
growth outlook is modest and highly vulnerable to risks from the continuing economic fallout from the COVID-19.

Economic and social development havebeen hampered by structural weaknesses
that have locked the economy in a lowlevel equilibrium. These include thedominance of low-productivity agriculture (reliance on poor-quality land andrainfall), limited economic diversification (weak private sector, narrow export
base, supply-side constraints), limited
fiscal space for public investments, lowcapital accumulation and weak productivity, and massive human capital challenges compounded by high population
growth. These weaknesses have been
exacerbated since 2015 by large external
imbalances, fiscal pressures, high domestic debt crowding out of private sector credit, and constrained access toforex. The result has been depressed
growth, limited job-creation, and highpoverty trends.
COVID-19 presents additional challenges
to households across the income distribution, through both direct and indirect
effects. COVID-19 may entail long-lastingrepercussions on human capital, as households are forced to adopt harmful coping
strategies such as selling productive assets
or reducing expenditures on educationand food. Border closures particularly
affect small farmers as significant trade in
agricultural products takes place between
Burundi and neighboring countries. Limited fiscal space and scant monetary andfinancial buffers undermine the government’s ability to stimulate the economy
and mitigate economic costs of the pandemic. The national development plan for
2018-2027 aims to boost economic growth
and resilience notably by supporting
growth sectors (such as market-oriented
agriculture, infrastructure, mining), developing human capital, and enhancing environmental protection. Implementing thisagenda poses significant financing needs
and requires political commitment to reforms.
In addition, uncertainty around the second wave of COVID-19 persists. Burundi’s increases in cases since December
2020 and the closure of land and sea borders are likely to slow the pace of recovery
depending on the duration of thesemeasures.

Recent developments
Although COVID-19 cases remain relatively low, the pandemic has impacted
Burundi’s fragile economy through borderclosures and lower commodity exports.
Economic growth for 2020 is estimated at
0.3 percent from 1.8 percent in 2019, owing to a slowdown in agriculture and acontraction in services. The industrial sector expanded moderately driven by thefood industry. Growth was supported bygovernment consumption(especiallyhealth) while other demand components
tumbled. Inflation rose in 2020 with higher food prices and disruptions to imported
consumer products.

FIGURE 1 Burundi / Public debt, fiscal and current accountbalances

FIGURE 2 Burundi / Actual and projected poverty rate andreal GDP per capita

Percent of GDP

Poverty rate (%)
100

80

Percent of GDP
0

70

-2

Real GDP per capita (LCU constant)
200000901800008016000070

140000

60

-4

50

-6

60

12000040-850100000

-10

40

80000

30

60000

30

20

-12

20

40000

10

-14

10

20000

0

-16

0

2014 2015 2016 2017 2018 2019e 2020e 2021f 2022f 2023f

Debt

Fiscal balance (rhs)International poverty rate

Current account balance (rhs)

Sources: Official statistics and World Bank calculations.

02006 2008 2010 2012 2014 2016 2018 2020 2022

Source: World Bank. Notes: see Table 2.

MPO 210 Apr 21

Real GDP pc

The fiscal deficit narrowed due to a drastic
cut in capital expenditure to address theloss in revenue, but remained high at 4.6
percent of GDP in 2020, leading to a further increase in public debt to 63.2 percent
of GDP (of which 26 percent is external).
Helped by lower oil prices, the current
account deficit (CAD) narrowed to a stillhigh 11.9 percent of GDP in 2020. The
deficit was mainly financed by trade credits. Exchange rate overvaluation weighson the economy. In December 2020, theparallel market premium averaged 70
percent while the depreciation of the official exchange rate was limited to 3.8 percent year-on-year. In September 2020, international reserves remained low covering 1.3 months of imports.
GDP growth per capita remains negative.
Poverty has been estimated at 87 percent in
2021 (based on international poverty line of$1.90/capita/ day, in 2011 PPP), up from72.8 percent in 2013 (last year with data
availability). Progress has been made ineducation and health, yet Burundi’s Human Capital Index remains low – with children today living up to only 39 percent of
their productive potential - compared tothe counterfactual if they had enjoyed full
health, including adequate nutrition, andeducation. Literacy rates remain particularly low among women and rural residents.
Food insecurity remains alarming, with 56

percent of children under 5 stunted andmalnutrition rates even higher outside of
the capital city.

Outlook
Under the base case that the COVID-19 isbrought under control during 2021, economic growth is projected at 2-3 percent
during 2021-23, supported by gains in all
sectors. Assuming normal weather conditions, agriculture will grow faster in 2021
as borders start to reopen. Mining activity
is expected to pick up as the country exploits its mineral potential and a new coltan mine was opened in 2020. On the demand side, a rise in private and public
investment is expected under economic
recovery.
The fiscal deficit is expected to narrow in
2021-2023, driven by measures to bolster
revenue collection as outlined in the Government’s Public Finance Management
Strategy 2018-2027. These measures rely on
increasing the effectiveness of tax administration and include broadening the tax
base (taxation of the informal sector) and
improving revenue collection. The strategy
also aims at improving the utilization of
external resources, notably the accounting
and monitoring and evaluation of grants.

TABLE 2 Burundi / Macro poverty outlook indicators

However, with external grants limited,public debt is expected to rise further to 67
percent of GDP in 2023 mostly due to issuance of new domestic debt. The CAD is
expected to remain high at around 14 percent of GDP in 2022–23 as the overvalued
exchange rate leads real growth in imports to outstrip export growth (the latteris expected to be driven by minerals).
The outlook remains vulnerable to thecontinuing economic fallout from the
COVID-19 and the availability and distribution of vaccines, fiscal slippages, forex
pressures and climatic shocks. Under alow-case scenario that COVID is not controlled and border closures and other restrictive measures recur throughout 2021,
economic growth could be reduced by 1
percentage point with attendant impacts
on poverty. On the upside, the new administration has shown efforts to reengage
with development partners, and the rapid
resumption of aid flows could accelerate
growth.

(annual percent change unless indicated otherwise)

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)

2018
1.6
3.5
6.7
24.9
11.0
19.0
1.7
3.0
2.4
0.7
-2.6
-11.9
0.0
-4.9
50.9
-4.5

2019
1.8
3.1
8.3
32.9
-0.5
17.1
1.8
3.1
2.1
0.9
-0.8
-13.4
0.0
-4.9
58.5
-4.3

2020 e
0.3
0.3
19.2
-16.6
-10.9
4.3
0.3
2.8
1.8
-1.7
7.5
-11.9
-0.1
-4.6
63.2
-3.9

2021 f
2.0
2.7
-0.6
21.4
4.6
6.9
2.0
3.1
2.0
1.3
3.4
-13.7
0.0
-4.4
69.2
-3.6

2022 f
2.5
2.8
4.4
7.1
4.7
6.0
2.5
3.2
2.0
2.2
3.7
-14.2
0.0
-4.2
75.4
-3.4

2023 f
3.0
3.1
5.1
6.0
4.9
5.8
3.0
3.2
2.0
3.3
3.6
-14.4
0.0
-4.3
66.8
-3.6

International poverty rate ($1.9 in 2011 PPP) a,b

82.9

84.0

86.2

87.0

87.5

87.4

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2006-QUIB B and 2013-ECVM B . A ctual data: 2013. No wcast: 2014-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int-to -po int elasticity (2006-2013) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 211 Apr 21

CABO VERDE
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio n

0.6

GDP , current US$ billio n

1.7

GDP per capita, current US$

3093.6

Internatio nal po verty rate ($ 1.9)

a

3.4
a

15.4

a

41.3

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

42.4

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

104.0

b

72.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

The COVID-19 crisis led to a contractionof real GDP of 14 percent in 2020, exacerbating pre-existing fiscal, debt, and external imbalances. Progress in poverty reduction since 2015 was erased. Over the
medium-term, growth is expected to recover gradually as tourism flows and foreign direct investment rebound. The outlook is subject to substantial downside
risks stemming from access to vaccines,
the emergence of new variants of the virus, the speed of global recovery, andclimatic shocks.

Political stability, democratic institutions,and pro-market reforms generated significant economic and social progress in
Cabo Verde since independence in 1975.
However, the country’s development
model, based on tourism and Foreign
Direct Investment (FDI) has shown signsof fatigue since the 2008 Global Financial
Crisis. The subsequent sluggish recovery
in Europe reduced the influx of funds to
Cabo Verde, with dwindling private investment and growth. Ineffective expansionary fiscal policy between 2010-2015
led to growing fiscal financing needs,
increasing public debt, and a slowdown
in productivity. To put public debt on asustainable path, authorities initiated afiscal consolidation program in 2016,
including the reform of key loss-making
State Own Enterprises (SOEs).
The impact and persistence of the COVID-19 pandemic exacerbated the vulnerabilities of the growth model. In addition to
the adverse economic effects of domestic
containment and mitigation measures,international travel restrictions led to a
sharp contraction in tourism and related
activities. Rising global uncertainty also
depressed FDI. Authorities responded tothe crisis appropriately, expanding public health services and social protection
programs as well as providing financial
support to small businesses and hard-hit
sectors, although it set back gain

in poverty reduction made in the past
five years.
The pace of the economic recovery is tied
to the duration of the pandemic, access tovaccines, the emergence of new variantsof the virus, and the speed of global recovery, particularly international tourism. Fiscal risks are high as the government is exposed to contingent liabilities
in sectors that are particularly vulnerable
to the crisis. A protracted pandemic
would aggravate the current crisis, triggering these liabilities and leading tomacroeconomic instability. The country
also remains significantly exposed tonatural disasters that could further weighon external and fiscal balances.

Recent developments
Economic activity contracted by 14 percent in 2020, the largest contraction onrecord and one of the highest in Africa.
The deceleration was driven by the shutdown of the tourism sector and the associated negative spillovers in upstream sectors. The services sector contracted by 18.4
percent, while industrial output declined
by 3.6 percent. Agriculture output grewby 2.5 percent as the 3-year long draught
came to an end in 2020.
The Current Account Deficit (CAD) increased from 0.4 percent of GDP in 2019 to
13.8 percent in 2020, owing to the collapse
in services exports. The CAD was financed primarily by grants and concessional loans. International reserves
reached 7.8 months of imports.

FIGURE 1 Cabo Verde / Real GDP per capita and debt
outlook

FIGURE 2 Cabo Verde / Actual and projected poverty rates
and real GDP per capita

Percentage of GDP

Poverty rate (%)
60

Billions of constant CVE

190%

140

120

170%

Real GDP per capita (LCU constant)
31000030000050

290000

100
150%

80

130%

60

40

28000030270000

40
110%

20

90%

0
2017

2018

2019

2020e

2021f

2022f

250000102400002023f

Public Debt: Post-COVID-19 forecast (LHS)
Public Debt: Pre-COVID-19 forecast (LHS)
Real GDP per capita: Post-COVID-19 forecast
Real GDP per capita: Pre-COVID-19 forecast
Sources: World Bank and IMF Staff estimates

26000020

02300002007 2009 2011 2013 2015 2017 2019 2021 2023
International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 212 Apr 21

Lower middle-income pov. rate
Real GDP pc

The overall fiscal deficit reached 9.3
percent of GDP in 2020, driven by a fallof 20 percent in tax revenue and an increase of 21 percent in current spending
due to health-related expenditures andtemporary subsidies. Financing needsof 12.3 percent of GDP were covered byconcessional credits, grants, domestic
borrowing, and resources freed by the
Debt Service Suspension Initiative(DSSI). The stock of public debt climbed
to 141.1 percent in 2020. The risk of external and total debt distress is high but
public debt remains sustainable due toits concessional profile, long maturity
and low interest rates.
Cabo Verde’s monetary policy isaligned with the Eurozone, as the Escudo is pegged to the Euro. Despite anaccommodative monetary policy stance,
inflation remained subdued at 1 percent
in 2020. Liquidity and capital ratios inthe banking system are adequate, but
exposure to non-performing loans is
high.
The crisis reversed the progress in poverty reduction achieved since 2015,
pushing close to 10,000 people into temporary poverty. Population living under the international poverty line of
US$1.9/day (2011 PPP) increased from
2.3 percent in 2019 to 3.7 percent in
2020.

Outlook
The economy will recover slowly from thepandemic. Real GDP growth is projected tobe 3.9 percent in 2021 and gradually accelerate to 6.1 by 2023. GDP per capita is projected to return to the 2019 level by 2024. In
the short-term, the recovery will be driven
by a gradual reactivation of the tourism
sector. Over the medium-term, private consumption and investment in tourism andthe blue economy, energy and ICT willcontribute to closing the output gap. The
resumption of FDI and structural reforms
will also unlock investments and accelerate
productivity. The outlook is subject to substantial downside risks stemming fromdelays in the recovery of tourism, financial
flows, and SOEs reforms.
The CAD is projected to reach 13.5 percent
of GDP in 2021, converging to 4.6 in 2023.
Medium-term external financing needs are
expected to be covered mainly by private
external debt and FDI, which is expected toreach 5 percent of GDP in 2023. International reserves would remain steady at
about 6 months of imports.
Authorities are committed to macroeconomic stabilization in the short-term andfiscal consolidation in the medium-term.
Consolidation measures will include

TABLE 2 Cabo Verde / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

enhanced management of fiscal risks, notably from SOEs, and revenue mobilization. The primary deficit is projected toreach 6.1 percent of GDP in 2021 and improve over the medium term to 0.5 percent in 2023. The extension of the DSSI in
2021 will free resources amounting to 0.5
percent of GDP and the public debt-toGDP ratio is expected to fall to 126.4 by
2023. Inflation is projected to remain below 1.5 percent over the medium-term.
The poverty rate (using the international
poverty line of $1.9/day) is projected to
decline to 3.3 percent in 2021 and reach 2.5
percent in 2023 with significant downside
risks associated with an uncertainty about
the depth and duration of the pandemic
and associated impacts on tourism.

(annual percent change unless indicated otherwise)
2018
4.5
1.5
2.2
4.4
15.9
8.7
4.5
-18.5
8.1
6.3
1.3
-5.2
4.1
-2.7
124.7
-0.2
2.5
12.7
36.3

2019
5.7
5.9
4.8
-4.5
10.0
2.0
5.7
-6.8
7.5
6.3
1.1
-0.4
4.1
-1.8
124.9
0.8
2.1
11.5
34.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2015-IDRF. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 213 Apr 21

2020 e
-14.0
-7.0
5.1
0.9
-49.0
-21.9
-14.0
2.5
-3.6
-18.4
1.0
-13.8
4.1
-9.3
141.1
-6.4
3.8
16.2
42.5

2021 f
3.9
2.9
2.6
0.3
15.1
5.6
3.9
6.2
4.2
3.6
1.2
-13.5
4.2
-9.1
140.9
-6.1
3.4
15.3
41.3

2022 f
5.2
4.1
-5.8
7.6
18.2
8.9
5.2
7.3
5.5
4.9
1.4
-9.7
4.5
-6.3
134.0
-3.5
3.0
14.2
38.7

2023 f
6.1
5.3
-3.7
6.4
11.3
5.7
6.1
8.1
6.6
5.7
1.5
-4.6
5.0
-3.3
126.4
-0.5
2.5
12.7
36.3

CAMEROON
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio n

26.5

GDP , current US$ billio n

39.7

GDP per capita, current US$

1494.5Internatio nal po verty rate ($ 1.9)

a

26.0
a

47.0

a

71.0

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

46.6

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

105.7

b

58.9

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

The COVID-19 pandemic resulted in thecontraction of Cameroon’s economy in2020, and additional 400,000 people fell
into extreme poverty. The pandemic has
mainly affected service sectors and thoselinked to global value chains, hampering
manufacturing sectors. Despite expenditure controls, the drop in domestic revenue has worsened the fiscal situation.
Moreover, the country remains at highrisk of debt distress. The outlook is favorable, with the economy recovering gradually and returning to pre-COVID 19
growth rates in 2023.

Cameroon is a lower-middle-income
country playing a leading role in the Central African Economic and Monetary
Community (CEMAC), holding 41.6 percent of the community’s GDP in 2019. The
country is richly endowed with naturalmineral resources, including oil, naturalgas, gold, iron, and manganese. The country has shown a relatively strong macroeconomic performance in recent years, withgrowth reaching 3.7 percent in 2019. Government’s expenditures increased continuously in the past decade due to the security crises. Concomitantly, non-oil revenues
increased on the back of improved tax
collection. Hence, the fiscal deficit reduced
significantly and represented 3.3 percent
of GDP in 2019, compared to 4.5 percent
of GDP in 2014. Over the last decade, thepace of economic growth has not beenhigh enough to lead to a significant poverty reduction because of the lack of redistributive policies and population growth.
The COVID-19 pandemic has compounded the cyclical and long-term risks facedby the country (exposure to external
shocks, high risk of debt distress, security
issues and political turmoil). Both thedrop in production of goods and services,
reduced exports, and disruptive global
value chains translated into financing
needs and daunting socio-economic challenges. The main sources of vulnerabilities
that could weigh on debt sustainability

include tighter financial conditions, SOEs’contingent liabilities and committed but
non-disbursed debt resulting, inter alia,
from delays in infrastructure projects. On
the social side, a prolonged health crisis
together with the weak safety nets havefurther overstretched the health system.
Moreover, ongoing civils conflicts in theSouth-West and the North-West notably
are adding to the challenge of recoveringfrom the pandemic.

Recent developments
The COVID-19 has hit the economy hard,with the tertiary sector being the mostimpacted. Branches such as hotels andcatering, transport, and public administration services experienced a significant
drop in their activities. Consumption andinvestment fell as income decreased anduncertainty spread as a result of containment measures. As a result, Q2 output
contracted by 1.1 percent (y-o-y) from a
4.4 percent growth (y-o-y) in Q2 2019.
Global trade weakness entailed a lower
demand from Cameroon’s main trading
partners, but the sharp drop of imports
supported the trade account balance tonarrow by 6.1 percent in 2020, compared
to 2019. Despite a drop in net current
transfers (by 18.2 percent between 2019and 2020), the current account deficit narrowed to 4.6 percent of GDP in 2020, from
5.0 percent of GDP in 2019. At the end of
December 2020, inflation has surged by
2.5 percent mainly driven by clothing andfootwear items. Food prices also increased

FIGURE 1 Cameroon / Real GDP growth and contributions toreal GDP growth

FIGURE 2 Cameroon / Actual and projected poverty rates
and real GDP per capita

Percent, percentage points

Poverty rate (%)
100

10Real GDP per capita (LCU constant)
700000868065000060

6000004055000020500000

4
2

0
-2
-4
-6
2000

2003

2006

Gov. cons.
Inventories
Statistical disc.
Source: World Bank.

2009

2012

2015

Exports
Private cons.
GDP

2018

2021

0

4500002007 2009 2011 2013 2015 2017 2019 2021 2023

GFCF
Imports

International poverty rate
Upper middle-income pov. rate
Source: World Bank.

MPO 214 Apr 21

Lower middle-income pov. rate
Real GDP pc

amid heightened tensions in the North,the Far North, and the South-West regions.
The fiscal accounts deteriorated, albeit lessthan anticipated, as the two major revenue
components performed well (oil and
VAT). For instance, the unexpected recovery in oil prices coupled with a good VAT
collection helped government revenues toreach 10.3 percent of GDP cumulatively in
Q1-Q3 2020, compared to 10.6 percent of
GDP in the corresponding period in 2019.
Meanwhile, the revised budget law involved
expenditures
reprioritization,
which led the overall fiscal deficit to an
estimated 3.9 percent of GDP in 2020,
compared to 3.3 percent of GDP in 2019.
Public debt increased driven by external
debt increase and reached 43.4 percent of
GDP at the end of December 2020, compared to 42.8 percent of GDP at the corresponding period in 2019.
The COVID-19 pandemic has reversed
parts of progress in poverty reduction.
Poverty simulations suggest that the economic downturn in 2020 could have increased extreme poverty incidence to 25.3
percent in 2020, pushing an additional
400,000 people to live with less than PPP$1.90 a day. Containment measures implemented between April and June reduced
production levels leading to non-essential
staff’s lay-off, a drop in remunerations,and lower enterprise turnover in the formal and informal sectors. Also, food insecurity issues increased primarily in conflict-affected areas.

OutlookCameroon’s economic activity is expected
to recover gradually from 2021 onwards
on the back of dynamic secondary andtertiary sectors. Higher oil production andprices, services supply, and improved
external demand would translate into
stronger private consumption and investment. The major upside risk is a rapid
vaccine release in the developed part of
the world. Real GDP would grow by 2.1
percent in 2021 (0.1 percent in per capita
terms), and the country is projected toreturn to its pre-COVID growth rate (3.8
percent) in 2023. The trade balance is expected to improve, reflecting higher export volumes and improved terms oftrade. Hence, the current account deficit
should narrow to 3.4 percent of GDP in
2021, from 4.6 percent in 2020, before
reaching 2.3 percent of GDP in 2023. Similarly, Cameroon’s fiscal position would
improve steadily over 2021-23, on the backof fiscal consolidation efforts. The partial
elimination of temporary tax incentives

TABLE 2 Cameroon / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

and measures to broaden the tax base will
support revenue mobilization in 2021,
while the postponement of non-priority
goods and services and capital expenditures will stabilize government’s expenditures. Therefore, the fiscal deficit will narrow to an estimated 3.5 percent of GDP in
2021, contrary to 3.9 percent of GDP in
2020.
The US$ PPP 1.9 poverty rate is expected
to remain the same, at 25.3 percent 2021,
drawing an additional 166,000 people into
extreme poverty. If the COVID-19 pandemic persists till 2022, an additional
166,000 people could move into extreme
poverty. Poverty reduction would resume
in the medium term as economic growth
gradually returns to its pre-COVID path.
Downside risks include renewed restrictions due to the recent surge in
COVID-19 cases, delayed deployment of
the vaccine, and a prolonged closure ofborders in major economies, which would
affect Cameroon’s economy. Should suchrisks materialize, Cameroon’s oil andcommodity exports would grow moremodestly than in the baseline scenario,
affecting both the fiscal and external accounts.

(annual percent change unless indicated otherwise)
2018
4.1
5.7
-0.2
7.9
1.8
8.1
4.1
5.1
3.1
4.4
1.1
-3.6
-2.3
39.3
-1.4
24.7
45.9
69.4

2019
3.7
4.5
1.8
8.1
5.1
10.5
3.6
2.8
3.6
3.9
2.5
-5.0
-3.3
42.8
-2.3
24.5
45.7
69.1

2020 e
-2.1
1.5
2.3
-3.6
-19.7
-5.4
-2.1
-0.2
-3.6
-1.8
2.5
-4.6
-3.8
43.4
-2.9
25.3
46.4
70.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2009- and 2014-ECA M -IV. A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 215 Apr 21

2021 f
2.1
2.2
1.4
4.5
2.8
4.9
2.1
4.1
4.3
0.5
2.5
-3.4
-3.5
43.6
-2.5
25.3
46.4
70.2

2022 f
2.7
4.3
1.1
5.1
2.8
8.1
2.7
4.8
4.6
1.3
2.5
-2.8
-2.9
43.2
-1.9
25.2
46.3
70.1

2023 f
3.8
6.0
-1.4
2.1
9.8
8.6
3.8
5.6
4.7
2.8
2.5
-2.4
-2.0
42.9
-1.2
25.0
46.2
69.9

CENTRALAFRICAN REP.
Table 12020

P o pulatio n, millio n

4.8

GDP , current US$ billio n

2.2

GDP per capita, current US$

462.6

a

56.2

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

102.0

b

52.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (2008), 201 1 PPPs.
(b) WDI for school enrollment (201 6); life expectancy (201 8).

The Central African Republic (CAR)
economy stagnated in 2020 following the
COVID-19 pandemic. The outlook is subject to downside risks arising from renewed insecurity amidst election disputes
coupled with uncertainty on the global
economy related to the impact of newstrains of COVID-19 and the rollout ofvaccines. Consolidating the peacebuilding
process and implementing key structuralreforms should remain a key priority.
Over 70 percent of the population has
been living in extreme poverty over the
past decade

Key conditions andchallenges
CAR is one of the most fragile and poorest
countries in the world. The country is endowed with ample natural resources but
has faced continued political instability
and cycles of violence since independence.
The poverty rate increased from 66.3 percent in 2008 to 71.4 percent in 2020 – 3.4
million people live below the international
poverty line (US$1.90 per day, 2011 PPP).
Access to education, health care facilities,
and basic social services remain limited
throughout the country and under pressure due to many internally displaced
persons. Consequently, the Human Capital Index is among the lowest in subSaharan African countries at 0.29 with alimited contribution to GDP growth. The
formal private sector is small, constrainedby several structural challenges, including
limited access to finance and infrastructure, low skills, gaps in the legal and regulatory frameworks governing economic
activities, and a fragile security environment. CAR’s economic diversification islimited and has been primarily driven by
agriculture, forestry, and mining activities
over the past decades, making the country
particularly vulnerable to commodity
price shocks. The socioeconomic effects of
COVID-19, coupled with renewed insecurity amidst post-election disputes, exacerbate an already precarious humanitariansituation. Nearly half of the population
requiring humanitarian assistance, andFIGURE 1 Central African Republic / Real GDP growth andcontributions to real GDP growth

8
6
4
2
0
-2
-4
-6
-8

2016

2017

2018

Private Consumption
Gross Fixed Investment
Real GDP Growth
Source: World Bank.

2019

2020

2021

2022

Recent developments
Despite a relatively contained health impact, the COVID-19 pandemic has significantly affected CAR’s economy, which isestimated to have stagnated in 2020, compared to an expansion of 3.1 percent in2019. Disruption in global value chains,
low external demand, and domestic containment
measuresaffected
trade,
transport, tourism, and mining sectors.
The agriculture, forestry, and telecommunications sectors were more resilient than
expected.
Public investments increased from 5.6
percent of GDP in 2019 to 11 percent of
GDP in 2020, driven by measures to fightand contain the COVID-19 pandemic –leading to an overall increase in grossfixed capital investment. Uncertainties
and shocks created by COVID-19 have led
to a reduction in private investments by
14.1 percent in 2020.
Inflation accelerated in the second quarterof 2020 as measures to curtail the spreadof COVID-19 disrupted food supply
chains but decelerated during the second
half of the year with the reopening of theborder. Overall, the average level of inflation in 2020 is estimated at 2.1 percent.
The fiscal balance, including grants,
switched to a deficit in 2020, as pressures

FIGURE 2 Central African Republic / Actual and projected
poverty rate and real GDP per capita

Percent, percentage points

2015

food insecurity affecting over half of the
CAR population. Pre-existing structural
challenges left CAR particularly vulnerable to a protracted deep political crisis andits socioeconomic impact.

2023

Government Consumption
Exports
Source: World Bank.

MPO 216 Apr 21

mounted from the expenditure side in
response to the COVID-19 pandemic. The
overall fiscal deficit is estimated at 2.5
percent of GDP in 2020, financed primarily by grants. As a result, public debt declined from 47.2 percent of GDP in 2019 to
46.8 percent of GDP in 2020. CAR remains
at high risk of debt distress.
The current account balance deteriorated
from 4.8 percent of GDP in 2019 to 7.6
percent of GDP in 2020, driven by weakexternal demand and private transfer andan increase in non-oil imports fueled bydonors funded investments. Trade balance
deteriorated by 4.1 percent as the exportof merchandise declined, and imports
increased slightly. The capital accountbalance improved from 3.6 percent in 2019
to 7.6 percent of GDP in 2020, reflecting an
upward trend in project grants. Foreign
direct investment declined by more than
60 percent, driven by uncertainties createdby the COVID-19 pandemic. Consequently, the balance of payments is estimated tohave generated a lower deficit of 0.3 percent of GDP in 2020.
The latest household survey was conducted in 2008, and the recent trends in household consumption and poverty are basedon projections. In 2008, nearly 66.3 percentof the population lived in extreme poverty. The coup in 2013 precipitated an
unprecedented political and economiccrisis that increased the incidence of extreme poverty to 75 percent. Since then,progress was made to reduce extreme
poverty, notably over the past 4 years,
albeit at a very slow pace. The Covid-19
pandemic has reversed this hard won
modest progress, and the extreme poverty
rate is projected to have 71.3 percent in
2020, which equates to about 3.5 million
people living in extreme poverty.

Outlook
CAR’s economy was expected to recover,
but the outlook is now less sanguine as
renewed insecurity amid election disputes
is undermining the prospect of a postCOVID-19 recovery. Real GDP growth isprojected at 0.7 percent in 2021 – 2.5 percentage points below initial projections
before the December 2020 elections. Economic activity is expected to reboundgradually, contingent on an improvementin the security environment. In the medium term, CAR’s economy is forecasted to
grow at 3.6 percent on average –1.5 percentage points below pre-COVID-19 projections. Extreme poverty is projected to
decline at a slower pace and remains high.
The consumer price index is expected toincrease to 3.5 percent in 2021, reflecting

TABLE 2 Central African Republic / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b

2018
3.7
1.3
14.1
26.0
3.8
8.0
3.6
3.4
1.5
4.4
1.6
-8.0
-1.0
50.0
-0.6
71.1

(annual percent change unless indicated otherwise)
2019
3.1
5.7
7.7
-9.6
1.9
4.9
2.6
3.1
2.1
2.3
2.8
-4.8
1.7
47.9
2.0
70.7

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2008-ECA SEB . A ctual data: 2008. No wcast: 2009-2020. Fo recast are fro m 2021to 2023.
(b) P ro jectio n using neutral distributio n (2008) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 217 Apr 21

inflationary pressures with the blockadeof the Bangui-Douala corridor amidst
election disputes. Inflation is projected tofall below the regional convergence criterion of 3 percent in the medium-term.
The fiscal position is expected to deteriorate further in 2021 with a deficit of 2.7
percent of GDP as grants decline and revenues drop with renewed insecurity andthe blockade of the Bangui-Douala corridor. In the medium term, the external
position is projected to worsen as a resultof a higher trade deficit and lower investment inflows. The current account balanceis expected to improve with an improvement in the balance of goods and services
but will remain structurally in deficit.
CAR’s economy is likely to enter a deeper
recession if renewed insecurity lingers.
The humanitarian situation will likely
deteriorate, with thousands of additional
people fleeing for their safety and falling
into poverty. Further violence and insecurity are likely to increase the country risk
premium, heighten investment uncertainty, delay the reform agenda, critical toleverage domestic resources and strengthen the social contract.

2020 e
0.0
-6.7
14.4
29.0
-3.2
-4.8
0.0
4.0
-2.0
-1.9
2.1
-7.6
-2.6
46.5
-2.3
71.4

2021 f
0.7
3.6
-9.7
-11.6
4.2
0.6
1.0
2.0
1.0
0.3
3.5
-6.8
-2.7
44.4
-2.4
71.6

2022 f
2.8
1.4
1.5
5.2
9.6
3.1
2.6
2.7
1.5
2.9
2.5
-5.2
-1.5
41.0
-1.1
71.4

2023 f
4.4
2.9
3.0
4.1
11.6
3.3
4.4
4.1
1.8
5.4
2.5
-5.2
1.0
38.7
1.3
70.7

CHAD

refugees from neighboring countries increases. Presidential and legislative elections scheduled for April and October 2021
respectively could increase uncertainty.

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

16.4

GDP , current US$ billio n

9.9

GDP per capita, current US$

603.6

Internatio nal po verty rate ($ 1.9)

a

38.1
a

66.3

a

86.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

43.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

89.2

b

54.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 1), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

The COVID-19 pandemic has significantly altered Chad’s economic recovery,
started in 2018. GDP contracted by 0.9
percent in 2020, and the poverty rate increased by 1 percentage point to 41.7 percent. Both the fiscal and current accountbalances deteriorated substantially, anddifficulties in financing fiscal deficit could
lead to domestic arrears' buildup. The
pandemic has highlighted Chad’s oil dependence and vulnerability to shocks.
Recovery will be fragile and subject tosignificant downside risks such as regional conflicts and climate shocks.

Chad's economic performance has been
below potential for most of the 2010s, keeping the country in the bottom part of mostdevelopment rankings. Growth averaged
negative 0.2 percent over the past five years,
about negative 3.2 percent in per capita
terms. Living conditions and access to essential services remain poor, due in part to cyclical insecurity, to exogenous constraints
such as being landlocked and without goodtrade networks, experiencing severe weather
conditions, and endogenous constraints
related to a weak governance, including in
the management of oil revenues, low humancapital investment despite a rapidly growing
population, and lack of infrastructure.
COVID-19 has highlighted the economic
weaknesses related to the dependency on
the oil sector. The combination of the global
recession, disruptions in global and domestic supply chains, measures to flatten thecontagion curve, and investment risk aversion have taken a heavy toll on the economy. This underscored Chad’s fragility due
to low levels of regional integration, poor
quality health care and education, and thelack of access to electricity and digital technology. The uncertain nature of the depth
and duration of the pandemic coupled withfiscal liquidity constraints exacerbate an
economic context already witnessing several downside risks. Regional conflicts may
further disrupt bilateral trade and stretch
government finances as the flow of

Recent developments
The dual effect of the persistent COVID-19
pandemic and the sharp collapse of oil
prices have plunged Chad into recession.
The economy contracted by 0.9 percent in2020 and the negative output gap widened to 4.1 percent. Agriculture and theoil sector remained the main drivers ofgrowth, contributing 1.1 percentage point,
while services contributed negatively (-2.0
percent). The impact of containment
measures on domestic supply chainspushed up prices and inflation rose from 1.0 percent in 2019, to 3.5 percent.
The current account deficit widened from
4.9 percent of GDP in 2019, to 9.3 percent.
The value of exports decreased by 21.9
percent driven by a sharp drop in oil prices (-35.1 percent); although in real terms,
export growth increased by 1.1 percent (asoil exports grew by 2.4 percent). Import
growth did not adjust in the same proportion as the government imported goods
needed to control the pandemic. The fiscal
deficit was financed by a significant increase in external grants.
Chad’s monetary and exchange rate policies are managed by the regional Bank ofCentral African States (BEAC). BEAC relaxed the monetary stance by cutting thepolicy interest rate from 3.5 percent, to3.25 percent in March 2020, to cushion the

FIGURE 1 Chad / Real GDP and potential GDP growth, output
gap

FIGURE 2 Chad / Actual and projected poverty rates andreal GDP per capita

Percent
6

Poverty rate (%)
100

Real GDP per capita (LCU constant)
500000

4

2
0
-2
-4

80

40000060

30000040

20000020

100000

-6

-8
-10

2017

2018

2019

2020

2021

2022

2023

0

Source: World Bank.

0

2011

Potential real GDP growth
Real GDP growth
Output Gap (% of potential GDP)

2013

2015

2017

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 218 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

pandemic's impact. Regional reserves
stayed at their 2019 level of 3.5 months ofimports in 2020.
Despite a significant increase in oil revenue(thanks to a one-year lagged in oil-revenue
taxation), Chad posted a fiscal deficit(excluding grants) of 3.7 percent of GDP, as
it increased its spending to mitigate theimpact of the pandemic. An increase in
grants, which stood at 4.8 percent of GDP,
led to an overall fiscal surplus (including
grants) of 1.1 percent of GDP. Public debt
reached 47.3 percent of GDP, and the riskof debt distress remained high.
Chad’s poverty rate remains high, with
about four out of ten Chadians (41.7 percent) leaving below the international poverty line of US$1.90 a day in 2011 Purchasing Power Parity (PPP), while 53 percent
of Chadian households are vulnerable.
Poverty is estimated to have increased by
1.6 percentage points between 2019 and2020, and the number of poor to have increased by about four hundred thousandpeople bringing the total of poor from 6.4
million to 6.8 million. Based on the 2020high frequency survey, i) two third of
Chadian households reported a loss intheir total income, and ii) 57 percent oftransfer receivers reported a decline inthis source of income. The combined effectof the loss of income, a reduction ofdomestic transfers and remittances, andincreased market prices due to the pandemic increased the national poverty rateby 5.5 percent. Income inequality remains
high with a Gini coefficient of 43.3.

Outlook
The economy is projected to slowly recover, thanks to the global oil markets resumption that would boost international
trade, in 2021 with growth reaching 1 percent, and a decrease in per capita growth
contraction to -1.9 percent of GDP, from 3.8 percent of GDP in 2020. With therollout of COVID-19 vaccines in the second half of 2021, the recovery is expected
to gain momentum in 2022-23 with economic growth reaching 2.7 percent on
average. Inflation should decelerate to 3
percent and remain below the CEMAC
convergence criteria as the effects of supply chain disruptions subsides and GDP
growth converges towards its potential.
The current account deficit is expected todecrease slightly in 2021; export growth isexpected to reach 4.8 percent, driven by
crude oil exports. Still, the current accountdeficit will remain substantial, averaging
8.5 percent of GDP over 2021-23. Foreign
direct investment and financial support
from donors should help finance the

TABLE 2 Chad / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

current account deficit. CEMAC regional
reserves are projected to remain below 5
months of imports by 2023.
The fiscal balance will turn into a deficit of
1.1 percent of GDP (including grants and5.6 percent of GDP (excluding grants) in
2021. Fiscal revenues are projected to decrease by 14.3 percent, due to a 39.1 percent
fall in oil revenue. Public expenditures arealso expected to decrease by 4.2 percent as
the COVID-19 related spending engaged isgradually removed. By 2022, the fiscal deficit should narrow to 0.8 percent of GDP
with the government’s efforts to mobilize
more domestic revenues outside the oil
sector and a slight decrease in government’s expenditures. Although public debt
will remain at around 47 percent of GDP,difficulties to pay debt services will leadthe country in debt distress.
The adverse effects of the COVID-19 crisis
on poor and vulnerable households are
expected to last for several years, with thepoverty rate expected to increase to 42.5
percent by 2023. The weakness of redistribution programs or structural economictransformation limit the space for poverty
reduction. In particular, poor and vulnerable households who earn a part of theirlivelihood from transfers and family enterprises that have been closed because of
the pandemic, are in risk of remaining or
falling into poverty.

(annual percent change unless indicated otherwise)
2018
2.4
0.7
-11.8
5.4
4.6
1.4
2.3
4.0
0.6
1.0
4.0
-4.7
1.5
48.3
3.0
40.2
68.0
87.4

2019
3.2
1.4
1.7
6.6
6.0
4.0
3.3
4.6
0.9
2.5
-1.0
-4.9
-0.6
44.4
1.0
40.1
68.0
87.4

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2011-ECOSIT-III. A ctual data: 2011. No wcast: 2012-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2011) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 219 Apr 21

2020 e
-0.9
0.3
18.1
-9.8
1.1
2.0
-0.9
2.4
-0.2
-5.2
3.5
-9.3
1.1
47.3
2.9
41.7
69.3
88.2

2021 f
1.0
0.6
-4.4
-0.6
4.8
4.0
1.0
5.8
0.8
-5.4
3.0
-7.8
-1.1
46.9
0.4
42.2
69.8
88.4

2022 f
2.5
2.5
3.4
13.3
0.7
4.1
2.4
3.2
1.6
1.6
3.0
-8.7
-0.8
47.0
0.3
42.4
69.9
88.5

2023 f
2.9
2.5
2.8
15.8
0.4
4.1
2.8
2.8
1.6
3.3
3.0
-9.3
2.2
47.0
3.3
42.5
69.9
88.5

COMOROS

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

0.9

GDP , current US$ billio n

1.2

GDP per capita, current US$

1348.3

Internatio nal po verty rate ($ 1.9)

a

19.1
a

39.7

a

64.6

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a45.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

99.5
64.1

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 3), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

The COVID-19 shock hit the economy
significantly in 2020, but the fallout fromthe pandemic is fully materializing only
this year. A prompt vaccination roll-out
would allow Comoros to progressively
return to normality. In a context oflongstanding fragility, inadequate government response to the pandemic may
cause social discontent and financial sector vulnerability. In addition, the pandemic is likely to have increased the shareof those living in poverty and deepened
poverty among the poor.

Comoros has been in a persistent lowgrowth equilibrium, in a context of social,political, and institutional fragility. The
economy over the last decade has been
primarily consumption-driven, fueled byremittances and tourism receipts from thediaspora, and relying on external aid. Low
domestic revenue along with a high public wage bill and weakly managed SOEs
constrain social spending and crowd out
the space for critical infrastructure. Private
sector development is limited by a small
domestic market and a weak rule of law, afragile financial system and an onerous
business environment. Poverty reduction
has remained modest while inequality has
been on the rise, including between ruralurban regions and across islands. Labor
force participation is remarkably low,
especially among female workers, andlow quality education has undermined thecontribution of human capital to productivity growth, with overall factor productivity growth missing. The monetary
agreement with France has contributed tofairly conservative fiscal policy, low inflation rates, and adequate levels of foreign
reserves, with no signs of significant currency misalignment in recent years.
COVID-19 is exacerbating existing economic and social challenges with shortterm risks aggravated by the rapid spreadof the virus since the beginning of theyear. High levels of non-performing loans

and longstanding solvency issues are testing the stability of the financial sector.
Deterioration of SOEs’ financial situation,
including of Comores Telecom, a national
telecom provider that is facing increased
competition, could intensify risks associated with SOEs’ contingent liabilities. In
light of the spatial inequalities between
the islands, a delayed or uneven responseby the government could lead to a renewed cycle of social discontent and political instability.

Recent developments
Despite a relatively contained first waveof COVID-19 in Comoros in 2020, mosteconomic activity was disrupted due tomobility restrictions and the suspension ofinternational travel, resulting in a drop of
tourism receipts. Demand for agricultural
products and services (leisure andtransport) were the most hit. Notwithstanding this, the limited spread of thepandemic, along with strong support
from the diaspora and sustained government health and social spending, led to asmaller contraction in growth (-0.5 percent) than previously anticipated. Inflation
remained low in 2020 supported by government measures to contain the price of
selected imports.
Vulnerabilities in the financial sector haveintensified. After years of insolvency of
SNPSF, a public systemic financial institution, the authorities started the restructuring process with the separation of the
postal from banking services (planned for

FIGURE 1 Comoros / Non-performing loans and credit
growthFIGURE 2 Comoros / Actual and projected poverty rates andreal GDP per capita

Percent

Poverty rate (%)
70

60

Real GDP per capita (LCU constant)
49500050

60

490000405048500030

40480000304750002047000010465000

20
10

0
-10

2019 Q1 2019 Q2 2019 Q3 2019 Q4 2020 Q1 2020 Q2 2020 Q30

Sources: WB Financial Stability Monitor for Comoros (December 2020).

4600002013

Non-provisioned NPLs (% of bank capital)
NPL (% of gross loans)
Private credit growth (% of real growth, y-o-y)

2015

2017

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 220 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

the second half of the year). Other two
small banks have been under provisional
administration due to capital shortfalls.
The BCC eased liquidity strains throughlower reserve requirements and requested
banks to extend maturities for hard-hit
debtors, limiting, at least temporarily, therise of NPLs (see Figure 1).
Fiscal policy measures have been taken to
mitigate the impacts of the pandemic
which include reduced taxation of selected imports, increased spending on health,subsidized pay for workers in key SOEs
and cash transfers to the poor. Despite ashortfall in domestic revenues, the fiscal
deficit was curbed to -0.1 percent of GDP
in 2020 (compared to –1.9 percent in 2019),
thanks to strong external budget support
from official donors and participation in
the Debt Service Suspension Initiative.
The current account balance was only
slightly negative in 2020 (-0.7 percent of
GDP compared to –3.9 percent in 2019)
despite the decrease in tourism receipts,
due to lower imports and an increase inremittances, which proved to be resilient
despite the economic slowdown in Europe(France in particular, where most of thediaspora lives). The poverty rate (atUS$1.90 per day) is estimated to have increased from 18.5 percent in 2019 to 19.6
percent in 2020 owing to social-economic
fallouts from the pandemic (Table 2).

OutlookThe new and stronger COVID-19 wave
since January and the anticipated challenges to vaccine acquisition and distribution, will likely delay economic recovery.
Recovery may start only during the second half of 2021, resulting in a nearly absent growth this year (0.2 percent). The
tightening of social distancing measures tocontain the spread of the new wave, andthe decision of the French government toclose its borders, would decrease tourism
receipts and aggravate the economic impact of the pandemic. Despite weak domestic revenues, the government is expected to continue boosting social andhealth spending to mitigate the impact ofthe pandemic.
The economy is expected to recover in
2022 and 2023, depending on the pace ofvaccination in Comoros and abroad,which would allow for a normalizationof economic activity, and globally. Likewise, Comoros’ fiscal stance is expected
to progressively return back to pre-crisis
levels, with external aid decreasing accordingly. There are significant downside
risks to the outlook, however, including a
prolonged pandemic and growing vulnerabilities in the financial sector. The

TABLE 2 Comoros / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

Comorian financial sector was alreadyhighly vulnerable prior to the pandemic,
with at least three financial institutions
undercapitalized, including one insolvent (SNPSF). Less resilient remittancesand growing difficulties among SOEs,
including Comores Telecom, and political tension from growing social frustration also represent significant risks to theoutlook. Poverty (measured against the
US$ 3.20 poverty line) is expected to decline progressively (see Figure 2), contingent on Comoros’ ability to contain theeconomic impacts of COVID-19, therollout of vaccinations, and the success of
mitigation measures adopted by the government.

(annual percent change unless indicated otherwise)
2018
3.4
1.8
0.0
19.0
19.2
10.9
3.0
2.7
1.7
3.3
1.7
-2.4
-1.7
17.4
-1.5
18.4
38.9
63.9

2019
1.9
2.0
-7.2
11.9
0.5
5.2
1.9
-0.9
1.4
3.3
3.3
-3.9
-1.9
23.9
-1.7
18.5
39.0
64.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2013-EESIC. A ctual data: 2013. No wcast: 2014-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2013) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 221 Apr 21

2020 e
-0.5
0.9
4.0
-4.9
-7.7
-1.7
-0.5
1.1
2.0
-1.7
1.4
-0.7
-0.1
29.7
0.3
19.6
40.4
65.3

2021 f
0.2
0.1
7.0
0.4
0.1
2.3
0.2
1.7
2.2
-0.8
0.9
-2.3
-2.4
33.1
-1.9
19.5
40.0
65.1

2022 f
2.2
2.5
-0.8
2.8
2.2
2.4
2.2
2.0
2.6
2.2
2.0
-3.5
-2.1
34.0
-1.5
19.1
39.7
64.6

2023 f
4.2
3.8
4.4
3.7
4.8
3.3
4.2
2.2
2.9
5.3
2.0
-3.6
-2.0
35.5
-1.4
18.6
39.0
64.2

Key conditions and
DEMOCRATIC
challenges
REP. OF CONGO
Table 12020

P o pulatio n, millio n

89.6

GDP , current US$ billio n

48.8

GDP per capita, current US$

544.6

Internatio nal po verty rate ($ 1.9)

a

77.2
a

91.4

a

97.9

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

42.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

118.5

b

60.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 2), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Economic activity weakened in DRC in 2020
due to COVID-19, with GDP growth estimated at 0.8 percent. The current account deficit
widened, significantly reducing international
reserves, causing exchange rate depreciation
and rising inflation. Moderate growth prospects are forecast for 2021 based on recovery
in the non-extractive sector and increase inworld commodity prices. However, uncertainty around the duration of the pandemic andglobal recovery as well as political stability
continue to weigh on medium-term prospects
for economic growth and poverty reduction.

DRC relies heavily on extractives as
growth drivers, which contributed 1.9
percentage points to growth in 2020. The
country’s high product and market concentration- copper and cobalt constituteover 80 percent of exports while China
absorbs 40 percent of exports - renders it
vulnerable to commodity price volatility
and export partners’ demand. With huge
untapped potential in agriculture, DRC isa net food importer, which reduces fiscal
and foreign exchange buffers and contributes to food insecurity. Major structural
constraints lead to an under-developed
service sector. Improving the businessenvironment and narrowing the infrastructure gap are needed to achieve economic diversification.
Political uncertainty, a legacy of DRC’s
period of political unrest, continues toweigh on growth. Consensus is key toadvance structural reforms and attract
investors. Additionally, fiscal policy has
limited scope as expenditure-led adjustments could further jeopardize long-term
growth prospects and pro-poor spending.
Therefore, improving domestic revenue
mobilization to sustainably widen fiscal
space is crucial.
DRC is second only to Nigeria in SubSaharan Africa on the number of extreme
poor. Poverty remains high in the country, including in urban areas, and significant geographical disparities exist, with

FIGURE 1 Democratic Republic of Congo / Real GDP
growth and contributions to real GDP growth

extreme poverty concentrated in central
and northwestern provinces. Despitesome improvement, social and humandevelopment indicators remain weak: in
2019, infant mortality of 66.1 per 1000 live
births was higher than the Sub-Saharan
average of 51.7, while the HCI of 0.37 in2020 remains below the Sub-Saharan average of 0.40.
The COVID-19 pandemic further exposed
DRC’s weak health and social protection
system. Strengthening the healthcare system remains a key challenge as the country continues to address both COVID-19
and Ebola outbreaks. A longer health crisis and its related economic disruptions
could result in behavioral changes thatmay delay the recovery, dampen growthprospects, widen inequality, and increase
vulnerabilities.

Recent developments
Economic growth decelerated to 0.8 percent in 2020 from 4.4 percent in 2019 as
non-mining sectors contracted by 1.6 percent (2019: 5.7 percent growth) due to mobility restrictions, weaker trading activities and constrained government spending. Private consumption and government
investment fell in 2020 by 1.0 and 10.2
percent, respectively. The extractives sector in contrast grew 6.9 percent in 2020(2019: 1 percent), helped by China’s robust
demand, the containment of workers on
mining sites and a recovery in commodity
prices. Copper and cobalt output rose by
12.7 and 11.4 percent (y-o-y), respectively.

FIGURE 2 Democratic Republic of Congo / Actual andprojected poverty rates and real GDP per capita

Percent, percentage points
12
10
8
6
4
2
0
-2
-4
-6
-8

2017

2018

2019

Private consumption
Government investment
Net exports

2020

2021

2022

2023

Government consumption
Private gross fixed investment
GDP

Sources: Democratic Republic of Congo Statistical Authorities, World Bank.

Source: World Bank. Notes: see Table 2.

MPO 222 Apr 21

The current account deficit (CAD) widened by 0.5 percentage points to 4.0 percent in 2020, as the deterioration in theincome balance largely outweighed theimprovement in trade balance. Capital
inflows only partly financed the deficit
and international reserves declined to 2.9
weeks of imports at end-2020 (2019: 3.1
weeks). The Congolese franc depreciatedby 13 percent on average in 2020, puttingpressure on inflation, which averaged 11.2
percent. BCC first loosened then tightenedmonetary policy, raising its policy rate to18.5 percent to maintain positive real interest rates and re-anchor inflation expectations.
The government’s pandemic response
widened the fiscal deficit by 0.7 percentage points to 1.9 percent of GDP in 2020.
Revenue decreased to 9.0 percent of GDP
in 2020, forcing expenditures down to 10.9
percent of GDP in 2020. The government
resorted to BCC’s advances for financing
until April-2020 and subsequently mobilized emergency support from the IMF
and AfDB. It also increased domestic debt
issuance and accumulated arrears.
Poverty is estimated at 73.3 percent in
2020, an increase of 0.7 percentage points
compared to 2019, due to the COVID-19
pandemic. This might not fully capture
the deteriorating living conditions since,
according to COVID-19 High Frequency

Phone surveys in Kinshasa, over 10 percent of households have seen members
lose their jobs while 20 percent have reduced their food consumption.

Outlook
Economic growth is projected to slightly
recover to 2.5 percent in 2021 before accelerating to 4.1 percent in 2023, closer to its
pre-COVID level. The non-extractive sector should resume growth in 2021 as pandemic-related disruptions progressively
fade and production normalizes. The mining sector is expected to expand further in
2021 and pick up pace in 2022. The Kamoa-Kakula copper project is on track to begin
production in July 2021.
The fiscal deficit should decline slightly
with a moderate recovery and efforts toimprove domestic revenue mobilization.
However, given the prolonged pandemic
and delays in the roll-out of vaccines, thedeficit is only expected to narrow to about
1.2 percent over 2021-22, before widening
again in 2023 considering the election cycle. The CAD is also projected to narrowby 2022 to 2.7 percent as higher commodity prices improve terms of trade. Net FDI
inflows are also expected to increase
fueled by higher global demand.

TABLE 2 Democratic Republic of Congo / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

2018
5.8
2.7
8.4
-29.5
25.7
5.9
5.9
1.5
12.1
1.3
29.3
-3.7
0.1
10.4
0.4
73.0
89.2
97.2

(annual percent change unless indicated otherwise)

2019
4.4
1.4
20.2
14.4
-2.5
-7.6
4.3
2.8
6.8
2.1
4.7
-3.5
-1.2
10.2
-0.9
72.6
89.1
97.1

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2012-E123. A ctual data: 2012. No wcast: 2013-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2012) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 223 Apr 21

Given the lingering adverse effects of
COVID-19 and with high population
growth likely to partially offset economic
growth, extreme poverty is projected tostagnate with only a slight reduction ofless than 0.1 percentage point by 2023.
DRC’s economy remains vulnerable tocommodity price movements and thegrowth performance of its major trading
partners. Also, underperformance in the
projected revenue mobilization -derived
from potentially reduced economic activity and extended fiscal relief measurescoupled with substantial spending pressure associated with a prolonged pandemic, could worsen fiscal imbalances andgenerate further arrears. Finally, renewed
political uncertainty might lead to further
economic instability and weak investment. Should these risks materialize, themedium-term growth prospects could bemuch weaker, hovering closer to 2.0 percent in 2021 and 2.9 percent in 2022.

2020 e
0.8
-1.0
6.6
5.1
2.8
1.5
0.8
1.9
2.8
-2.1
11.2
-4.0
-1.9
10.5
-1.6
73.3
89.5
97.3

2021 f
2.5
1.6
9.0
5.7
4.6
6.0
2.5
3.2
3.0
1.6
10.0
-3.9
-1.4
10.2
-1.2
73.5
89.5
97.3

2022 f
3.0
1.5
4.7
13.0
5.0
6.5
3.0
3.2
3.6
2.3
7.0
-2.7
-1.0
9.3
-0.8
73.5
89.5
97.3

2023 f
4.1
1.0
3.5
32.2
5.6
10.5
4.1
3.2
4.1
4.5
5.0
-2.5
-1.8
8.8
-1.6
73.2
89.4
97.2

REPUBLIC
OF CONGO

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

5.5

GDP , current US$ billio n

10.7

GDP per capita, current US$

1938.3

Internatio nal po verty rate ($ 1.9)

a

39.6
a

64.1

a

83.9

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

48.9

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

106.6
64.3

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 1), 201 1 PPPs.
(b) WDI for school enrollment (201 2); life expectancy (201 8).

The Congolese economy contracted by an
estimated 7.9 percent in 2020, driven by
the underperformance of the oil sector anda slowdown in non-oil activities. The extreme poverty rate increased sharply by 4
percentage points, reaching 52.5 in 2020.
The debt level has worsened, maintaining
Congo in debt distress. Although theeconomy is set to return to positive
growth in 2022, the poverty rate is expected to further increase by 0.7 percentage point between 2020 and 2023.

Congo experienced a negative averagereal growth rate of -5.2 percent over 20152020. This contraction in the economy isprimarily a result of the country’s highdependency on oil. The decline in oil prices observed in recent years and weak governance reflected in high levels of nonconcessional borrowing have led Congo
into debt distress; its debt-to-GDP ratio
has more than doubled from 47.4 percent
in 2014 to an estimated 103 percent in2020. Moreover, weak governance in key
sectors has prevented revenues from natural resources from translating into higher
growth and investment in human capital.
The COVID-19 pandemic has exacerbatedthese issues striking a particularly severe
blow on the poor. The proportion of the
population living below the international
extreme poverty line of $1.90 PPP per day
has risen by about a third from 39.1 percent in 2015 to 52.5 percent in 2020.
The risks to Congo’s economic stability
stem not only from the spread of the
COVID-19 pandemic in the country but
also from its international repercussions.
The country is overwhelmingly reliant on
the hydrocarbon sector. On average, it
contributed 78 percent of Congo’s exports and 30 percent of its GDP between
2015 and 2020. This makes the Congolese
economy extremely vulnerable to volatile
oil prices. Congo’s ability to reduce its
debt through the successful clearance of

FIGURE 1 Republic of Congo / Real GDP growth andcontributions to real GDP growtharrears and the restructuring of privatecommercial claims, among other channels,
will determine how soon the country canreturn to a sustainable debt level. Furthermore, as Congo is already a country affected by FCV, potential internal social unrest
due to falling incomes and post-elections
security concerns could also impact macroeconomic stability and sustainable growth.

Recent developments
The COVID-19 pandemic and associatedoil price shocks are placing an unprecedented strain on the Congolese economy.
GDP is estimated to have contracted by
7.9 percent in 2020. Hydrocarbon production shrank by 7.7 percent due to a contraction in global demand for oil and technical difficulties in some oil fields.
The overall budget deficit in 2020 is estimated at 1.3 percent of GDP, in contrast
to a surplus of 3.5 percent in the preceding
year. However, the fiscal deficit for 2020 isestimated to be less than the earlier(October) World Bank forecast of 13.4 percent of GDP, owing to better than expected oil revenues in the second half of2020 combined with lower than anticipated government spending.
Driven by a decrease in exports and acollapse in commodity prices, Congo isexpected to record a current account deficit of 2.8 percent in 2020, wider than the
0.8 percent registered in 2019. Meanwhile, the debt-to-GDP ratio increased
from 82.3 percent in 2019 to 103 percent
of GDP at the end of 2020. Negotiations

FIGURE 2 Republic of Congo / Actual and projected poverty rates and real GDP per capita

Percent, percentage points
8
4
0

-4
-8
-12
-16
2014 2015 2016 2017 2018 2019 2020e 2021f 2022f 2023f
Oil GDP
Source: World Bank.

Non-oil GDP

Net Taxes

Real GDP
Source: World Bank. Notes: see Table 2.

MPO 224 Apr 21

to restructure external commercial debt
have intensified recently. However, Congo has not been able to finalize the debt
restructuring negotiations with oil traders.
Although Congo is benefitting from the
Debt Service Suspension Initiative (DSSI),
the restructuring of the external commercial debt will be critical to ensure debt
sustainability.
The economic crisis and the COVID-19
pandemic have worsened poverty rates
and living conditions. Poverty rates haverisen by more than four percentage
points in just one year: 48.5 in 2019 to52.5 in 2020. Recent household surveys
also reveal that about 75 percent ofhouseholds experienced a reduction in
their ability to pay rent and 69 percent intheir ability to meet food needs, highlighting the need to allocate more resources for social spending.

OutlookCongo needs to strengthen its macrofiscal situation, bolster institutions tofoster greater non-oil economic activities,
while improving the scope and quality ofservice delivery to build the country’s
human capital and basic infrastructure.

The economy is not expected to recover
fully in 2021 as the outlook is subject toheightened risks including the durationand severity of the COVID-19 pandemic,
the COVID-19 vaccine rollout, potential
internal social unrest due to falling incomes, as well as the government’s ability
to put in place fiscal consolidation
measures to address its debt situation.
The economy is expected to contract by
0.1 percent in 2021. Economic activity is
projected to rebound gradually over 20222023, with GDP growth averaging 2.7 percent as the oil sector starts to recover andlife returns to a new normal. However, theproportion of people living below the international poverty line is set to rise froma level of 52.5 percent in 2020 to 53.2 percent in 2023 despite the gradual recoveryof the economy. Furthermore, the recent
flooding disaster that started in late 2020and has continued in early 2021 presents
an additional challenge that could impact
the most vulnerable and add further stressto the weak fiscal situation. It also calls forCongo’s readiness to address climatechange vulnerabilities and mitigate disaster risks.
While fiscal consolidation is expected toresume in 2021, its success remains uncertain given the reliance on the hydrocarbon
sector, the volatility of oil prices and a

TABLE 2 Republic of Congo / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

procyclical fiscal policy stance. Macroeconomic stabilization would require restoring fiscal sustainability through continued
public debt restructuring and public financial management reforms.

(annual percent change unless indicated otherwise)
2018
-4.8
4.5
-4.7
-24.9
11.4
5.1
-6.4
-1.0
-8.5
-4.3
1.2
8.5
3.0
5.7
77.2
7.6
47.9
71.6
89.3

2019
0.2
2.5
-18.7
-2.4
7.4
3.2
-0.4
0.7
0.3
-1.7
2.2
-0.8
3.4
3.5
82.3
8.0
48.5
72.1
89.6

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2011-ECOM . A ctual data: 2011. No wcast: 2012-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2011) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 225 Apr 21

2020 e
-7.9
-4.2
13.8
-20.5
-8.5
-10.4
-8.0
-6.0
-7.7
-8.7
1.4
-2.8
1.8
-1.3
103.0
0.0
52.5
74.5
91.0

2021 f
-0.1
2.0
-1.2
-1.5
2.0
4.5
-0.1
-1.5
1.5
-2.0
2.0
1.5
2.0
0.8
94.6
2.4
53.3
75.3
91.3

2022 f
2.3
2.5
-0.5
5.0
3.6
6.0
2.3
1.5
2.7
1.9
2.2
3.2
2.5
2.4
86.0
3.9
53.4
75.4
91.4

2023 f
3.1
3.5
0.9
6.0
3.9
6.5
3.1
2.0
3.0
3.4
2.5
3.8
2.3
1.8
81.7
3.7
53.2
75.2
91.2

COTE D’IVOIRE
Table 12020

P o pulatio n, millio n

26.4

GDP , current US$ billio n

60.0

GDP per capita, current US$

2275.1

Internatio nal po verty rate ($ 1.9)

a

29.8
a

59.1

a

83.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

41.5

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

100.3
57.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

The COVID-19 pandemic negatively impacted the economy in 2020 through disruptions to services, trade, lower external
demand and reduced foreign financing
flows, reducing real growth to 1.8 percent. Fiscal and external balances deteriorated, debt pressures increased, and poverty rose. Downside risks to the economic
outlook predominate, including a second
COVID-19 wave, a decline in agricultural commodity prices, a sluggish global
recovery and security vulnerabilities.

Key conditions andchallenges
During the last decade, Côte d’Ivoire has
been one of the fastest-growing countries
in Sub-Saharan Africa (SSA), with real
GDP growth averaging 8.2 percent per
year (5.7 percent in per capita terms) over
2012–2019. This was driven mainly by apost-conflict recovery, public investment,
and reforms that supported a credit expansion. However, the catch-up effects are
dissipating, and the country will need to
attract private investment and accelerate
the structural shift towards higher valueadded activities.
Meanwhile, within-firm productivity
rose in manufacturing, but there has been
little structural change between firms
allocating resources to the most productive ones. Côte d’Ivoire has made significant progress on improving the businessenvironment in terms of easing regulations and was one of the strongest reformers according to the World Bank’s
Doing Business report until 2019, although progress has been limited in thepast year. Private investment is below
levels seen in other emerging market
economies. Difficulties accessing industrial land, higher transport and logistics
costs, and limited access to finance, especially for SMEs, remain key barriers toinvestment. Further structural reforms(access to finance, access to land, tax reforms) will be essential to sustain thepace of private sector led growth.

The economic recovery since 2012 translated into some improvement of households’ livelihoods. The national poverty
rate declined from 44.4 percent in 2015, to39.5 percent in 2018, but rose in 2020 due
to the pandemic. The crisis highlighted
vulnerabilities in social safety nets, andpoverty, inequality and regional disparities remain key concerns that require continued government expenditure (social
programs and basic infrastructure). In
addition, domestic resource mobilization
is insufficient to match spending needs.
Therefore, it is critical to expand the tax
base and improve governance in revenue
administration (including digitalization oftax procedures) to create the fiscal spacenecessary to promote equitable and inclusive growth.

Recent developments
GDP growth slowed to 1.8 percent (near 7
percent projected pre-COVID). The volatility in global demand and commodity
prices led to lower exports, while FDI andexternal financial flows shrank. Household consumption grew by 1.9 percent.
Agriculture showed some resilience, but
services and industry were hit hard by theconfinement restrictions and supply chain
disruptions. Inflation increased moderately, due mainly to higher food costs.
High frequency surveys suggest formal
private sector employment dropped by 41
percent during COVID-19 restrictions. The
national poverty rate rose and remained
above previous levels (39.4 percent in

FIGURE 1 Cote d’Ivoire / Real GDP Growth, current andfiscal account balances

FIGURE 2 Cote d’Ivoire / Poverty rates and real GDP per
capitaPercent

Poverty rate (%)

Percent of GDP

8

2

7

0

6

100

Real GDP per capita (LCU constant)
1600000
1400000

80

1200000-2

5-4

1000000

60

4

-6

3

80000040

600000

-8

2
1

-10

0

-12
2016

2017

2018

2019e 2020p 2021p 2022p 2023p

200000002008 2010 2012 2014 2016 2018 2020 2022

Real GDP growth (lhs)
Fiscal balance (rhs)
Current account balance (rhs)
Source: World Bank.

40000020

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 226 Apr 21

Lower middle-income pov. rate
Real GDP pc

2018) at 41.5 percent in October 2020, corresponding to nearly 425 thousand additional poor.
The fiscal deficit widened to 5.9 percent of
GDP in 2020 and debt rose to 45.8 percent
of GDP (from 41.2 in 2019), driven by thegovernment’s COVID-19 emergency response package. Tax revenues narrowed,
reflecting the toll on economic activity andthe fiscal cost of crisis measures.
The current account deficit increased to
3.8 percent of GDP in 2020, mainly reflecting a lower trade surplus, as global prices
for cocoa beans – 27 percent of exports in2018 – and external demand for the country’s exports were subdued.
Côte d’Ivoire’s monetary and exchange
rate policies are managed by the Central
Bank of West African States (BCEAO),
with a fixed peg between the CFA Francand the Euro. To support COVID-19 related extra spending, the BCEAO announced monetary and macroprudential
measures since March 2020, including a
policy rate cut and extended refinancing
operations of the 3-month COVID-19
bonds to support governments and businesses. Cote d’Ivoire’s reserves reachedan estimated 5.5 months of imports in
2020. Between March and October 2020,
the REER appreciated by 6.4 percent y/y,reflecting the nominal appreciation of theEuro against the USD.

Outlook
Economic growth should gradually return to pre-pandemic levels by 2023.
Real GDP is projected to grow by 5.7
percent in 2021, building on the recoveryof late 2020 which was reflected in somehigh frequency monthly indicators picking up again (export volumes, google
mobility indicators, etc.). Domestic consumption will continue to pick up alongside the recovery. Inflation is projected
to remain below the WAEMU target,
anchored by the CFAF/Euro peg and aprudent monetary policy. The externalcurrent account deficit is expected tonarrow gradually, reaching 2.7 percent
of GDP by 2023 as exports recover andgrow faster than imports, strengthening
the country’s trade balance.
The fiscal deficit is projected to gradually narrow towards the WAEMU criterionof 3 percent by 2023. Continued crisissupport spending for households andfirms, and accelerated public investment,
will put pressure on public expendituresin 2021. Fiscal consolidation in the medium-term should come from increased
digitalization in revenue administration,
renewed efforts in collections and tax
policy reforms, combined with the

TABLE 2 Côte d’Ivoire / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

gradual withdrawal of COVID spending
and control over current spending.
Poverty incidence increased during the
pandemic, but the economic recovery,
continued government expenditure andexpansion of the country’s social safety
net through cash transfers are expected toput poverty back onto a downward trajectory in 2021.
Despite this relatively favorable outlook,downside risks are significant. Côte d’Ivoire may yet face a second domestic peakof COVID-19 outbreaks if new strains
become more prevalent, which may require further confinement measures. The
country has ordered vaccines and the vaccination campaign (to begin with essential
staff from the healthcare, security andeducation sectors) has started in March
2021. In addition, continued pandemic
restrictions in trade partners (the US andEU) may depress export prices and demand, while slowing down the recovery
of foreign direct investments.

(annual percent change unless indicated otherwise)
2018
6.9
8.0
1.9
18.7
5.6
2.2
6.9
5.3
10.7
6.1
0.4
-3.5
1.2
-2.9
40.1
-1.6
29.4
59.1
84.1

2019
6.2
6.0
4.1
5.5
5.7
4.4
6.2
1.4
10.1
6.1
0.8
-2.7
1.0
-2.3
41.2
-0.7
29.3
59.1
84.4

2020 e
1.8
1.9
0.3
6.2
-4.6
-0.2
1.8
0.7
4.0
1.3
1.2
-3.8
0.2
-5.9
45.8
-4.0
29.3
59.1
84.3

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2008-ENV and 2015-ENV. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using annualized elasticity (2008-2015) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 227 Apr 21

2021 f
5.7
3.0
5.1
9.7
4.6
1.5
5.7
1.8
5.0
6.9
1.4
-3.4
1.6
-4.7
46.1
-3.0
29.2
59.2
84.5

2022 f
6.0
6.0
0.1
4.5
4.8
1.4
6.0
1.9
7.0
6.6
1.6
-3.2
1.8
-3.4
46.3
-1.7
29.1
59.2
84.8

2023 f
6.5
6.5
-5.3
5.8
5.7
1.1
6.5
1.7
7.0
7.3
1.8
-2.7
1.7
-2.9
45.8
-1.3
29.0
59.2
85.0

EQUATORIALGUINEA
Table 12020

P o pulatio n, millio n

1.4

GDP , current US$ billio n

9.6

GDP per capita, current US$

6852.7

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

Key conditions andchallenges

a

a

61.8
58.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) WDI for school enrollment (201 5); life expectancy (201 8).

Equatorial Guinea experienced its sixth
consecutive year of economic contraction
as lower hydrocarbon exports and fiscal
consolidation dampened growth. The
country is affected by the COVID-19 pandemic, its global consequences and theimplementation of containment measures.
The economy is expected to remain inrecession in the medium term. Downside
risks include a protracted COVID-19
pandemic, delays in the implementation of
the structural reforms that are needed to
improve competitiveness, and the effectiveness of fiscal policy.

Equatorial Guinea entered 2020 with achallenging macroeconomic situation
characterized by five years of economic
contraction and a fragile fiscal position.
The Equatorial Guinean economy is an
undiversified economy which is dominated by a declining hydrocarbon sector that
represents 55.7 percent of GDP, 87.6 percent of exports and 80.2 percent of government revenues in 2017-2019. Weak governance and a poor business environment
constraint the use of the country's resources to reduce poverty, and the unleashing of the country’s economic potential to achieve inclusive growth.
The impact of the COVID-19 pandemic on
the real and fiscal sectors stressed theneed to diversify the economy to achieve
more inclusive growth, and to implement
reforms that will help restore fiscal sustainability. Improving human capital andthe business environment remain criticalto diversifying the economy. As data remain scarce, there is a need to conduct the
Living Standard Measurement Survey(LSMS), planned in 2021, to benchmark
poverty incidence and undertake a poverty assessment to understand challenges
faced by low-income households and inform design of the next National Economic and Social Development Plan, and implement the interim national development
strategy. Economic prospects are subject
to several headwinds. Despite the recent

FIGURE 1 Equatorial Guinea / Major sources of macroeconomic changes

developments on different vaccines in
2020, there is still an uncertainty surrounding their effectiveness and the timeline of their deployment in developing
countries. In addition, investors could beconcerned by the possible exuberance inequity markets and volatility in these markets could further feed uncertainty. In its
2021 Budget Law, the government adopted some tax cuts to increase liquidity infirms but it also adopted withholding taxes to adequately collect domestic tax revenues. However, the impact of these domestic resource mobilization (DRM)
measures could be reduced by weak capacity to enforce the tax law and the absence of e-platforms which could help thetax administration. Finally, increased
spending pressures and the government’s
capacity to secure external financing – inthe form of budget support – could negatively affect the fiscal balance.

Recent developments
The COVID-19 pandemic resulted in an
economic recession which was driven bylower domestic and external demand.
With the implementation of containment
measures at the national and international
levels, real gross domestic product (GDP)contracted by 4.9 percent in 2020, compared with -6.0 percent in 2019. On the
supply side, the recession was broadbased. Compared to our initial projections, the economic contraction was lesssevere because oil production stabilizedwith the drilling of additional wells.

FIGURE 2 Equatorial Guinea / Non-income poverty
indicators
Mortality rate,
under-5 (per 1,000
live births)
200%
100%
0%
Malnutrition
prevalence, height
for age (% ofchildren under 5)

Maternal mortality
ratio (modelled)
estimate, per100,000 live births)
EqG relative to regional average
EqG relative to MIC averageunity benchmark

Sources: National authorities, World Bank Commodity Pink Sheet and World Bank
staff estimates.

Source: World Development Indicators (WDI).

MPO 228 Apr 21

The prolonged lockdown, the associateddisruption of economic activities and thesixth year of economic recession are likely
to have resulted into additional losses injobs and earnings. The proportion of the
population living below the poverty line is
expected to have increased as Equatorial
Guinea has very limited social safety nets,
and the tertiary sector, which employs
about 38.6 percent of the labor force, hasbeen particularly affected by containment
measures. Additionally, the number of
COVID-19 cases is increasing due to anerosion in compliance with containment
measures, misuse of face masks and lackof hand sanitation.
Due to the decline in oil price that resulted
in lower government revenues (-3.2 percent of GDP in 2020) and an increase ingovernment expenditures (+2.1 percent of
GDP in 2020), Equatorial Guinea recordeda shift from a fiscal surplus of 2.0 percent
of GDP in 2019 to a fiscal deficit of 3.3
percent of GDP in 2020. In addition to thedecline in government revenues, the government adopted some targeted and temporary measures to support the private
sector (estimated cost of 0.3 percent ofGDP) in 2020. In this challenging economic environment, the government cleared a
portion of domestic arrears in 2020 (1.9
percent of GDP) but they were still estimated at 20.6 percent of GDP at end-2020.

This fiscal stance resulted into a higher
total public debt estimated at 52.3 percent
of GDP (at end-2020).
Lower oil prices also deteriorated thecountry’s external position as its contribution to net foreign assets declined by Euro
265 million as the value of exports declined by 30.4 percentage points in 2020,
and the current account deficit increased
to 10.9 percent of GDP in 2020 from 1.6
percent of GDP in 2019.

OutlookWith more favorable economic prospects
in trading partners, real GDP is projected
to increase by 2.4 percent in 2021 on theback of an increase in gas production fromthe Alen field and the backfill project to
the LNG plant. The current account deficit
is projected to narrow to 4.7 percent of
GDP 2021. However, the economy is projected to be back in recession in 2022-2023
as existing oil wells will reach maturity
and major projects, such as the Fortunagas project, have not yet materialized.
This outlook is subject to headwinds related to the management of the pandemic at
the national and global level, the volatilityof financial markets, the access to externalfinancing to implement the government

TABLE 2 Equatorial Guinea / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)

2018
-6.2
3.4
1.6
-10.1
-5.7
6.2
-6.2
-2.4
-11.7
5.8
1.3
-2.8
3.0
0.1
42.1
0.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA

MPO 229 Apr 21

budget, and potential delays in the implementation of critical reforms.
In its 2021 budget law, the government
anticipated an increase of the fiscal deficit
to about 3.8 percent of GDP in 2021 on theback of lower government revenues. The
fiscal deficit is, however, forecasted atabout 4.2 percent of GDP 2021 because of
the above-mentioned headwinds. Progressin the implementation of the IMF program
could help to finance the substantial grosstotal financing needs, estimated at 11.9
percent of GDP. The clearance of a portionof domestic arrears (about 2.1 percent ofGDP), planned in 2021, could marginallystrengthen the banking system and affectprivate sector confidence in the nonhydrocarbon sector despite uncertain outlooks. Public debt is projected at 46.6 percent of GDP in 2021, and to average 53.3
percent of GDP in 2022-2023.
With growth in 2021 being primarily driven by the hydrocarbon sector and the service sector projected to record a sluggish
economic expansion, unemployment andpoverty are likely to increase. The designof effective social policies depends on results from the Survey on the Impact of
COVID-19 conducted in December 2020.

(annual percent change unless indicated otherwise)
2019
-6.0
3.4
-4.5
-55.8
-6.2
-9.0
-6.0
-5.8
-8.7
-1.2
1.2
-1.6
5.3
2.0
45.9
2.7

2020 e
-4.9
3.4
-5.3
-42.1
-9.0
-7.8
-5.0
0.4
-6.8
-2.1
5.8
-10.9
3.9
-3.3
52.3
-2.0

2021 f
2.4
3.4
-4.2
-34.0
3.5
-0.7
2.4
2.8
3.7
0.3
3.5
-2.7
5.6
-4.2
46.6
-2.3

2022 f
-5.6
2.8
-10.9
1.9
-9.2
-4.0
-5.5
1.4
-13.2
6.8
3.4
-3.0
5.5
-2.6
53.0
-0.5

2023 f
-2.3
2.8
1.2
5.5
-5.0
1.1
-2.3
1.4
-8.5
6.0
3.3
-6.9
5.5
-1.7
53.7
0.6

ERITREA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

3.5

GDP , current US$ billio n

2.1

GDP per capita, current US$

588.8

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

a

68.4

a

65.9

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent WDI value (201 8).

Real GDP growth declined 0.6 percent in2020 as a drop in net exports and private
consumption was cushioned by a sharp
increase in capital spending in mining.
The latter resulted in a fiscal deficit of
4.8 percent of GDP. Despite the positive
impact of the new mines on growth, themedium-term outlook remains bleak without a re-engagement with the broader
international community and the resolution of the external arrears. Latest available data from 1996/97 suggests poverty is
widespread.

With UN sanctions lifted in November
2018, Eritrea has started emerging from a
decade of international isolation. However, the re-engagement progress with
development and international partners
stalled a year ago. Efforts to shift from acentrally planned to a market-led economy have been very slow and sporadic,
and large SOEs dominate economic activity. Monetary policy is characterized
by administrative measures and fiscal
dominance, while severe import restrictions enable a fixed exchange rate
regime pegged to the US dollar andcharacterized by low foreign exchange
reserves. The banking system is largely
lending to the government and lacks
international correspondence banks,
while payment and settlement systems
are absent. The country is among themost vulnerable and least adapted toclimate change in Sub-Saharan Africa,
and frequent weather shocks pose aheavy burden for the economy and rural
livelihoods. The mining sector, whichstarted operating in 2011, accounts forover 90 percent of total exports, yet contributions to budget revenues are limited.
The Covid-19 crisis hit Eritrea amid a hiatus in its reengagement with development
partners leaving it without needed external funding. In addition, informal-crossborder trade was affected by the conflictin northern Ethiopia. Yet, Eritrea’s isolation moderated the magnitude of the initial external shock.
The emergency conditions prevailing in
the country over the past decade have led
to data production capacity constraints.
Specifically, national accounts data arelimited to unofficial GDP estimates by the
Ministry of Finance and inflation estimates are produced only for the capital,
Asmara, while full balance of payments
accounts are missing. The last population
census in Eritrea took place more than 25
years ago. Therefore, little is known aboutsocioeconomic outcomes, including poverty. Data from 1996/97, covering only
urban areas, suggests that poverty was
widespread with around 70 percent of the
population living in poverty.

Recent developments
Hit by the COVID-19 crisis, real GDP
growth declined an estimated 0.6 percent
in 2020 from 3.8 percent in 2019. A lockdown over several months and borderclosures weighed heavily on private consumption. Yet, the sharp rise in government capital spending moderated the impact of the Covid crisis on output growth.
Specifically, the sharp decline in exports
of about 6.5 percent was offset by a contraction in imports and sharp increase ingovernment investment totaling about
5 percent of GDP. The latter marked theopening of two mines (Colluli and Asmara) supported by net FDI inflows. The
government also continued building the

FIGURE 1 Eritrea / Evolution of total public debt

FIGURE 2 Eritrea / Wage bill

Percent of GDP

Percent of GDP

350

20

300

18
16

250

14

200

12

150

10
8

100

6
50

4

0

2
2016

2017

Domestic debt

2018

2019
External debt

2020

2021p

2022p

0
2015

Total public debt

Sources: Ministry of Finance, Planning and Economic Development.

2016

2017

2018

2019

2020

2021p

Sources: Ministry of Finance, Planning and Economic Development.

MPO 230 Apr 21

2022p

important connection road from the Ethiopian border to the port of Massawa. Deflationary pressures aggravated prior to the
Covid-19 crisis by the temporary openingof borders with Ethiopia in 2019 haveeased and inflation reached 4.9 percent in
2020.
The external current account surplus is set
to narrow to 10.7 percent of GDP in 2020
from 12.1 percent in 2019, largely due to a
slowdown in remittances but also due to acompression of the merchandise trade
surplus to around 3 percent in 2020 from
4.5 percent of GDP in 2019. The traditionally large net errors and omissions stem
largely from trade with Ethiopia undertaken by the private sector rather than thegovernment.
Meanwhile, the fiscal deficit widened toclose to 5 percent of GDP in 2020 from
1.5 percent in 2019. The fiscal expansion
was driven by an investment push in two
mines and the road to Massawa as well as
small dams. Public debt is estimated atabove 260 percent of GDP, of which 80
percent is owed to domestic banks. Thatsaid, fiscal and domestic debt outcomesremain uncertain given frequent data revisions due to reporting lags of several
months due to widespread manual processes.

Outlook
Aided primarily by the economic recovery
in China, export growth of commodities islikely to lift real GDP growth to 2 percent
in 2021 from -0.6 percent in 2020. As the
Colluli and Asmara mines export at full
capacity and aggregate demand rebounds
on the back of sustained and widespread
vaccination, real output growth could
accelerate to an average of about 4.5 percent over the next two years. The government also expects spillover effects fromthe new potash mine of Colluli to fertilizer
production, which in turn could increase
productivity in agriculture, improving
food security and livelihoods, especially if
introduced in parallel with policy reforms
that foster private sector development.
Nevertheless, significant downside risks
cloud the horizon. Sizable uncertainties
surround the evolution of the Covid-19
pandemic, including logistical and economic roadblocks hampering the prospects of timely and widespread vaccination domestically and abroad. Furthermore, severe climate vulnerabilities
continue to burden Eritrea and could
worsen in coming years. Finally, theTABLE 2 Eritrea / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)fragile macroeconomic situation and severe credit constraints leave the country
with little space to boost preparedness
facing these risks, and to control damages
should they materialize.
In this context, efforts to normalize thecountry’s relations with the international
community could result in a pathway to
reduce significantly external arrears andprovide much-needed external financing.
This in turn would provide resources tobuild much needed infrastructure over the
medium term, to help abate the risks associated with climate change and jump-start
the private and financial sectors.

(annual percent change unless indicated otherwise)
2018
13.0
13.2
0.8
-62.8
8.9
18.7
12.8
24.0
11.1
4.9
-14.4
15.4
2.9
4.3
267.1
5.7

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA

MPO 231 Apr 21

2019
3.8
5.5
39.3
67.5
-5.0
1.4
3.7
27.0
13.0
-26.0
-16.4
12.1
3.9
-1.5
271.8
0.2

2020 e
-0.6
-1.9
16.4
152.2
-6.5
-3.8
-0.7
-0.5
-0.7
-1.1
4.9
10.7
3.8
-4.8
263.1
-3.2

2021 f
2.0
2.0
8.8
17.7
35.6
22.9
2.0
3.4
1.4
0.3
2.9
13.9
3.6
-4.4
248.2
-2.9

2022 f
4.9
8.0
4.7
-10.4
6.4
6.4
4.9
3.1
10.2
1.5
1.9
13.5
3.5
-0.8
231.8
0.6

2023 f
3.8
6.1
4.1
0.4
4.2
6.3
3.7
2.5
7.6
0.5
2.0
12.1
3.4
-0.7
219.7
0.6

ESWATINI

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

1.2

GDP , current US$ billio n

4.5

GDP per capita, current US$

3918.9Internatio nal po verty rate ($ 1.9)

a

29.2
a

52.1

a

72.0

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)
a

54.6

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

114.7

b

59.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Economic growth is estimated to havecontracted by 3.1 percent in 2020-an upward revision from previous projection of-3.5 percent reflecting some recovery witnessed during the second half of 2020.
However, the second wave of pandemic isdampening the recovery in 2021. Fiscal
deficit increased in 2020 reflecting higher
COVID-19 related expenditure and declining revenues. The slow recovery fromthe pandemic, will contribute to stagnation in poverty reduction, with around athird of the population projected to live in
extreme poverty.

The Eswatini economy is closely integrated with the South Africa economy whichmakes it vulnerable to developments inSouth Africa. It exports over 65 percent
of its exports and imports over 70 percent from South Africa. Eswatini’s currency, the emalangeni, is pegged to theSouth African rand, with the banking
sector dominated by South Africanbanks. Fiscal revenues largely depend on
Southern African Customs Union(SACU) revenues, which are shaped bydevelopments in South Africa. The country’s heavy dependence on highly volatile SACU revenues translate into significant fluctuations in public spending andpose a challenge to the management offiscal resources.
The COVID-19 pandemic has exposed
Eswatini’s deeper economic and healthchallenges. COVID-19 related deaths
increased significantly during the second
wave, increasing by over 500 in just twomonths compared to less than 150 during
the first phase. The pandemic has
stretched the health care system complicated by high prevalence of HIV/AIDS.
The pandemic contributed to the contraction of the economy in 2020. Over the
past decade, poverty levels, jobs and theincomes of the average Eswatini citizens
have stagnated, while public finances
have deteriorated. Addressing the underlying structural challenges remain a key

priority for the economy to sustainably
grow at higher levels.
Poverty levels have historically beenhigh and there has been little progress in
reducing them, with close to 30 percentof the population living below the
US$1.90/day (2011 PPP) international
poverty line. The poverty level rises tojust over half of the population when thelower-middle-income-country thresholdof US$3.20/day is used. This, together
with high inequality levels – with a consumption per capita Gini index of 54.6 in2017 – increases vulnerability to economic shocks. Unemployment was high even
before COVID-19, affecting 23 percent of
the labor force in 2016.

Recent developments
The economy partly recovered during thesecond half of 2020, as reflected in theservice and industry sectors. It is estimated to have contracted by 3.1 percent in
2020, a slight upward revision from a previously projected contraction of 3.5 percent. Easing of lockdown restrictions supported some construction, manufacturing
and services activities. Though the manufacturing sector contracted in 2020, somesigns of recovery were witnessed througha lesser decline in exports in 2020H2 compared to 2020H1.
Domestic revenue declined year on year(y/y) by 2.7 percentage points of GDP in2020 due to the COVID-19 pandemic
while SACU revenues increased by 3 percent to 12.9 percent of GDP. The decline in

FIGURE 1 Eswatini / Real GDP growth and Current accountbalance

FIGURE 2 Eswatini / Actual and projected poverty rates andreal GDP per capita

Percent
5

Poverty rate (%)
100

Percent of GDP
8

3

Real GDP per capita (LCU constant)
38000

80

36000

60

34000

40

32000

20

30000

5
1
-1
2

-3
-5

-1
2017

2018

2019

2020

Real GDP growth (lhs)
Sources: Ministry of Finance, Eswatini.

2021

2022

0

2023

28000
2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Current account balance (rhs)

Source: World Bank staff calculations.

MPO 232 Apr 21

2017

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

revenues reflects lower economic activity
due to COVID-19 containment measures.
Expenditures remained within the supplementary budget approved in June 2020.
The fiscal deficit for FY2020/21 is estimated to have reached 8.5 percent of GDP,
mainly financed by higher SACU receipts
and loans from the World Bank and the
IMF to deal with the pandemic. Public
debt increased to about 45 percent of GDP
in 2020, driven by external debt.
Annual inflation increased to 3.9 percent
in 2020, from 2.6 percent in 2019, reflecting
COVID-19 induced supply chain disruptions. The freeze of utility prices kept inflationary pressures lower in 2020. Monetary policy remained accommodative inJanuary 2021, as the repo rate was kept
constant at 3.75 percent since July 2020.
Current account surplus increased in 2020,
partly due to surpluses recorded in tradebalance and secondary income account(largely higher SACU revenue). Althoughboth exports and imports contracted in
2020, trade balance remained in surplus.
As a result of the socio-economic impactof the pandemic, poverty is projected toincrease. The $1.90/person/day international poverty rate is estimated to haveincreased from 28 percent in 2019 to 29.4
percent in 2020. This was mainly due tolower household consumption as reduced
economic activity resulted in loss of

employment. The dominance of the informal sector means most businesses have nomeans or safety nets to withstand the economic shock induced by COVID-19. Furthermore, the pandemic has exacerbatedthe household food insecurity challenge.

OutlookThe second wave of the COVID-19 pandemic is projected to reverse the economic
gains witnessed during the second half of2020 and constrain economic activity in the
short to medium term. The economy is projected to grow by 1.3 percent of GDP in
2021, reflecting COVID-19 related containment measures implemented in early 2021.
Inflation is expected to increase in 2021,
partly due to rising oil and domestic administered prices. The US$1.90/person/day international poverty rate is projected at 29.3
percent in 2021 and 29.3 percent in 2022
given the mild economic recovery, together
with high unemployment. Overall, the recovery remains uncertain and hinges on theevolution of the COVID-19 pandemic,
rollout of the vaccines and the pace of recovery of the global and regional economies, particularly that of South Africa.
The fiscal deficit is projected to decrease to
6.5 percent of GDP in 2021, reflecting theTABLE 2 Eswatini / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

start of the implementation of three-year
Fiscal Adjustment Plan. In 2021, the plan
focuses on recurrent expenditure containment amounting to 0.6 percent of GDP(reducing wages, goods and services andtransfers to SOEs) and boosting domestic
revenue by 1.1 percent of GDP. Further,
the recovery in 2021 will lead to increase
in revenues, while the loans already disbursed by the World Bank and IMF havehelped to cushion the financing gap andreduced domestic expenditure arrears.
Debt levels will remain high in 2021, as
the country is projected to borrow externally, given constrained domestic financial market.
The current account surplus is projected
to decrease in 2021, partly due to declining SACU revenues and higher imports ofmedical necessities to deal with the second wave of COVID-19. However, fiscal
adjustments are projected to contain thegrowth of other imports while supply
disruptions are projected to ease in thesecond half of 2021 boosting exports.

(annual percent change unless indicated otherwise)
2018
2.4
2.7
-4.7
35.1
10.9
-8.7
2.4
5.9
-0.3
3.7
4.8
1.3
-0.9
-10.0
24.6
-8.8
28.4
51.8
71.4

2019
2.2
2.6
-3.5
3.3
8.0
6.0
2.2
-0.6
4.4
1.3
2.6
4.0
-2.1
-7.2
30.9
-5.6
28.0
51.4
71.1

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-HIES. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 233 Apr 21

2020 e
-3.1
-3.7
-5.4
2.3
-3.2
-3.6
-3.1
1.9
-7.6
-0.9
3.9
5.6
-0.1
-8.5
45.7
-6.4
29.4
52.3
72.1

2021 f
1.3
2.6
-3.7
0.3
4.9
4.1
1.3
4.5
3.0
-0.3
5.6
4.0
-0.6
-6.5
51.2
-3.6
29.3
52.2
72.0

2022 f
1.1
2.2
-2.5
2.9
3.7
4.5
1.1
3.4
-0.3
1.6
4.6
3.3
-0.7
-6.2
55.8
-3.1
29.3
52.2
72.0

2023 f
1.5
2.2
-2.5
5.3
3.9
5.1
1.5
2.5
4.2
-0.4
4.8
5.0
-0.7
-2.9
52.8
0.0
29.2
52.1
72.0

ETHIOPIA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

115.0

GDP , current US$ billio n

107.4

GDP per capita, current US$

934.6

Internatio nal po verty rate ($ 1.9)

a

30.8
a

68.9

a

90.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

35.0

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

c

90.0
66.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) Ethiopia LSM S (201 8/1 9).
(c) M ost recent WDI value (201 8).

After a better-than-expected outturn in
FY20, the economy is expected to slow
down further in FY21. While employment
levels have recovered, a quarter of households still reported reduced income in
October, and firm revenue has been hit.
Base money expansion has presumably
helped ease liquidity constraints and fuelcredit growth, but it may have also contributed to inflation, which reached 19.2
percent in January 2021. The Ethiopian
economy would rebound in the medium
term as macroeconomic and structuralreforms are completed.

Ethiopia has been among the fastest growing countries in the world, with GDP expanding at an average rate of 10.3 percent
during 2004-2019. Growth has been driven
by large-scale public investment in infrastructure. While poverty declined byabout 10 percentage points during 20042016, gains are modest when compared toother countries that saw fast growth, andthere is evidence that rural dwellers andthe poorest have not equally benefited
from growth in recent years.
The limitations of the state-led development model in Ethiopia have become apparent. Structural transformation remains
incipient, and the role of the private sector
is constrained by SOE dominance and an
uneven playing field. The financing of thelarge capital investments coupled with aloss in competitiveness, caused by anovervalued exchange rate, have put thecountry at high risk of debt distress. Acknowledging these shortcomings, the authorities launched a Homegrown Economic Reform Agenda in September 2019,
which aims to foster efficiency and introduce competition in key growth-enabling
sectors (energy, logistics, telecom), improve the business climate, and address
macroeconomic imbalances. Among othermeasures, authorities are expected toadopt a market-determined exchange rateand introduce a modern monetary policy
framework by end-2022.

Ethiopia is facing formidable challenges.
While the armed confrontation in the
North of the country seems to have been
geographically contained so far, risks of a
protracted and more widespread conflictpersist. The humanitarian situation is reported to be dire, with thousands of people displaced. The desert locust invasion
could affect crops, threatening food security. And there is risk that poverty increases due to the COVID-19 impacts given thehigh levels of vulnerability to shocks.

Recent developments
Ethiopia grew at 6.1 percent in FY20, as
the impact of the COVID-19 pandemic
took place largely in the final quarter ofthe fiscal year. Crop production improved, while growth in services andmanufacturing eased to single digits.
While external demand remains depressed
due to COVID-19, it is showing some signsof recovery. Merchandise exports excluding gold declined by 4.1 percent during
July-December 2020 (year-on-year), whilemost items (except garments) showed signsof recovery in the second quarter of the
fiscal year. Including gold, merchandise
exports grew at 21 percent. Exports of services (including air travel) dropped by 9.2
percent. An even sharper drop in imports,
driven down by limits in SOE spending
and currency depreciation has resulted in
the narrowing of the current account balance. Remittances, which dropped by 10
percent in FY20, rebounded during the firsthalf of FY21 (19.1 percent). Meanwhile, net

FIGURE 1 Ethiopia /Inflation and monetary aggregates

FIGURE 2 Ethiopia / Share of respondents who reported
income reduction or loss.

Percent change yoy

Percent

45

60

40
35

50

30
25

40

20
15
10

30

5

0
Jul-15 Mar-16 Nov-16 Jul-17 Mar-18 Nov-18 Jul-19 Mar-20 Nov-20
Inflation
Source: National Bank of Ethiopia.

Base money20
R1 (April)

R2 (May)

Broad money
Source: Wieser et al., 2020.

MPO 234 Apr 21

R3 (June)

R4(Jul/Aug)R5 (Sep)

R6 (Oct)

foreign direct investment remains depressed, dropping by 1.7 percent during
the same period.
While healthcare spending increased significantly as part of the response to thepandemic, total expenditure dropped in
FY20. Revenue collection deteriorated
mainly due to the drop in indirect tax collections as demand has weakened. Overall, the general government deficit is estimated to have increased to 2.8 percent of
GDP in FY20, compared to 2.5 percent of
GDP in FY19.
Reserve money surged by 37 percent during July-December 2020 (year-on-year),and bank credit has continued to expand
strongly (28.7 percent nominal growth,yoy). A 5 percent decrease in payment
collection by commercial banks suggest
some firms and households are struggling
to repay their loans. Inflation, which had
slightly eased in recent months, picked up
again, reaching 19.2 percent in January,
possibly pushed by seasonality factors
and monetary expansion. Faster nominal
depreciation resulted in a reduction in real
overvaluation during the first half of
FY21, although the still elevated parallelmarket premium suggest foreign exchange shortages persist.
The COVID-19 pandemic has had severe
economic impacts, resulting from reduced
employment and income. Employment

rates plunged in the early days of the pandemic, with 8 percent of respondents losing their jobs by April 2020. While employment levels have recovered (except
for some persistent job losses in urban
areas), the situation faced by households
remains challenging. According to thehigh frequency phone surveys, more thanhalf of the households reported in April
2020 that their incomes were either reduced or had totally disappeared. While
the proportion of those who reported reduction of income decreased in subsequent months, it remained high as of October 2020, at 26 percent.

Outlook
Growth is expected to decelerate further
in FY21, to about 2 percent, impacted by
reduced income reported by firms andhouseholds and a slowdown in crop production. Continued import compression
and favorable terms of trade are expected
to contain the current account deficit in
FY21. The fiscal deficit is expected to reachabout 3 percent of GDP in FY21, slightly
above FY20 outturn. Inflation would remain elevated in FY21, while trending
down in the medium term as a tighter
macroeconomic stance is implemented

TABLE 2 Ethiopia / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

once the pandemic abates. As key macroeconomic and structural reforms are fully
implemented by 2022, foreign direct investment, exports, and economic growth
are expected to strengthen in the medium
term.
The effects of the COVID-19 pandemic on
livelihoods are expected to be severe.
Household incomes, as shown by the high-frequency phone surveys, are impacted
through a reduction in aggregate demandthat affects low-income households disproportionately. Results from the phonesurvey of firms show that Covid-19 andrelated containment measures have substantially impacted firms’ operations.
With formal firms not hiring, a reduction
in aggregate demand will also affect the
self-employed. Casual laborers and selfemployed (44 percent of urban households) are hit particularly hard with an
expected downturn of the economy.
Moreover, reduced fiscal space will put
pressure on the provision of social services during and after the economic
downturn, potentially having detrimental
long-term effects on the poor.

(annual percent change unless indicated otherwise)2017/18
7.7
5.3
3.6
6.8
5.0
0.2
7.7
3.5
12.2
8.7
14.5
-6.2
-2.9
59.6
-2.4
27.6
65.6
85.8

2018/19 2019/20 e 2020/21 f 2021/22 f 2022/23 f
9.0
6.1
2.3
6.0
7.5
5.1
5.0
2.5
4.0
6.5
7.2
0.6
17.6
9.0
14.0
12.4
6.3
-3.5
5.2
4.8
3.0
-0.9
7.0
12.0
5.7
0.6
-2.3
1.5
2.2
2.5
9.0
6.1
2.3
6.0
7.5
3.8
4.3
4.0
4.0
4.0
11.5
9.6
3.5
9.0
16.0
12.0
5.2
0.1
5.5
4.1
12.5
19.9
19.0
10.0
9.0
-5.1
-4.1
-3.3
-3.7
-3.7
-2.5
-2.8
-3.2
-2.2
-1.9
57.3
56.5
56.6
55.6
53.3
-2.0
-2.3
-2.5
-1.5
-1.1
26.5
25.9
25.9
25.4
24.6
64.4
63.7
63.8
63.1
62.2
84.2
83.4
83.4
82.6
81.4

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2010-HICES and 2015-HICES. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 235 Apr 21

GABONKey conditions andchallenges

Table 12020

P o pulatio n, millio n

2.2

GDP , current US$ billio n

14.5

GDP per capita, current US$

6503.1

Internatio nal po verty rate ($ 1.9)

a

3.4
a

11.2

a

32.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

38.0

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

139.9

b

66.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 7), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Gabon’s economy is set to contract by 1.9
percent in 2020 as COVID-19 induced adownturn in global demand and a fall inoil prices. The pandemic is continuing todamage Gabon’s public finances with asignificant hit to its revenues leading torecord high levels of debt and the accumulation of arrears. As the COVID-19 crisis
is unfolding, the medium-term outlook
suggests a timid recovery and no prospects of poverty reduction before 2023.

Gabon’s economic recovery was gaining
pace as economic diversification and fiscal
adjustment efforts had started to pay off.
This progress has been threatened, however, by the COVID-19 pandemic and thedecline in oil prices. Inadequate governance and a poor business climate are major challenges for Gabon’s economy totransform its wealth in natural resources
into sustainable development and broadbased improvement of living conditions.
A second wave of COVID-19 cases triggering tighter restrictions on economic
activity may cause even more hardship forthe population. Efforts to improve supply
chains and in particular food supply tourban areas should be maintained to contain food price pressures and tackle foodsecurity issues.
Fluctuations in oil and manganese prices
remain the main risk factors, given the
country’s reliance on these commodities.
A reduction in Gabon’s oil production toalign it with the decision made by the
OPEC and its allies to cut production
would require the country to acceleratefiscal consolidation or seek debt reprofiling. Despite the challenging economic
context, it is still important for the Government to preserve public investment,
maintain efforts to repay current domestic
arrears and avoid any additional accumulation to lay the ground for a rapid economic recovery and mitigate the negative

FIGURE 1 Gabon / Real GDP growth, fiscal balance andgovernment debt

4

80

70
2

Recent developments
The COVID-19 crisis has pushed Gabon
into recession in 2020. Evidence suggeststhat real GDP contracted by 1.9 percent in2020 after growing at 3.9 percent in 2019.
The contraction was led by the decline inoil production and the weakness in theservice sector while manganese and mineral production significantly increased.
Price pressures remained limited in 2020,
well below the 3 percent limit in the
CEMAC zone. Pressures on food prices
have been largely contained.
The deterioration of the overall fiscal
deficit in 2020 may be more contained
than anticipated in the 2020 revised
budget law. Lower tax revenues due to

FIGURE 2 Gabon / Actual and projected poverty rates andreal GDP per capita

Percent of GDP

Percent

poverty and social impacts in the medium
term. Sustained implementation of reforms to support domestic revenue mobilization, reduce the civil service wage bill,strengthen public finance management
and the efficiency of public investment are
crucial for improving the country’s
growth prospects.
COVID-19 has exacerbated existing social
challenges, with a significant impact on
the most vulnerable. The reduction in government revenues is a major threat to thefinancing of the social protection program
benefiting the most vulnerable, which isalready underfinanced. Self-employedworkers and workers in informal activities, who are excluded from the social
protection system, will experience major
income losses.

Poverty rate (%)
60

Real GDP per capita (LCU constant)
2900000

50

2800000

50

40

2700000

40

30

2600000

20

20

2500000

10

102400000

60

0
-2

30

-4
-6

0
2015

2016

2017

2018 2019e 2020f 2021f 2022f 2023f

02300000
2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Real GDP growth, % change
Debt (rhs)

Fiscal balance, % of GDP

Sources: Gabonese authorities and World Bank staff estimates.

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 236 Apr 21

Lower middle-income pov. rate
Real GDP pc

the expected recession and tax relief related to the COVID-19 pandemic werecombined with declining oil revenues
owing to low crude oil prices. Both current and investment spending contracted
in 2020. Debt levels have reached historical highs, estimated at 75 percent of GDP
in December 2020. Gabon has started
accumulating arrears on external anddomestic debt again due to cash pressures resulting from delays in mobilizing
external funding, equivalent to 1 percent
of GDP by the end of 2020.
With lower oil prices, Gabon’s export
earnings decreased in 2020 despite higher
export volumes of oil and manganese.
Imports also declined in 2020 mostly driven by lower imports of manufactured andcapital goods. Overall, the trade balance
recorded a smaller surplus than in theprevious year. The current account deficit
is expected to widen to 4.1 percent of GDP
in 2020.
Poverty has been exacerbated by the
COVID-19 pandemic with a poverty rateestimated at 33.8 percent in 2020, up
from 32.3 in 2019. The negative impact of
the COVID-19 crisis on households issignificant with income and jobs losses,
and constrained access to health and other basic services as evidenced by theshare of adults and children who were
not able to receive care to fulfill theirneeds (29.2 percent and 33.3 percent respectively) in September 2020.

Outlook
Amid exceptional uncertainty on the turnaround in the pandemic despite hopes
from recent vaccine approvals, Gabon’s
economy is projected to grow 1.5 percent
in 2021 and 2.5 percent in 2022. Growth
will be supported mainly by sustained
private investments in agribusiness, woodprocessing and mining in the medium
term thanks to the gradual global recovery. The medium-term outlook suggests a
timid recovery with output levels expected to take about three years to returnto their 2019 levels.
The authorities are expected to revert tothe path towards fiscal consolidation once
the fallout from the pandemic subsides.
Hence, the fiscal deficit is expected to narrow gradually over the medium term. The
projected rise in tax revenue, combinedwith efforts to limit tax exemptions, is
expected to offset partly the projected
decline in commodity revenues. Cuts incurrent spending are also expected to contribute to improving the fiscal balance.
The current account deficit is expected togradually narrow in the medium term

TABLE 2 Gabon / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

supported by higher oil prices and a resumption of investment in wood and agribusiness thanks to the expected progressive global economic recovery.
Due to current constraints faced by the
Gabonese economy and the impact of thepandemic on household income, the shareof households living on less than $5.5 per
day is expected to reach 34 percent in 2021
before decreasing to 33.7 percent in 2023.

(annual percent change unless indicated otherwise)
2018
0.8
-0.4
-18.2
8.0
4.2
-0.6
0.9
9.5
-0.7
0.7
6.3
-3.2
-1.3
60.6
1.1
3.4
11.5
32.7

2019
3.9
0.9
1.9
6.1
21.2
20.5
4.3
7.9
7.4
2.1
3.0
-0.3
1.4
59.1
3.6
3.4
11.3
32.3

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2017-EGEP . A ctual data: 2017. No wcast: 2018-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2017) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 237 Apr 21

2020 e
-1.9
-2.6
-3.4
-30.6
11.8
-8.9
-1.9
1.6
2.6
-5.1
2.0
-4.1
-3.5
75.0
-0.1
3.6
12.0
33.8

2021 f
1.5
0.2
-3.1
2.3
3.0
1.0
1.5
3.0
4.3
-0.5
3.0
-2.4
-1.0
70.4
1.9
3.6
12.1
34.0

2022 f
2.5
1.5
-0.1
2.8
4.1
3.0
2.5
5.0
6.3
-0.5
3.0
-0.4
-0.3
64.6
2.6
3.6
12.1
34.0

2023 f
3.6
1.9
1.3
6.4
4.8
4.3
3.6
5.0
7.3
0.7
3.0
-0.1
0.2
61.9
3.0
3.6
11.9
33.7

GAMBIAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

2.4

GDP , current US$ billio n

1.9

GDP per capita, current US$

788.1

Internatio nal po verty rate ($ 1.9)

a

10.3
a

38.4

a

72.7

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

35.9

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

101.7

b

61.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Growth stagnated in 2020, driven by apandemic-induced fall in tourism andprivate consumption. Despite the crisis,
the external and fiscal deficits were kept
in check due to increased donor support.
Growth and poverty reduction are expected to gradually recover over the medium term, as the pandemic recedes. The
outlook is subject to downside risks stemming from the speed of global recovery,
the magnitude of the domestic COVID-19
outbreak, the vaccine roll-out, and thepace of fiscal and structural reforms.

Since the democratic transition of 2017,
the Government has taken important
steps to lay the foundations for democracy, improve the rule of law, restore
macroeconomic stability, and reignite
growth, which averaged 6 percent between 2017-2019. Following strong economic performance and debt restructuring, The Gambia exited debt distressin early 2020, paving the way for an
IMF Enhanced Credit Facility. However, the new Constitution was rejected in
Parliament, foreshadowing possible
difficulties with sustaining economic
governance reforms in the run-up to
the 2021 elections.
COVID-19 has exacerbated existing
economic and social challenges, particularly as tourism stopped, partiallyreversing gains in poverty reduction.
Given that the risk of debt distress remains high, The Gambia has limited
fiscal policy buffers to respond to adownturn. Its outlook is subject todownside risks stemming from thedepth and duration of the pandemic,
possible virus mutations, the deployment of vaccines across key tourist
markets, the reform pace ahead of theelections and climatic shocks. Upsiderisks are limited, originating from afaster pandemic recovery and tourism
rebound.

FIGURE 1 Gambia / Fiscal and primary balances and debt

Percent of GDP

GDP growth fell to 0 percent in 2020 (-2.9
percent in per capita terms). The services
sector was affected most, as containment
measures suppressed private consumption
and tourism declined, with flight arrivals
falling by 62.4 percent. Nevertheless, ample
rains spurred a rebound in agriculture,
while strong private foreign inflows, especially remittances, supported construction
and commerce.
The current account deficit widened to 5.5
percent of GDP, as the tourism drop waspartially offset by remittances and officialtransfers. FDI financed the deficit, while theexchange rate remained stable. International reserves reached 4.9 months of next
year’s imports, supported by a record 80.9
percent growth in net remittances, which
may reflect some transfers moving to theformal financial sector.
The Government registered a primary
surplus, reducing the fiscal deficit to 1.9
percent of GDP and public debt-to-GDP to
75.8 percent, as grant increases supported
most of the pandemic-related spending.
Tax collections decreased by 0.4 percent of
GDP but reached 95 percent of the preCOVID-19 target, supported by the revision of reference prices combined with the
adoption of transactional-value-based
customs and excise levies. The tax shortfall was compensated by higher non-tax
revenue due to one-off proceeds fromrecovery of assets stolen by the previous
autocratic regime. Although expenditure

FIGURE 2 Gambia / Actual and projected poverty rates andreal GDP per capita

Percent of GDP

2

Recent developments

85

Poverty rate (%)
80

80

60

75

40

70

20

Real GDP per capita (LCU constant)
28000

1

27000

0

26000

-1

-2
-3

25000
24000

-4
-5

23000

-6

-7

65
2018

2019

Fiscal balance (lhs)2020 e2021 f

2022 fPrimary balance (lhs)

Sources: The Gambian authorities and World Bank estimates.

0

22000
2015 2016 2017 2018 2019 2020 2021 2022 2023

2023 f

International poverty rate
Upper middle-income pov. rate

Debt (rhs)

Source: World Bank. Notes see Table 2.

MPO 238 Apr 21

Lower middle-income pov. rate
Real GDP pc

remained stable, recurrent spending increased to accommodate COVID-19 needs,
while reallocating funding from lowerpriority areas. However, capital expenditure declined due to pandemic-related
implementation challenges. Due to previous debt restructuring, relief under the
Debt Service Suspension Initiative (DSSI)
was modest (0.23 percent of GDP).
Inflation decreased to 5.9 percent, driven
by a demand drop, low fuel prices, a stable exchange rate, temporary administrative price controls on essential goods andthe dissipation of the postal rate increaseof April 2019. The central bank continued
with cautious monetary easing, lowering
the policy rate from 12.5 percent in end2019 to 10 percent by end-2020, while reducing the statutory reserve requirement
ratio by 200 basis points to 13 percent inMay. Broad money continued to grow by
22.0 percent, supported by the buildup of
net foreign assets in the banking system.
The COVID-19 pandemic has adversely
affected households’ labor market activities, access to markets and health care.
Despite government support, stable prices, and improved labor market conditions following the relaxation of containment measures in the third quarter of
2020, households have experienced arapid income decline. As a result, thepoverty rate is estimated to have increased from 8.4 percent in 2019 to 9.2

percent in 2020, equivalent to over 25
thousand additional poor.

Outlook
The economy is expected to gradually recover in 2021, as private consumption is lessconstrained by lockdowns and large public
infrastructure projects are implemented.
However, the exceptional rainfall-driven
agricultural performance of 2020 is not expected to continue, and private construction
would slow down, given the subdued economic activity in 2020 and normalized remittance inflows. Over the medium-term,
growth would be spurred by services/
tourism, industrial activity, agriculture recovery, and the pandemic-induced absorption of technology. This assumes renewed
focus on reforms, political stability, and normal weather. As a result, real GDP is projected to grow by 3.5 percent in 2021 and 5.5
percent in 2022. Inflation will temporarily
increase before steadily dropping to 5.1 percent in 2023, close to the 5 percent target.
The current account deficit is expected towiden, driven by the high import content
of public investments, as the recovery begins in 2021, and by declining grants andprivate inflows over time, which were partially frontloaded in 2020. Exports would
grow, supported by revitalized re-exports.

TABLE 2 Gambia / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

The deficit will largely be financed by FDI
and capital transfers. Foreign exchange
reserves would hover around 4.5 months ofnext year’s imports.
The fiscal deficit is projected to widen to 4.5
percent of GDP in 2021 due to lower grants
and continued spending on infrastructure.
As the economy recovers, tax revenues
should increase, supported by improved tax
expenditure monitoring and administrative
measures. Expenditures would decreaseover the medium-term, as recurrent spending slows down. Transfers to SOEs and subvented agencies are expected to fall, as theGovernment strengthens SOE corporate
governance and balance sheets and rationalizes agencies. The fiscal deficit would gradually start decreasing after 2021, anchored in
the new Medium-Term Fiscal Framework
2021-25. Furthermore, savings under DSSI
would extend to 0.15 percent of GDP in
2021. Public debt-to-GDP should remain on
a downward path, reaching 66.1 percent by
2023. Although the recovery is expected tostart in 2021, COVID-19 will undermine
poverty reduction in the near future, in thecontext of subdued growth. With uncertainty about the future of international tourism,
labor demand may also be adversely impacted. The international poverty rate is
expected to decline to 9.0 percent in 2021
and 7.3 percent by 2023, with significant
downside risks associated with an uncertain
recovery.

(annual percent change unless indicated otherwise)
2018
7.2
9.7
3.7
2.0
44.2
17.6
7.2
3.7
2.0
10.1
6.5
-9.5
-6.1
84.6
-3.0
9.2
35.5
70.7

2019
6.1
4.1
14.6
25.3
-1.2
3.1
6.1
-1.3
14.3
6.5
7.1
-5.3
-2.5
80.1
0.6
8.4
33.3
69.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2015-IHS. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 239 Apr 21

2020 e
0.0
1.0
22.9
11.6
-37.9
-6.3
0.0
5.0
6.4
-3.6
5.9
-5.5
-1.9
75.8
1.1
9.2
35.5
70.7

2021 f
3.5
2.6
-1.0
15.8
20.0
16.3
3.5
2.8
6.2
2.8
6.3
-12.5
-4.5
74.8
-1.9
9.0
35.1
70.4

2022 f
5.5
6.1
-4.0
8.7
25.3
14.8
5.5
3.3
5.2
6.4
5.5
-12.9
-2.2
70.7
0.4
8.4
33.1
69.2

2023 f
7.0
5.8
5.2
9.4
20.0
11.9
7.0
3.4
7.9
7.9
5.1
-10.9
-1.2
66.1
1.0
7.3
31.2
66.3

GHANAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

31.1

GDP , current US$ billio n

69.6

GDP per capita, current US$

2239.4

Internatio nal po verty rate ($ 1.9)

a

12.7

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)

a

29.3

a

55.1

a

43.5

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

104.8

b

63.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Ghana’s increasing dependence on commodities and limited structural transformation left it vulnerable to shocks.
COVID-19 hit the economy in 2020, leading to a significant decline in per capita
GDP for the first time since 2013 and to arise in poverty. The government’s response helped contain the crisis, but the
fiscal deficit and public debt skyrocketed.
Economic activity is expected to remain
subdued until 2023, with recovery threatened by a COVID-19 rebound and therecent Ebola outbreak in Guinea.

After thirty years of strong economic
growth, Ghana’s economic model has
shown some vulnerabilities over the past
decade, despite real GDP growth averaging 6.8 percent per annum. The economy
has become increasingly reliant on primary commodities, with limited diversification or growth-enhancing structural transformation, resulting in fast depletion ofnatural capital and increased vulnerability
to external shocks. Per capita GDP growthover the past decade has slowed down
(averaging 3.3 percent), reflecting the sustained high average population growthrate of 2.3 percent per annum. Ghana has
also suffered from repeated episodes ofmacroeconomic instability, linked to election-cycle overspending and commodity
price volatilities and, more recently, anenergy crisis and a weak financial sector.
Over the past decade, the pace of poverty
reduction has slowed, in large part reflecting limited creation of productive jobs.
Uneven regional distribution of social andphysical infrastructure has increased spatial disparities making it difficult for thepoor to escape poverty. In 2016, the poverty rate was 29.3 percent (using the lower-middle-income threshold) and by 2019had fallen to 27.0 percent. However, the
COVID crisis significantly impacted
household welfare and poverty has
jumped to 30.4 percent in 2020. Surveys
administered in May-June 2020 suggestthat three-quarters of households saw adecrease in their incomes, especially fromself-employment, remittances, and privatetransfers. Ghana has suffered a slowdown
in many services sectors, such as wholesale and retail trade and hospitality. The
poverty and social effects are also being
felt through loss of incomes in agriculture,
particularly in the cocoa sector, and manufacturing, despite public support programs.

Recent developments
Ghana’s economy contracted by 3.2 and
1.1 percent in the second and third quarters of 2020, respectively, pushing thecountry into a recession for the first timein 38 years. However, a modest growth of
1.1 percent is estimated for the full year of2020 thanks to a strong 4.9 percent growthin Q1, at the onset of the COVID-19 crisis.
The Government attempted to mitigate
the pandemic’s impact on households andbusinesses by enacting the Corona Virus
Alleviation Plan (CAP) and the mediumterm COVID-19 Alleviation and Revitalization of Enterprises Support (CARES)
program in mid-2020. But the low growthin 2020, coupled with high population
growth, has pushed real per capita incomes 1 percent lower than in 2019.
Government financing needs increased
substantially during the pandemic, pushing the Government to resort to central
bank financing, resulting in sharp increases
in debt and debt service cost. Fiscal pressures arose from costly financial sector

FIGURE 1 Ghana / Real GDP growth and real sectoral growth
rates

FIGURE 2 Ghana / Actual and projected poverty rates and
GDP per capita

Percent
18

Poverty rate (%)
80

16

70

3500

60

3000

50

2500

40

2000

30

1500

4

20

1000

2

10

500

14
12
10
8
6

0

Real private consumption per capita (LCU constant)
4000

0
2016

2017

Agriculture

2018

2019

2020e

Industry

Sources: Ghana Statistical Service and World Bank.

2021f
Services

2022f

2023f

0

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023
International poverty rate
Upper middle-income pov. rate

Total

Source: World Bank. Notes: see Table 2.

MPO 240 Apr 21

Lower middle-income pov. rate
Real priv. cons. pc

reforms in 2018-2020 and the Energy Sector Recovery Program (ESRP), started in
2019. The overall fiscal deficit, including
energy and financial sector costs, wastherefore already elevated at 7.6 percent of
GDP in 2019 and the debt-to-GDP ratio at
63.9 percent. The COVID-19 crisis andelection related spending led to the suspension of the fiscal rule and the fiscal
deficit is estimated at 16.2 percent of GDP
in 2020. While debt remains sustainable,
the April 2020 Debt Sustainability Analysis (DSA) concluded that Ghana remains
at high risk of debt distress.
Ghana’s current account deficit widened
to 3.0 percent of GDP at the end of 2020
from 2.9 percent in 2019, reflecting a lower
trade surplus and higher services outflows. However, stronger remittance inflows and lower net investment income
outflows, especially from the extractive
sector, helped moderate the impact onreserves. The Ghana Cedi depreciated at amuch slower rate of 3.9 percent against
the US dollar in 2020, compared with 12.9
percent in 2019. This reflected the improved risk sentiment in the global financial market, increased inflows from mining, remittances, and BOP support which
helped ease demand pressures.
Inflation has been kept in check in 2020,
despite a slight acceleration at the end of
the year. The year-on-year change of theConsumer Price Index was 10.4 percent in
December, above the upper limit of thecentral bank’s target range of 6-10 percent,mainly due to higher food inflation. To
minimize the pandemic’s impact on theeconomy and the banking sector, the Bankof Ghana (BoG) lowered the Monetary
Policy Rate (MPR) by 150 basis points to14.5 percent, and reduced the Primary
Reserve Requirements and the Capital
Adequacy Ratio. Yet, net private credit
growth slowed to 5.8 percent at the end of
December 2020, sharply down from 23.8
in December 2019. Overall, however, thebanking sector’s performance remained
strong during 2020.

OutlookGhana’s economy showed early signs ofrecovery in the second half of 2020 asbusiness sentiments improved with theending of the lockdowns. The economic
contraction was smaller in Q3 than Q2,
thanks to strong year-on-year performance in the agriculture, manufacturing
and tradable services sectors. The medium-term negative impact of the pandemic on
growth will continue to be felt throughlow external demand, low commodity
prices, particularly of oil, and lower FDI

TABLE 2 Ghana / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

and tourism receipts. However, continued
recovery could spur growth to 1.4 percent
in 2021 and further to 3.6 percent by 2023.
With relative stability in the exchange rate
and the central bank’s gradual return to atighter monetary policy stance, inflation is
expected to moderate to the central bank’s
target range. The fiscal and current account balances are expected to improve
only slowly over the medium term (seeTable 2), largely reflecting adverse external factors and a slow return to normalcy
in domestic revenue mobilization. Against
this backdrop of economic slowdown andnew restrictions, poverty is likely to continue to rise in 2021 to 30.9 percent before
declining as private consumption growthrecovers.
The two major short-to-medium termrisks are health related. First, risks stemfrom the second pandemic wave alreadyaffecting some African countries withmore virulent variants of the COVID virus. There has been a sharp rebound incases in Ghana requiring further restrictions. A fast vaccine rollout could
help mitigate this risk. Second, the Ebola
outbreak in Guinea in mid-January posessignificant health and economic risks for
Ghana given the very porous land borders. Ghana’s fiscal position is also a major risk factor with rising domestic andexternal debt, including Eurobonds.

(annual percent change unless indicated otherwise)
2018
6.3
9.4
1.8
13.2
10.3
4.6
6.2
4.8
10.6
2.7
9.8
-3.1
-7.0
59.0
-1.4
11.7
27.5
52.8

2019
6.5
4.2
5.4
-10.0
6.7
1.7
6.5
4.6
6.4
7.6
7.9
-2.9
-7.6
63.9
-1.9
11.5
27.0
52.1

2020 e
1.1
-9.7
6.4
34.5
-2.3
-2.3
1.1
1.8
0.2
1.6
10.4
-3.0
-16.2
78.7
-9.8
13.2
30.4
56.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-GLSS-VII. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.7 based o n private co nsumptio n per capita in co nstant LCU.

MPO 241 Apr 21

2021 f
1.4
-0.3
-11.0
9.2
-3.2
-3.0
1.4
1.9
0.5
2.0
9.8
-3.3
-12.1
78.9
-4.5
13.7
30.9
57.4

2022 f
2.4
4.1
-10.0
1.8
1.0
0.4
2.4
3.0
2.4
2.2
9.6
-3.1
-11.1
80.1
-4.1
13.2
30.5
56.9

2023 f
3.6
4.1
-10.1
5.1
1.0
0.4
3.6
3.0
3.2
4.4
6.8
-3.0
-10.7
81.0
-3.8
12.9
30.0
56.0

GUINEA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

13.1

GDP , current US$ billio n

15.2

GDP per capita, current US$

1159.3

Internatio nal po verty rate ($ 1.9)

a

36.1
a

70.9

a

92.5

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

33.7

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

91.5

b

61.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 2), 201 1 PPPs.
(b) WDI for school enrollment (201 6); life expectancy (201 8).

Growth was resilient to the pandemic,
slowing to 4.7 percent in 2020. Capital
investment was reduced to contain theincrease in the fiscal deficit, following
Covid-19 measures. The fiscal and external
deficits were supported by increased donor
financing and improved terms of trade.
Growth and poverty reduction are expected
to recover, supported by sustained mining
growth and a rebound in services. Downside risks include prolonged COVID-19
and Ebola outbreaks, delayed vaccine
rollouts, the slow pace of fiscal and structural reforms, and social unrest.

Over the past five years, Guinea’s robust
macroeconomic performance and growthhas been supported by prudent fiscal
management. However, the economy remains undiversified, highly dependent on
mining (15 percent of GDP) and agriculture (25 percent of GDP). Mining (bauxite
and gold) accounts for about 80 percent ofexports, rendering the economy exposed
to fluctuations in commodity prices Domestic credit amounts to less than 10 percent of GDP, reflecting the underdevelopment of financial markets. Growth is also
constrained by low investment levels andlarge infrastructure gaps. Tax revenues
have been declining, after reaching a peakof 14.2 percent of GDP in 2016, mainly as aresult of tax exemptions for the mining
sector. The low rate of tax collection is a
key constraint to development given thelarge infrastructure and social needs.
Guinea’s human capital index (HCI) is
below what would be predicted for its
income level. Although income inequality
is relatively low, gender gaps are widespread across all dimensions, with a substantial divide in school enrollment, wages, agricultural productivity, and politicalrepresentation.
COVID-19 has exacerbated existing economic and social challenges, slowing poverty reduction. It has also underscored theurgent need to enact deeper structuralreforms to diversify the economy andpromote a more inclusive growth model.
Guinea is at moderate risk of external debt
distress, but with limited space to absorb
shocks. This assessments hinges on commitments to maintain a prudent borrowing plan, respecting the limits embeddedin the December 2020 Debt Sustainability
Analysis (DSA). Risks to the economic
outlook remain skewed to the downside,
particularly due to the evolution of the
COVID-19 pandemic and a recent Ebola
outbreak, with the distribution of vaccines
being critical factor to address both.

Recent developments
Economic growth decelerated to 4.7 percent in 2020, 1.8 percent in per capita terms,
due to the COVID-19 pandemic. Whilemining production sustained growth in2020, the service sector is estimated to havegrown only 0.4 percent due to declining
activity in the hotel, restaurant andtransport sectors. Investments in the mining sector boosted bauxite production
while higher gold prices bolstered artisanalgold exports. Inflation accelerated to 10.6
percent in 2020, from 9.5 percent in 2019,with higher food prices partly due to supply disruptions and an increase in central
bank financing to meet the larger fiscal
deficit resulting from COVID-19 impact.
The current account deficit narrowed to12.5 percent of GDP with higher mining
exports compensating for higher importsof medicines, sugar, and intermediate andcapital goods. Mining-related FDI continued to be the main source of external

FIGURE 1 Guinea / Fiscal revenues and expenditures

FIGURE 2 Guinea / Actual and projected poverty rates andreal GDP per capita

Percent of GDP

Poverty rate (%)
100

21
18

Real GDP per capita (LCU constant)
7000000
600000080

155000000

12
960

4000000

40

3000000

6

2000000
20

3

0
2016

2017

2018

Tax Revenues
Current Expenditures

2019

2020f

2021f

2022f

2023f

0

0

2012

Other Revenues
Capital Expenditures

Sources: Guinean authorities; and World Bank staff projections.

1000000

2014

2016

2018

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 242 Apr 21

2020

2022

Lower middle-income pov. rate
Real GDP pc

financing and declined to 10.7 percent of
GDP in 2020. International reserves are
estimated at 3.8 months of imports in
2020.
The overall fiscal deficit (including grants)
widened to 2.7 percent of GDP in 2020,
driven by two factors. First, at 11.4 percent
of GDP in 2020, tax revenues reached its
lowest level since 2011, due to tax exemptions for mining projects and under the
COVID-19 response plan, as well as weak
tax administration. Second, subsidies tothe public electricity utility, which had
more than doubled in 2019, further increased in 2020 because of electricity subsidies offered under the COVID-19 response plan, and reliance on expensive
thermal technology. Under-executed capital expenditures partially offset higher
current transfers and social spending toprotect vulnerable households. The debtto GDP ratio increased to 39.1 percent of
GDP in 2020.
Projections based on GDP per capita
growth suggest that extreme poverty incidence has declined from 25 percent in2019 to 24 percent in 2020. This corresponds to over 3.2 million people living in
extreme poverty in 2020. While this indicates that some of the extreme poor havebeen lifted out of extreme poverty, the
COVID-19 pandemic has likely pushed
part of the vulnerable population intopoverty. Indeed, statistics from the
COVID-19 household High-Frequency
Phone Survey conducted in OctoberNovember 2020 show that over 8 out of 10
households experienced earning losses
due to the COVID-19 pandemic withhouseholds receiving transfers and thoseowning nonfarm enterprises being themost affected. Non-monetary poverty –the Multidimensional Poverty Index –estimated at nearly 32 percent in 2018,
remains high.

OutlookOver the medium-term, mining-related
infrastructure investment will continue todrive growth. Economic growth will accelerate to 5.5 percent in 2021 but will decline
to 5.2 percent in 2022-2023 because of lower growth in the service sector. Public andprivate investment for infrastructure(energy and transport) will support theconstruction sector. Better provisioning ofagriculture inputs and infrastructure investments should also improve agricultural productivity. The implementation of
structural reforms to strengthen governance and the business climate, as well as
more reliable electricity provision, following completion of the Souapiti hydropow-

TABLE 2 Guinea / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

er project in 2020, should attract private
investments and support private sector
development. Inflation is expected to remain high but decline gradually to 7.8
percent by 2023.
The external current account deficit isprojected to increase to 14.8 percent of
GDP in 2021, reflecting higher imports
for infrastructure spending and othercapital goods. The deficit is projected to
decline thereafter, to 11.6 percent of GDP
by 2023, with exports projected to growfaster than imports after completion of
the dam. FDI inflows will meet over 70
percent of financing requirements between 2021 and 2022, with long-termloans meeting the rest.
The extreme poverty rate is projected todecrease to 23.4 percent in 2021 alignedwith modest expected growth and willfurther decrease to 21.4 percent by 2023
based on growth projections. However,according to results from the HighFrequency Phone Survey, the impact of
the COVID-19 pandemic on job and income losses has not been subsiding. With
the risk of a sustained negative impact of
the COVID-19 pandemic combined with
the Ebola outbreak, poverty reduction is
likely to be undermined. The recovery of
the service sector may support earnings
and employment in urban areas.

(annual percent change unless indicated otherwise)
2018
6.2
3.8
-7.2
8.7
7.2
3.7
6.7
5.4
6.4
7.4
9.8
-18.7
11.0
-1.1
37.4
-0.3
26.3
61.1
88.5

2019
5.6
5.4
-6.3
-8.4
-0.6
-9.5
6.5
4.8
8.0
5.9
9.5
-13.7
12.9
-0.5
33.1
0.0
25.0
59.8
87.7

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2012-ELEP . A ctual data: 2012. No wcast: 2013-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2012) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 243 Apr 21

2020 e
4.7
3.5
42.9
16.5
8.9
26.9
4.7
3.1
11.3
0.4
10.6
-12.4
10.5
-2.7
39.1
-2.1
24.4
59.1
87.3

2021 f
5.5
3.2
-5.5
40.9
6.0
8.6
5.5
3.9
8.6
3.6
8.0
-14.7
7.2
-2.4
41.7
-1.5
23.4
57.8
86.7

2022 f
5.2
1.4
8.7
7.1
5.6
3.6
5.2
4.4
7.8
3.3
7.9
-11.9
8.0
-2.3
42.1
-1.3
22.5
56.6
86.3

2023 f
5.2
1.4
7.8
7.6
5.6
3.6
5.2
4.4
7.8
3.2
7.8
-11.5
8.3
-2.2
41.0
-1.3
21.4
55.5
85.9

conditions and
GUINEA-BISSAU Key
challenges
Table 12020

P o pulatio n, millio n

2.0

GDP , current US$ billio n

1.4

GDP per capita, current US$

714.9

Internatio nal po verty rate ($ 1.9)

a

68.4
a

85.4

a

93.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

50.7

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

118.7

b

58.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 0), 201 1 PPPs.
(b) WDI for school enrollment (201 0); life expectancy (201 8).

Containment measures against
COVID-19 and weak external demand forcashew nuts caused GDP to contract by
2.4 percent in 2020. High spending needs
and a slump in tax income widened thefiscal deficit to 9.0 percent of GDP andraised the debt to GDP ratio to 78.4 percent. Growth is projected to increase to 3
percent in 2021 with a slight recovery inthe cashew market. The medium term will
be characterized by fiscal consolidation tomaintain debt sustainability.

Exports of raw cashew nuts, which account for 90 percent of merchandise exports, determine economic performance inGuinea-Bissau. Cashew production is dispersed among many smallholder farmers,
whose income supports overall economic
activity. Annual GDP grew 5.4 percent
on average between 2015 and 2017 (3.2
percent in per capita terms) as cashew
prices reached record highs, but GuineaBissau is structurally vulnerable to terms-of-trade shocks and climate changerisks. Raw cashew prices have been on a
downward trajectory since 2018, adversely affecting economic growth, poverty,
and government finances. Around 13
percent of tax revenue is directly related
to cashew nut exports.
A small tax base and poor tax administration generate tax receipts of lessthan 10 percent of GDP. Deficient revenue collection capacity has created ahigh dependency on indirect taxes
which are mostly collected through customs procedures. The public wage billcorresponds to more than 50 percent oftax income, limiting public service provision and domestically financed capital
expenditure. Primary deficits and externally financed infrastructure projects
have led to considerable debt accumulation and high debt servicing costs. However, the country’s infrastructure remains in a dire state.

Persistent political instability has taken aheavy toll on economic development anddiversification. Policy uncertainty andpoor business environment lay at thesource of a practically missing industry
sector, which combined with low diversification and productivity in the primarysector, keeps the country highly dependent on food and capital imports. As
COVID-19 has accentuated the urgent
need for transformation, the Government
drew a new development plan aiming to i)modernize public institutions, ii) accelerate job creation iii) boost the productive
sector and infrastructure iv) improve human capital and living conditions v) promote regional integration and vi) preserve
biodiversity. Its success depends onstrong political engagement and sufficientmeans of financing.

Recent developments
The pandemic struck at the onset of theannual cashew marketing season, which
reduced external demand, causing farmgate prices to reach their lowest in 6 years.
Strict lockdown measures affected the
supply of goods and services, and increased unemployment. Private consumption and investment weakened, while
public expenditure grew considerably,
supported in part by the international
community. Overall, GDP contracted by
2.4 percent in 2020 (-4.7 percent in percapita terms).
Tax receipts dropped 16.1 percent, but
increased non-tax revenue, grants, andFIGURE 1 Guinea-Bissau / Evolution of main economic
indicators

FIGURE 2 Guinea-Bissau / Actual and projected poverty
rates and real GDP per capita

Percent

8

Poverty rate (%)
100

3

80

26000060

25000040

24000020230000-2

Real GDP per capita (LCU constant)
270000

-7

-12

2012

2014

2016

2018

2020e

2022f

0

Real GDP growth (%)
Fiscal balance (% of GDP)
Current account balance (% of GDP)
Sources: Ministry of Finance and World Bank.

220000

2010

2012

2014

2016

International poverty rate
Upper middle-income pov. rate
Source: World Bank: see Table 2.

MPO 244 Apr 21

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

debt service adjustments supported thefiscal space. High recurrent expenses, particularly health and social spending, and
new infrastructure investments, significantly increased total expenditure by 32
percent. Thus, the overall fiscal deficit
grew from 3.9 percent of GDP in 2019 to 9
percent in 2020. High financing needs of
10 percent of GDP, which includes thepayments of arrears, were addressed withconcessional borrowing and domestic
lending, raising public debt to 78.4 percent
of GDP. The latest Debt Sustainability
Assessment (DSA) concluded that the riskof external and overall debt distress ishigh, but public debt is assessed as sustainable on a forward-looking basis.
The current account deficit worsened
from 8.6 percent of GDP in 2019 to 10.1
percent in 2020, driven by a drop of 22
percent in export value of cashew nuts.
Lower prices of oil imports were counterbalanced by high import prices for rice,
the main staple food.
Guinea-Bissau’s monetary and exchange
rate policies are managed by the Central
Bank of West African States (BCEAO),
which maintains a fixed peg between the
CFA Franc and the Euro. Its reserves
reached an estimated 5.5 months of imports in 2020 due to large donor supportand reduced imports during the pandemic. Between March and October 2020, the

REER appreciated by 6.4 percent y/y, reflecting the nominal appreciation of theEuro against the USD. To support regional
economy and COVID-19 related extra
spending, the BCEAO announced a set ofmonetary and macroprudential measuressince March 2020, including policy rate
cut and extended refinancing operationsof the 3-month COVID-19 bonds. Inflation
accelerated from 0.3 percent in 2019 to 1.5
percent in 2020, reflecting increased foodprices (+3.5 percent) as a result of disruption in international trade and national
supply channels.
Poverty measured using $1.90 international poverty line increased from 63.8 to 66.2
percent between 2019 and 2020 corresponding to an augmentation of the number of poor by around 75,000 people.

OutlookBased on a subsiding of the COVID-19
pandemic around mid-2021, a gradual
recovery of the international cashew market and higher investments, GDP growthis set to reach 3 percent in 2021 and increase to 5 percent until 2023.
Fiscal consolidation is set to bolster the
medium-term debt sustainability. Bettertax administration, increased tax rates,

TABLE 2 Guinea-Bissau / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

and efforts to broaden the tax base shallsubstantially increase revenue in 2021.
Prudent current spending, including on
the public wage bill, will limit the fiscal
deficit to 5.1 percent of GDP in 2021. Overa term of 5 years, the fiscal deficit is set tonarrow to 3 percent and the debt ratio to
70 percent of GDP, in line with the
WAEMU convergence criteria.
Due to the country’s high import dependence, the trade balance will remain in alarge deficit over the medium term, despite an increase in cashew exports. Increased foreign aid inflows are set to narrow the current account deficit to 6.4 percent in 2021.
The outlook is subject to high downside
risks, including lower cashew nut prices
and a more prolonged fallout from the
COVID-19 pandemic, as a vaccination
program may be delayed. The country’s
fragile socio-economic context may increase social tensions, which could triggera renewed political instability, or hinder
the authorities’ commitment to macroeconomic stability and prudent fiscal policies.
The economic recovery is expected tomaintain the poverty rate around 66 percent in 2021. Poverty will gradually decline from 2021 and will stand at 63.8 percent in 2023, accompanied by a decreaseof the number of poor by about 22,000
people.

(annual percent change unless indicated otherwise)
2018
3.4
-0.5
5.1
7.6
14.4
-8.5
3.4
3.4
5.7
2.7
0.4
-3.6
-4.9
59.2
-4.3
64.9
83.1
92.7

2019
4.5
1.4
16.6
33.8
8.7
14.1
4.5
5.8
4.2
3.5
0.3
-8.6
-3.9
66.9
-2.6
63.8
82.9
92.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2010-ILA P -II. A ctual data: 2010. No wcast: 2011-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2010) with pass-thro ugh = 0,87 based o n GDP per capita in co nstant LCU.

MPO 245 Apr 21

2020 e
-2.4
-3.8
9.0
9.6
-14.6
-3.0
-2.4
-0.8
-0.7
-4.3
1.5
-10.1
-9.0
78.4
-7.5
66.2
83.9
93.1

2021 f
3.0
2.1
2.4
4.7
10.1
5.0
3.0
4.1
2.9
2.1
2.0
-6.4
-5.1
78.4
-2.7
65.8
83.7
93.0

2022 f
4.0
2.3
2.7
8.0
10.4
5.1
4.0
4.3
4.8
3.5
2.0
-5.4
-3.6
76.7
-1.1
65.2
83.4
92.8

2023 f
5.0
3.5
4.0
6.9
10.2
5.3
5.0
5.1
6.1
4.6
2.0
-4.4
-3.4
74.3
-1.1
63.8
82.9
92.6

KENYAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

53.8

GDP , current US$ billio n

102.7

GDP per capita, current US$

1910.4

Internatio nal po verty rate ($ 1.9)

a

37.1
a

66.5

a

86.6

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

40.8

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

103.2
66.3

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 6); life expectancy (201 8).

Kenya’s real GDP is estimated to havecontracted by 0.3 percent in 2020 as the
COVID-19 pandemic took a heavy toll on
the economy. Nonetheless, ongoing policy
responses to the crisis and reopening of
the economy are leading to a moderate
recovery. Recent gains in poverty reduction were reversed but are expected torecover, supported by more inclusive policy responses. Delayed vaccination, more
severe global recession, and fiscal slippages could challenge the projected recovery
in the medium term.

Buoyed by increased public spending, theKenyan economy experienced robust GDP
growth over the past decade, averaging
5.8 percent, elevating Kenya to a middleincome country and catalyzing a significant reduction in the poverty level. Government consumption and investment
accounted for almost a quarter of thisstrong growth performance, reflecting an
ambitious development agenda that included plugging the large infrastructure
gap and implementing devolution. However, this has resulted in increasing fiscal
deficits (from 3.5 percent of GDP in
2010/11 to 7.8 percent of GDP in 2019/20)
and public debt accumulation (from 43.1
percent of GDP in 2010/11 to 65.8 percent
of GDP in 2019/20), as expenditure growth
outpaced revenue mobilization.
The COVID-19 pandemic reversed some ofthe earlier gains in poverty reduction
through a decline in job opportunities, lower earnings and closure of household-run
businesses. The unemployment rate increased to a four-year high of 10.4 percent
in June 2020. Many wage workers, especially women, faced reduced working hours
and wages. With schools closed, the pandemic caused a decline in access to education and exacerbated pre-existing education disparities for poor children. COVID19 also constrained access to health services
due to the unavailability of consulting doctors and long waiting times.

The pandemic-induced economic contraction has intensified fiscal pressures as thegovernment refocused its attention on
mitigating the economic and social toll of
the pandemic. The planned fiscal consolidation was paused. Even as the crisis
weakened revenues, the government increased spending and cut taxes to cushion
the impact of COVID-19 on households
and businesses. Although it is evident thatthe pandemic has increased unemployment and poverty, policymakers face highuncertainty in navigating the economy outof the pandemic as the future course of thevirus, both globally and in Kenya, and its
full economic and social impact remains
unclear.

Recent developments
Kenya’s real GDP contracted by an estimated 0.3 percent in 2020. The pandemic
disrupted international trade and travel,
sharply cutting exports of cut flowers andtourism. Meanwhile, domestic containment measures curtailed services activities—notably education (most institutions
were closed between March and December), but also transport, trade, and hospitality services—and businesses slashedinvestment spending. Strong growth inagriculture cushioned the economic impact of the pandemic. High-frequency
indicators suggest the economy began torecover in the fourth quarter of 2020, with
the Purchasing Manager Index showing
steady business activity expansion
through early 2021, consistent with the

FIGURE 1 Kenya / Projected fiscal deficit before and after
COVID-19

FIGURE 2 Kenya / Actual and projected poverty rates andreal private consumption per capita

Percent of GDP

Poverty rate (%)
100

10Real private consumption per capita (LCU constant)
100000

80

80000

60

60000

40

40000

20

20000

8

6

4

2
2016/172018/192020/212022/23002005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Projected fiscal deficit before COVID-19
Projected fiscal deficit after COVID-19

International poverty rate
Upper middle-income pov. rate

Sources: The National Treasury, 2021 Budget Policy Statement.

Source: World Bank. Notes: see Table 2.

MPO 246 Apr 21

Lower middle-income pov. rate
Real priv. cons. pc

recovery in working hours and wages
from the rapid response phone surveys.
In response to the crisis, the government
implemented supportive fiscal and monetary policies. The Central Bank of Kenya
reduced the policy rate by 125bps and the
cash reserve ratio by 100bps; introduced
flexibility in loan repayments, loan provisioning, and classification as well as suspending negative credit listing; and enhanced digital finance to reduce cashtransactions and facilitate online transactions. Meanwhile, the government increased expenditures—to support thehealthcare system, protect the most vulnerable households, and support firms—
and provided tax relief (including lowering VAT and corporate tax rates). As aresult, the fiscal deficit edged up to 7.8
percent of GDP in 2019/20, compared with
6.0 projected before COVID-19, and government debt rose to 65.8 percent of GDP.
The international poverty rate has risen to34.1 percent in 2020 from 33.9 percent in2019 due to the impact of COVID-19,
based on simulations using the relationship between real GDP growth and poverty. However, estimates based on rapid
response phone surveys indicate povertyrose substantially higher, particularly
amongst urban households. This led to a
new group of poor, which are more often

involved in services and—on average—
are younger and better educated.

Outlook
The economy is expected to rebound in
2021, although uncertainty remains elevated. Aided by a projected recovery in private consumption and the reopening of
education institutions, growth will recover to 4.5 percent in 2021 and remain at 5.3
percent on average over 2022–23. Merchandise exports are expected to accelerate in 2021, supported by global economic
upturn, but a full recovery in services exports (mainly tourism) is unlikely until
2022. The current account deficit is projected to widen over the medium-term asimports strengthen on the back of domestic economic recovery.
The baseline assumes that policymakers
continue gradually normalizing the extraordinary measures adopted in the wakeof COVID-19 as economic conditions improve. Since January 2021, the Credit Reference Bureau resumed listing loan defaulters, measures to encourage mobile
money usage expired, and pre-pandemic
tax rates (income tax and VAT) were restored. Subsequently, increased domestic

TABLE 2 Kenya / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

revenue mobilization and contained expenditure are expected to reduce public
debt accumulation in the medium term.
This baseline outlook also assumes timely
mass availability of COVID-19 vaccines(expected in 1H2021) and the absence of a
new wave of rising infections that would
necessitate
widespreadcontainment
measures. Delayed vaccination, fiscal slippages, adverse weather conditions, andmore severe global recession could challenge the projected recovery in the medium term. Realization of these downside
risks could result in lower average growthof 3.7 percent in 2021-22.
With the recovery from COVID-19, poverty is expected to continue its pre-COVID-19 downward trend with a likely decline
of slightly under one percentage point per
year. However, this will require implementation of recovery programs to ensure
Kenya resumes the pace of poverty reduction prior to COVID-19. Besides, investments into inclusive policy interventions
like raising agricultural productivity, creating private sector jobs, and maintaining
and enhancing safety net programs isneeded to sustainably reduce poverty inthe future.

(annual percent change unless indicated otherwise)
2018
6.3
6.5
5.6
1.3
3.9
2.5
6.3
6.0
5.5
6.7
4.7
-5.7
1.7
-7.5
60.8
-2.8
34.5
65.2
85.9

2019
5.4
5.0
4.9
2.4
-0.2
-2.0
5.5
3.6
4.6
6.7
5.2
-5.8
1.1
-7.7
62.7
-3.3
33.9
64.9
85.7

2020 e
-0.3
1.3
5.2
-3.3
-0.1
-0.6
-0.3
6.4
3.6
-4.4
5.3
-4.8
0.3
-8.3
67.2
-4.1
34.1
65.0
85.8

2021 f
4.5
5.1
4.8
4.2
3.2
5.6
4.5
4.8
3.9
4.6
5.4
-5.2
0.5
-8.1
69.0
-3.9
33.5
64.7
85.6

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2005-IHB S and 2015-IHB S. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using annualized elasticity (2005-2015) with pass-thro ugh = 1based o n private co nsumptio n per capita in co nstant LCU.

MPO 247 Apr 21

2022 f
4.7
5.2
4.0
4.3
6.0
6.2
4.7
4.9
4.5
4.7
5.6
-5.3
1.1
-6.6
68.7
-2.4
32.9
64.4
85.4

2023 f
5.8
6.1
3.1
7.4
6.3
6.5
5.8
5.2
5.4
6.2
5.6
-5.5
1.3
-4.9
66.6
-1.1
32.1
63.9
85.2

LESOTHO

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

2.1

GDP , current US$ billio n

2.1

GDP per capita, current US$

958.1

Internatio nal po verty rate ($ 1.9)

a

27.2
a

49.9

a

73.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

44.9

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

high even before COVID-19 at 22.5 percent in 2019 (strict definition), rising to38.3 percent (when the expanded definition is used).

b

120.9

b

53.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 7), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

Economic growth continues to remain
subdued driven by the negative effects of
the COVID-19 pandemic and floods inearly 2021. The economy is expected torebound and grow by 2.9 percent in 2021
mainly due to the recovery in construction, mining and manufacturing. Poverty
is estimated to have increased to 31.2 percent in 2020, up from 28.5 percent in
2019, using the international poverty
line. Rural population with food insecurity increased from 18 percent to 30
percent.

Lesotho has been experiencing slow
growth and persistent inequality whichhave been exacerbated overtime by environmental-related shocks, political instability and decelerated economic growth.
Inevitable spillovers from the South African economy, especially due to high prevalence of COVID-19 and unsolved structural impediments to growth in South
Africa such as electricity shortages, continue to pose challenges to Lesotho. The pandemic has worsened the already dire economic performance in South Africa, andthis is expected to spillover to Lesotho
through the lower SACU receipts andremittances. The public debt levels havealso been on an increase largely due tohigher borrowing associated with the policy responses due to COVID-19.
The pandemic is unfolding in a context ofhigh poverty and unemployment. About athird of the population still lives on lessthan US$1.90/person/day (in 2011 PPP
terms). Poverty is concentrated in rural
regions which tend to have poorer accessto basic infrastructure and services. Further, rural communities are more vulnerable to climatic shocks which contribute toerratic and generally low productivity inagriculture, a sector that is a source of
livelihoods for most of the rural population. The pandemic has worsened economic vulnerability and food insecurity inthe country. Unemployment rate has been

Recent developments
The economy was already in recession
even before the advent of COVID-19. RealGDP contracted by 1.2 percent and 0.4
percent in 2018 and 2019, respectively. Itfurther contracted by 1.8 percent in thefirst quarter of 2020 before any COVID-19
case was reported in the country. The first
positive COVID-19 case was reported in
May 2020 and economic growth contracted by 15.7 percent in the second quarter of
2020, consequent to nationwide lockdown
implemented in late March that brought
the economy to a halt. All economic sectors, except for agriculture, informationand communication, real estate, educationand health contracted in the second quarter of 2020. Mining contracted by 44 percent and manufacturing by 29 percent
mainly due to weak global demand. While
hospitality sector and, wholesale and retail contracted by 51 percent and 38 percent, respectively, in the second quarter of2020.
On average, annual inflation rate registered 5.0 percent in 2020 compared with
5.2 percent in 2019 largely due to higher
food and energy prices, amidst supplydemand challenges imposed by closureof borders and domestic lockdown
measures during 2020. The year-on-year
inflation rate has accelerated to 5.4

FIGURE 1 Lesotho / Growth of real GDP at factor cost andcontributions to real GDP growth

FIGURE 2 Lesotho / Actual and projected poverty rates andreal GDP per capita

Percent, percentage points
20

Poverty rate (%)
100

10

80

13000

60

12500

40

12000

20

11500

0

Real GDP per capita (LCU constant)
13500

-10
-20
-30
2019

2020

2021

2022

Services
Industry
Agriculture
Real GDP Growth, at factor cost
Sources: WDI and staff estimates.

2023

0

11000

2017

2018

2019

2020

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 248 Apr 21

2021

2022

2023

Lower middle-income pov. rate
Real GDP pc

percent in January 2021. The current account deficit narrowed from 4.1 percent
of GDP in 2019 to 3.6 percent in 2020 asexports of goods and services declined
faster than imports of goods and services, as well as higher SACU revenue
inflows since April 2020 and it is expected to widen further in the mediumterm. The Central Bank of Lesotho (CBL)
eased the monetary policy stance by reducing the policy rate by a cumulative
275 basis points from March to July 2020
to react to the COVID-19 shock. The fiscal deficit is expected to narrow to 3.7
percent of GDP in 2020 largely due tohigher SACU inflows and widen in themedium-term. Health and social-related
expenditure are expected to rise in linewith COVID-19 mitigation measures,
while capital expenditure is expected to
decline due to reallocation.
The poverty rate is estimated to have increased from 28.5 percent in 2019 to 31.2
percent in 2020, using the US$1.90/person/
day (in 2011 PPP terms) international poverty line. COVID-19-related lockdown
measures have had a negative shock to thelabor market, resulting in job and income
losses with the effects concentrated inurban areas. Rural population with foodinsecurity increased from 18 percent in2018 to 30 percent in 2020, while urban
population with food insecurity increased

from 9.2 percent to 13.3 percent. Remittances have also fallen due to the global economic slowdown, especially inSouth Africa. Food insecurity is high: thefindings from the COVID-19 SocioEconomic Impact on Household Survey
conducted by the Bureau of Statistics(BOS) estimate 21.1 percent of the population to have been affected by severe foodinsecurity in June 2020, and this stagnatedat 20.9 percent in September 2020.

Outlook
Economic growth is expected to reboundto 2.9 percent in 2021 and gradually recover to 3.1 percent in 2022. Agriculture
is expected to grow moderately in themedium term as agricultural subsidies
and good rains are expected to contributeto crop production. Furthermore, medicinal cannabis farming as well as horticulture farming projects are also expected toprovide impetus to grow. The projected
recovery in the medium-term is set to be
led by a rebound in the manufacturing,
construction and mining activities. The
construction activities associated withthe second phase of Lesotho Highlands
Water Project (LHWP-II) have alreadystarted in the first half of 2021, and these

TABLE 2 Lesotho / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

are expected to have a positive impact on
growth. Services are also expected to add
impetus to the growth momentum overthe medium-term.
Inflation is expected to follow developments in the regional food and energy
prices due to supply-demand challenges
imposed by restricted movements andclosure of borders and will accelerate
steadily to 5.5 percent by 2023. Uncertainties surrounding the efficacy, affordability
and timeliness of COVID-19 vaccines continue to pose a huge risk to macroeconomic outlook. The recovery of exports andoverall economic growth largely depends
on external demand conditions as well as
the re-opening of the global economy. The
recession in the neighboring South African economy is expected to dampen Lesotho’s growth outlook through various
channels, such as reduced SACU receipts
and lower remittances.
Economic recovery will be accompanied
by declining poverty rate but will remain
higher than in 2019. The US$1.90/person/
day (in 2011 PPP terms) poverty rate is
project to fall slightly to 30.5 percent in
2021 and further to 29.6 percent in 2022.
The scaling up of government social assistance programs is expected to cushion theadverse impacts of COVID-19 pandemic.

(annual percent change unless indicated otherwise)
2018
-1.2
-18.4
-1.9
-24.1
-2.3
-13.1
-1.2
-12.0
3.7
-1.2
4.0
-2.3
1.4
-0.1
44.5
0.9
28.0
50.5
73.8

2019
-0.4
-2.5
7.8
0.4
-10.8
-1.4
-0.4
5.5
-1.3
-0.4
5.2
-4.1
1.3
-6.7
47.9
-6.0
28.5
50.8
74.1

2020 e
-5.8
1.1
-10.3
-4.1
-9.2
-2.8
-5.8
2.3
-15.7
-5.8
5.0
-3.6
1.3
-3.7
65.4
-3.5
31.2
53.1
76.3

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2017-CM SHB S. A ctual data: 2017. No wcast: 2018-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2017) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 249 Apr 21

2021 f
2.9
1.3
7.5
-2.4
6.3
3.3
2.9
3.6
7.5
2.9
5.2
-8.1
1.4
-10.8
69.1
-10.4
30.5
52.4
75.9

2022 f
3.1
1.2
0.7
25.8
3.6
5.4
3.1
3.2
8.2
3.1
5.4
-10.5
1.3
-9.6
74.3
-9.4
29.6
51.4
75.1

2023 f
3.2
1.8
4.0
17.2
3.2
5.8
3.2
3.2
8.2
3.2
5.5
-11.7
1.3
-9.7
72.9
-9.4
28.5
50.8
74.1

LIBERIA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

5.1

GDP , current US$ billio n

2.9

GDP per capita, current US$

583.1

Internatio nal po verty rate ($ 1.9)

a

44.4

a

35.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

85.1

b

63.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

Liberia’s economy is expected to recoverin 2021 as economic activity picks up
following the lifting of lockdown measuresin the second half of 2020. Real GDP is
projected to expand by 3.3 percent in
2021 and rise to an average of 4.4 percent
during 2022-23. Headline inflation is
expected to moderate to single digits on
the back of a tight monetary policy stance.
The outlook assumes high uncertainty
and downside risks around COVID-19
and the likely resurgence of Ebola.

Liberia’s economy is undiversified andhighly reliant on primary commodity exports and therefore vulnerable to shocks,
which continue to pose macroeconomic
challenges. The economy contracted forthe second year in a row in 2020 due to theadverse impact of the COVID-19 pandemic. Limited fiscal space from low domestic
resources mobilization and a relatively
high wage bill continue to constrain public investments in key sectors, including
agriculture, infrastructure, education, andhealth thus keeping GDP growth below
the population growth. Extreme poverty
incidence increased to pre-2012 levels during the two consecutive years (2019-20) of
economic contraction and is projected topeak at 52.1 percent in 2021. Poverty reduction is expected to resume from 2022
onwards, but the recent shocks have set
progress back by 5 years.
The COVID-19 pandemic has adversely
impacted economic and social outcomes.
Two-thirds of households reported income loss and dire food situation according to the High Frequency Phone Monitoring Survey Report (HFPMS) launched inAugust 2020. In the wake of the COVID19 pandemic, the deadly Ebola Virus Disease (EVD) that severely affected lives andlivelihood in Liberia (2014-2015) has resurfaced in neighboring Guinea. With therelatively porous borders, there is a highrisk of spread into Liberia with the accompanying fiscal pressures as government
activates it preparedness and response
plan. Meanwhile, the financial sector has
faced consistent shortage of Liberian dollars, partly due to high inflation rates
since 2018.

Recent developments
The COVID-19 pandemic and related containment measures adversely impacted
economic activity during most of 2020.
Following the lifting of lockdown
measures in the second half of 2020, economic activity has picked up in most of
the productive sectors of the economy.
With the notable exception of the mining
sector, which experienced an 8.1 percent(y/y) reduction in iron ore production,
output in other productive sectors of theeconomy increased significantly during
the second half of 2020, reflecting an increase in domestic and external demand.
Rubber output increased by 6.9 percent (y/y) in the second half of 2020, as operations
resumed in the sector amid favorable international prices. Gold output increasedby 19.5 percent (y/y) despite the recent
decline in international prices. Productionof cement and beverages rose by 55.8 percent (y/y) and 29.0 percent, respectively,
indicating increased activities in the construction and other services sector as lockdown measures were lifted. Business sentiment also improved with about 70.6 percent of firms having positive expectations
for sales and 6.1 percent anticipating an

FIGURE 1 Liberia / Real GDP growth and sectoral contribution to real GDP growth

FIGURE 2 Liberia / Actual and projected poverty rate andreal private consumption per capita

Percentage points

Poverty rate (%)
80

5Real private consumption per capita (LCU constant)
250

70

3

200

60

1

50

-1

40

150
100

30

-3

20

-5

50

10

-7
2019

2020e

Agriculture
Services

2021f

2022f

2023f

0

Industry
Real GDP growth

Sources: World Bank staff calculations based on IMF and CBL data.

0
2007

2009

2011

2013

2015

International poverty rate

Source: World Bank. Notes: see table 2.

MPO 250 Apr 21

2017

2019

2021

2023

Real priv. cons. pc

increase in workforce according to the
HFPMS concluded in December 2020.
Headline inflation declined significantly
reaching 17.4 percent in 2020, down from27.0 percent in 2019. Food and non-foodinflation fell to 15.7 percent and 11.5 percent, respectively in December 2020, from
23.0 percent and 18.6 percent a year ago.
The moderation in inflation was due tothe Central Bank of Liberia (CBL) tightmonetary policy stance in 2020, weak economic activity, and lower international oil
prices. Despite sharply lower international
oil prices, fuel prices in Liberia fell only
slightly due to the introduction of an excise tax to boost revenue collection.
The fiscal deficit narrowed to 3.7 percent
of GDP in FY2020, from 6.1 percent in
FY2019. The FY2021 budget of US$570
million was approved in October 2020 anda mid-year review of fiscal operations
showed public expenditure within thelimits of the revenue collected. Revenue
collection amounted to 9.8 percent ofGDP, while cash expenditure amounted to
8.5 percent of GDP, reflecting a fiscal surplus on a cash basis. Liberia’s current account deficit narrowed to 20.5 percent of
GDP in 2020 due mainly to an improvement in the trade balance as a result of
increased iron ore and gold exports. The
improvement in the trade balance and risein net remittances inflows helped support

the relative stability in the L$/US$ exchange rate in 2020. Gross official reservesrose to US$326 million, equivalent to 2.5
months of imports in 2020, up from
US$292 million, equivalent to 2.3 monthsof imports in 2019 due to increased donor
support.

Outlook
Liberia’s economy is expected to recoverand return to a relatively strong growth
path over the medium term. Output is set
to expand by 3.3 percent in 2021 and riseto an average of 4.4 percent during 202223 as economic activity picks up in the
productive sectors, especially mining,
agriculture and construction. The headline
inflation rate is expected to moderate further to single digit in 2021 as the CBL
maintains its tight monetary policy stanceto contain inflation. Annual average inflation rate is expected to decline to 9.8 percent in 2021 and further to 5.5 percent by
2023.
The fiscal deficit is projected to narrow to
2.9 percent of GDP in FY2021, and further to 2.0 percent of GDP by FY2023 asrevenues improve and the Government
maintains its tight expenditure controls.
However, Liberia’s external position is

TABLE 2 Liberia / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b

expected to deteriorate in 2021 as importdemand rises faster than export growth.
The current account deficit is projected towiden to 22.3 percent of GDP in 2021, andfurther to 22.8 percent of GDP in 2023.
The outlook assumes high levels of uncertainty around the evolution of the COVID19 crisis and the evolving Ebola situation,with risks tilted to the downside. The resurgence of the COVID-19 pandemic andits likely impact on external demand andglobal and domestic supply chains; delayed access to vaccines, as well as low
confidence and unaddressed vulnerabilities in the financial sector could undermine economic recovery, increase poverty,
and weaken Liberia’s fiscal and externalbalances. An outbreak of Ebola in Liberia
will only heighten these risks and uncertainties.

(annual percent change unless indicated otherwise)
2018
1.2
6.0
-4.3
-13.6
-0.3
-13.8
1.2
-0.2
20.0
-4.6
20.4
-23.5
-4.8
40.3
-4.2
44.9

2019
-2.3
-2.8
4.0
-4.3
1.6
0.4
-2.3
0.4
5.2
-7.9
27.0
-22.1
-6.1
52.5
-5.4
48.2

2020 e
-2.9
-1.9
-11.6
0.2
-10.2
-7.4
-2.9
5.3
0.6
-12.1
17.4
-21.1
-3.7
56.6
-2.3
51.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-HIES. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 1 based o n private co nsumptio n per capita in co nstant LCU.

MPO 251 Apr 21

2021 f
3.3
1.1
1.0
7.6
1.0
1.3
3.3
3.5
5.2
2.0
9.8
-22.3
-2.9
62.0
-1.8
52.1

2022 f
4.2
8.6
-8.5
2.9
1.6
3.1
4.2
3.0
5.3
4.9
7.0
-22.5
-2.9
64.5
-0.7
48.1

2023 f
4.7
8.6
-16.6
6.0
1.6
3.1
4.7
3.0
5.7
5.8
5.5
-22.8
-2.0
64.0
0.1
44.4

MADAGASCAR
Table 1

Key conditions andchallenges

2020

P o pulatio n, millio n

27.1

GDP , current US$ billio n

13.7

GDP per capita, current US$

505.4

Internatio nal po verty rate ($ 1.9)

a

78.8
a

91.5

a

97.5

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

42.6

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

134.1
66.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 2), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

The Covid-19 crisis has plunged the Malagasy economy into its deepest recessionin over a decade. A rebound in external
demand and the resumption of domestic
investments are expected to support a
gradual recovery starting in the second
half of 2021. The evolution of the pandemic and how the government responds to it
will define the pace of this recovery. A
return onto its pre-crisis poverty reduction trend is conditional on the country
staging a growth spurt from 2022onward.

Broad-based development in Madagascar
remains hindered by a combination of
inadequate infrastructure, weak humancapital, poor governance, and a high degree of exposure to political unrests andweather-related shocks. However, whenpolitical stability prevails, a segment of
the private sector has been able to prosper
and support growth.
Following the 2009-13 political crisis, theeconomy has been recovering with GDP
growth reaching a decade-high of 4.4 percent in 2019. The resumption of externalaid, reopening of access to international
preferential market, and incremental reforms in public financial management andbusiness environment have supported therecovery. The competitiveness of labor
cost and availability of vast arable land
are among factors that attracted private
investment in export-oriented activities
such as agribusinesses, IT outsourcing,
and apparel. Investments have been accompanied by formal job creation in industry and services but at a pace insufficient to absorb much of the 75 percent of
total workforce that are employed in agriculture and mostly located in rural areas.
The Covid-19 crisis has halted the recovery momentum, plunging the country into
its deepest recession since 2009. As a result, the recent trend of poverty reduction
was halted, and the prevalence of povertyrose by 3.5 percentage points to 80

percent from 2019 to 2021. The evolutionof the pandemic and the response of thegovernment as well as the trend of recovery among main export destinations will
shape the near-term outlook and create an
unusually high degree of uncertainty
around projections. In the short term, thekey challenges lie in the preservation of
lives and livelihoods by reinforcing thehealth sector response and expandingsocial protection and private sector support programs. Alongside, more transparent management of public resources andcontinued reliance on concessional financing for public debt are needed to preserve
fiscal sustainability. Over the mediumterm, sustained growth will require themobilization of domestic resources, reforms to stimulate private investment andjob creation, leapfrog the digitalization of
the economy, and boost agricultural
productivity

Recent developments
The impact of the Covid-19 crisis on the
Malagasy economy is more severe thanpreviously projected. The continued closure of international borders, the recession
in main export markets, and a collapse in
private investment have resulted in a recession estimated at –4.2 percent in 2020,
which is 3 percentage points lower thanthe October 2020 projection. The Covid-19
outbreak has primarily affected exportoriented activities. Revenues from exportof goods contracted by 20 percent in 2020
compared to 2019 and tourist arrivals

FIGURE 1 Madagascar / Real GDP growth scenarios

FIGURE 2 Madagascar / Actual and projected poverty rates
and real GDP per capita

Percent
6

Poverty rate (%)
100

4Real GDP per capita (LCU constant)
90000080

285000060
800000040-2750000

20
-4
0

-6
2020

2021
Pre-crisis

Source: World Bank.

2022

2020

2021

7000002005 2007 2009 2011 2013 2015 2017 2019 2021 2023

2022

International poverty rate
Upper middle-income pov. rate

Current projection

Source: World Bank. Notes: see Table 2.

MPO 252 Apr 21

Lower middle-income pov. rate
Real GDP pc

declined by more than 80 percent, resulting in a widening of the current accountdeficit to 4 percent of GDP. In addition,
domestic demand has been dampened byincome losses caused by lockdown and a
sharp drop in private investment. In June
2020, an estimated 64.4 percent of household surveyed reported a decline in theirincome due to social distancing measuresand 7.7 percent contraction in employment has been recorded. A small recovery
in employment has been observed towards the end of the year. Against thisbackground, the poverty rate is estimatedto have risen to 79.7 percent in 2020, up
from 76.5 percent in 2019, sending approximately another 1.4 million people under
the international poverty line of $1.90/
capita/day (in 2011 PPP). Urban populations were more immediately affected by
the COVID shock, but rural households
were impacted as well by contracting demand, particularly for off-farm activities.
In November 2020, decreasing food consumption has remained among the top
coping strategies when dealing with income-reducing shocks, further risking
long-term health implications for household members.
Lower economic activity and temporary
tax relief measures have reduced fiscal revenues to 9 percent of GDP and widened theoverall fiscal deficit from 1.3 percent of

GDP in 2019 to 5.2 percent of GDP in 2020.
As a result, public debt surged from 37
percent in 2019 to 45 percent in 2020. However, the risk of debt distress remains moderate as external financing has been mostly
on concessional terms, with emergency
support from donors mostly covering theunexpected increase in external and fiscal
financing needs. Supported by the inflow
of external financing, the year-on-year depreciation of the local currency against the
US$ has been moderate at 5 percent, contributing to contain inflation at 4.5 percent
in 2020. The financial sector has been overall resilient, supported by a banking sector
that remained sufficiently capitalized. In
contrast, the microfinance sector has beenfragilized by temporary cash flow difficulties due to delays in loan repayment anddeposit withdrawals at the beginning of thecontainment period.

Outlook
Growth is projected to progressively pickup, but Covid-19 will have protracted
effects on the economy and poverty. GDP
growth is expected to reach 2 percent supported by a recovery in global demand,
the resumption of nickel exports, and public investments and accelerate further in

TABLE 2 Madagascar / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

the medium term by a return of private
investors. As a result, poverty is projected
to decline to 77.2 percent by 2023 (basedon an international poverty line of $1.90/
capita/day, in 2011 PPP). However, theimpact of the pandemic is expected to casta long shadow on economic and social
prospects and could be compounded byother shocks, including droughts and other climatic events affecting already vulnerable populations. Under baseline conditions, GDP per capita would only reach its
pre-crisis level by 2024, with risks being
mostly titled to the downside.
A modest economic recovery should lower the budget deficits, reaching 3.8 percent
in 2023. The main driver of this decline
will be a gradual pickup in government
revenues, offsetting accelerating public
investments. In this context, public debt isprojected to stabilize around 52 percent of
GDP in 2023. The current debt risk profile
for Madagascar still makes plans to scale
up priority investments appropriate but
calls for prudent borrowing policies andfast-track reforms to boost revenue mobilization and public spending efficiency.

(annual percent change unless indicated otherwise)
2018
3.2
1.6
-7.9
11.0
2.4
11.1
2.3
0.4
2.0
3.3
7.3
0.7
2.6
-1.3
39.5
-0.5
77.3
90.7
96.6

2019
4.4
1.2
1.9
12.9
10.9
4.6
4.3
5.5
6.6
3.1
5.6
-2.3
2.5
-1.4
37.4
-0.7
76.5
90.3
96.1

2020 e
-4.2
-1.0
2.1
-2.9
-15.3
-7.3
-4.2
2.3
-14.3
-4.1
4.3
-4.0
2.7
-5.2
45.1
-4.4
79.7
92.0
98.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2005-EP M and 2012-ENSOM D. A ctual data: 2012. No wcast: 2013-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 253 Apr 21

2021 f
2.0
1.7
2.1
5.6
3.8
4.8
2.0
2.4
2.7
1.6
5.9
-4.4
2.6
-5.4
49.7
-4.5
80.0
92.2
98.2

2022 f
5.8
3.4
4.3
12.7
7.1
6.9
5.8
3.0
6.9
6.9
6.1
-4.3
2.4
-4.6
51.2
-3.6
78.5
91.4
97.3

2023 f
5.4
4.0
4.0
9.4
7.0
6.6
5.4
3.2
6.3
6.2
6.1
-4.3
-3.8
51.9
-2.7
77.2
90.7
96.6

MALAWI

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

19.1

GDP , current US$ billio n

8.1

GDP per capita, current US$

425.3

Internatio nal po verty rate ($ 1.9)

a

69.2

a

44.7

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

144.8
63.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Malawi’s economic growth fell to 0.8 percent in 2020 and is expected to pick up to
2.8 percent in 2021. The country’s services and industry sectors have beenheavily affected by the COVID-19 pandemic. Malawi will benefit from a onetime boost to maize production in 2021
due to favorable weather and extensive
input subsidies. However, it will need tostrengthen fiscal sustainability and invest
in diversification in order to sustainably
increase growth and reduce persistently
high poverty levels.

Malawi’s continued reliance on subsistence, rainfed agriculture has limited its
growth potential, increases its susceptibility
to weather shocks, and creates food insecurity. This has been compounded by trade
restrictions, which impede investment andcommercialization, and erratic electricity
supply that limits value addition and slows
economic diversification. Public investment
has been low, offset by large and increasing
subsidies to maize production. These factors have contributed to persistently highpoverty levels and limited structural transformation. The share of the population
below the international poverty line of$1.90 per day has decreased only marginally from 72 percent in 2010 to 68 percent in2019. Weak budget management and economic policies have contributed to recurring and increasing fiscal deficits, whichhave been largely funded by high-cost domestic borrowing. This has led to a highlevel of domestic debt, which increasingly
reduces fiscal space for development
spending and also risks crowding out private sector investment. While Malawi has
benefitted from exchange rate stability andlower inflation in recent years, this has also
contributed to real appreciation, which
reduces competitiveness.
The COVID-19 pandemic has heavily impacted Malawi’s economy, with a second
wave affecting the country since midDecember 2020. Trade disruptions, lower

FIGURE 1 Malawi / Fiscal deficit and public debt

Percent of GDP

tourism and remittances, and social distancing policies and behavior have slowed
activity in the service and industry sectors
but has been partially offset by a strong
agriculture harvest due to favorable
weather conditions. The urban poor havebeen particularly affected, and an estimated 12 percent of the total economically
active population have experienced job
losses. The COVID-19 pandemic is reducing revenues and increasing expenditure
for COVID-response, which together withexpansionary policies by the new administration, further worsen the fiscal position
and reduce fiscal space. In particular, the
new administration is implementing a
costly universal agricultural input subsidy
that will boost maize production in the
short term, but will need to be reformed tomake it fiscally sustainable and support
diversification. The nature of the recovery
will depend on the evolution of the pandemic in Malawi. A strong recovery andhigher growth will be needed in the medium term for the country to reduce its debt
burden and to sustainably reduce poverty.

Recent developments
Growth in 2020 is estimated at 0.8 percent, down from the pre-COVID projection of 4.8 percent. With population
growth around 3.0 percent, this represents
a contraction in per capita GDP of greaterthan 2 percent. Political stability returned
following the June 2020 Presidential elections; however, global and domestic factors emanating from the pandemic are

FIGURE 2 Malawi / Actual and projected poverty rates andreal GDP per capita
Percent of GDP

13
12
11
10
9
8
7
6
5
4
3
2
1
0

80
70

Real GDP per capita (LCU constant)
82000

Poverty rate (%)
80
70

80000

60
60

50

50

40

78000
76000
74000

30
40
30
20

Sources: Ministry of Finance and World Bank.

70000

10
0

68000

2010

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
Fiscal Deficit (lhs)

72000

20

Public Debt (rhs)

2012

2014

2016

International poverty rate
Source: World Bank. Notes: see Table 2.

MPO 254 Apr 21

2018

2020

2022
Real GDP pc

affecting Malawi’s economy, including: 1)
disruption in global value chains, tradeand logistics; 2) decrease in tourism; and3) decrease in remittances. This has combined with social distancing policies andbehavior contributing to reduction in domestic demand. Lower international oil
prices, on the other hand, helped reducethe import bill and alleviated fuel andtransportation price pressures. A reduction in international remittances and tourism also contributed to a worsening external sector balance, with the current account deficit estimated to widen to 18.3
percent of GDP in 2020, which is largely
financed by development assistance.
Headline inflation decelerated to 7.6 percent in December 2020, down from a recent peak of 11.5 percent in December
2019, supported by lower food and global
oil prices.
The FY2020 fiscal deficit expanded to 9.4
percent of GDP, far wider than the revised target of 5.4 percent of GDP. Thiswas due to optimistic revenue assumptions combined with weaker growth dueto the pandemic, as well as recurrent
expenditure overruns due to electionrelated pressures, COVID-19 response,
higher domestic interest payments, andrepayment of unbudgeted arrears. Financing of the fiscal deficit, largely using
domestic resources has pushed domestic

debt beyond external debt levels. Public
debt increased to 66.4 percent of GDP in
2020.

OutlookThe second wave of the pandemic whichstarted in late 2020 has been more intensethan the first and is further disrupting
economic activity. Extensive input subsidies and favorable weather are expected
to contribute to a one-time jump in maize
production, which, combined with apickup in tobacco production after 2020’s
weak harvest, should lead to a strong agriculture performance in 2021. However,the vaccine is not expected to reach a significant portion of the population until atleast mid-2022. As such, social distancing
policies and behavior are expected toweigh on economic activity and suppress
domestic demand and only a weak rebound is expected in the services and industry sectors in 2021. International tourism, in particular, is unlikely to return toprevious levels in the short term. These
factors are expected to lead to growth of
2.8 percent in 2021. With GDP per capita
growth remaining low, the share of the
population below the international $1.90
poverty line is projected to continue to

TABLE 2 Malawi / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b

stagnate around 68 percent in 2021 andremain near this level through 2023.
The FY2021 budget is expansionary andthe projected fiscal deficit of 12.7 percent
of GDP could widen further. Revenue andgrants are already weaker than budgeted,which may further underperform due to
PAYE tax reform measures implemented
since November. Expenditure has increased substantially due to the Affordable Inputs Program (AIP) for the agriculture sector and increasing interest payments. The wage and pension bill is also
increasing moderately. In addition, moreresources are needed for pandemic response, and expenditure arrears are resurfacing. The deficit will be largely financed
by domestic borrowing. The Government
needs to contain spending in order to limit
rapidly increasing interest costs and reduce domestic debt.
The current account deficit is projected toremain near 18 percent of GDP over the
medium term. A good agricultural performance will induce a one-time increase inagriculture exports. However, steadily
declining global demand for tobacco andlimited agricultural diversification will
hamper export growth. Health responsematerials will also boost imports.

(annual percent change unless indicated otherwise)
2018
3.5
7.3
-14.3
-2.9
6.9
6.4
2.9
2.4
2.2
3.4
9.2
-20.5
1.5
-7.8
59.4
-3.9
68.3

2019
4.4
3.9
3.5
6.0
3.8
3.6
4.4
4.3
3.8
4.5
9.4
-17.2
1.4
-6.5
59.4
-2.6
67.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-IHS-IV. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 255 Apr 21

2020 e
0.8
1.8
12.7
5.9
-5.0
-1.8
0.8
3.4
1.2
-0.7
8.6
-18.3
1.1
-9.4
66.4
-5.0
68.3

2021 f
2.8
2.4
-6.5
0.1
4.8
2.9
2.8
5.2
1.6
1.9
8.8
-17.4
1.0
-12.7
76.5
-7.0
68.3

2022 f
3.0
2.5
6.5
9.0
-0.3
1.1
3.0
1.7
2.4
3.8
7.6
-18.1
1.8
-9.5
80.6
-3.0
68.2

2023 f
4.5
2.9
6.9
8.2
2.5
2.4
4.5
3.2
4.3
5.2
7.0
-17.9
2.2
-8.9
83.6
-1.9
67.6

MALI

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

20.3

GDP , current US$ billio n

17.2

GDP per capita, current US$

848.3

Internatio nal po verty rate ($ 1.9)

a

50.3
a

79.8

a

95.0

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

33.0

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

75.6
58.9

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (2009), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

After robust growth in 2019, the ongoing
COVID pandemic and August military
coup in 2020 triggered an economic contraction rolling back poverty reduction byhalf a decade. The fiscal balance widened,
and debt pressures increased, although theexternal balance strengthened due to improved terms of trade. Growth and poverty reduction are expected to gradually
recover over the medium term. The outlook is tilted to the downside with risks
from the political transition, rising insecurity, persisting COVID-19 impacts,
and climatic hazards.

The undiversified economy has experienced little structural change in recent
years. The manufacturing sector remains
small (14 percent of GDP) and concentrated in agro-industries and textiles, reflecting low levels of human capital with jobs
concentrated in the informal sector. Exports are dominated by gold and cotton,
subject to volatile prices and climatic
shocks. Farmers’ productive capacity remains low with limited access to finance.
Scaling access to agricultural technologies
and promoting selected value chains toincrease poor farmers’ income, should
remain strategic goals if Mali is to accelerate its economic transformation.
Governance challenges were brought tothe forefront by the military coup of August 18, 2020. Beforehand, the country had
made limited progress towards restoring
trust in the state, while greater decentralization, a key tenet of the Algiers Peace
Agreement in 2015 has not fully materialized. The poor management of SOEs
(notably EDM and CMDT) increased fiscalpressure. Tax administration reforms progressed slowly while spending efficiency
remains low. In the coming years, restoring peace and democratic rule, while consolidating the fiscal position constitute thecountry’s most pressing challenges.
The recent surge of COVID-19 cases in
Mali and globally also constitutes downside risks. Despite the terms of trade

FIGURE 1 Mali / Real GDP growth, current and fiscal accountbalances
Percent of GDP
3

Percent
6
5

0

4
3

-3

improvement, due to the counter-cyclicalnature of the gold prices, the underdiversified economy is vulnerable to continuing depressed external demand. A
prolonged outbreak would also stall thedomestic recovery, increasing the cyclicaldeficit on top of additional outlays including the rollout of the vaccination program
and the costs of the political transition.

Recent developments
Real growth contracted by 2 percent (-4.9
percent in per capita terms) in 2020 due tothe COVID-19 shock and August 2020coup. The retail, construction and hospitality sectors declined. Agriculture wasdampened by the poor performance ofcotton and cereal production. In contrast,
telecommunications, mining and industry
were resilient. On the demand side, private consumption and investment declined. Inflation turned positive since Julymainly due to increased food costs.
The current account deficit narrowed to
2.3 percent of GDP in 2020, due to improved terms of trade and despite regional economic sanctions (August to October)
following the military coup. The deficit
was mainly financed by foreign direct
investment (FDI) and project grants in
2019, but external inflows declined in
2020, due to the pandemic and the postcoup donor disengagement.
The fiscal deficit rose to 5.5 percent of
GDP in 2020. Revenues dropped at the
beginning of the pandemic (-17.2 percent
y/y in 2020Q1) but recovered since May,

FIGURE 2 Mali / Actual and projected poverty rates and real
GDP per capita
Poverty rate (%)
120

Real GDP per capita (LCU constant)
280000270000100

26000080

2500002-616024000040

0230000

-9

-1

20

-2

220000

-12
2016

2017

2018

2019e 2020p 2021p 2022p 2023p

0

Real GDP growth (lhs)
Fiscal balance (rhs)
Current account balance (rhs)
Sources: Malian government and the World Bank.

2100002006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 256 Apr 21

Lower middle-income pov. rate
Real GDP pc

responding to the relaxation of containment measures and the end of tax reduction measures. Expenditures increased(for wages and transfers) with cuts in nonessential investment. Public debt rose to
44.1 percent of GDP in 2020, though Mali
remains at a moderate risk of debt distress. Mali participated in the Debt Service
Suspension Initiative (DSSI) and requested an extension till June 2021, benefitingfrom lower debt servicing costs of 0.04
percent of GDP in 2020 and 0.23 percent of
GDP in 2021.
Mali’s monetary and exchange rate policies are managed by the Central Bank ofWest African States (BCEAO), which
maintains a fixed peg between the CFA
Franc and the Euro. Its reserves reachedan estimated 5.5 months of imports in2020 due to large donor support and reduced imports during the pandemic. Between March and October 2020, the REER
appreciated by 6.4 percent y/y, reflecting
the nominal appreciation of the Euroagainst the USD. To support regional
economy and COVID-19 related extra
spending, the BCEAO announced a set ofmonetary and macroprudential measuressince March 2020, including policy rate
cut and extended refinancing operationsof the 3-month COVID-19 bonds to help
governments and businesses.

The COVID-19 crisis has rolled back poverty
reduction of the last five years. The poverty
rate (US$ 1.9/day in 2011 PPP) decreased
from 45.6 percent in 2015 to 42.1 percent in2019. However, in 2020, a combined loss of
income and remittances and rising prices
drove up the poverty rate by three percentage points to 45 percent (representing almosta million additional people living below theextreme poverty line).

Outlook
Growth will gradually rebound, reaching
2.5% in 2021 and 5.2% in 2022. As the pandemic wanes, private consumption willcontinue to recover as evidenced by highfrequency indicators during the second
half of 2020. With new elections promised
within 18 months of the political transition(since September 2020), lower politicaluncertainty should boost private investments, while public investments are expected to rebound in 2021-2022. Preliminary simulations suggest poverty may
remain stable at 45 percent in 2021, before
decreasing to 44 percent in 2022 and 43
percent in 2023.
The favorable terms of trade in recent
years would narrow in 2021-2023 withTABLE 2 Mali / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

projected higher oil prices and a return ofgold prices to historical levels. Importdemand will rise following the recovery inprivate consumption. The current accountdeficit should gradually increase andsettle around 3.0 percent of GDP in themedium term, financed by FDI and increased external flows.
Tax collections will accelerate with continued reforms. Non-tax revenues and grants
should increase with the expected sale of athird telecommunication license and thegradual reengagement of donors. Expenditures will remain high in 2021 with the
postponement of pandemic related spending. The fiscal deficit is projected to stay at
5.5 percent of GDP in 2021 and gradually
return to the WAEMU criterion of 3 percent by 2024. Public debt will reach 47.1
percent in 2023 before declining.
Downside risks to the outlook are significant,includingnew
confinement
measures, rising insecurity in the central
regions, weather shocks, and a tumultuous transition.

(annual percent change unless indicated otherwise)
2018
4.7
3.0
2.0
-0.9
-0.1
-12.1
5.3
5.9
5.5
4.8
1.9
-4.9
2.7
-4.7
36.1
-3.9
43.2
75.3
93.5

2019
4.8
3.8
4.0
6.3
2.3
5.9
4.5
4.1
3.7
5.2
-3.0
-4.9
1.8
-1.7
40.5
-0.7
42.1
74.6
93.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2009-ELIM . A ctual data: 2009. No wcast: 2010-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2009) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 257 Apr 21

2020 e
-2.0
-10.3
21.5
-16.0
-19.0
-4.0
-2.2
-7.6
1.4
0.6
0.7
-2.0
1.4
-5.5
44.1
-4.3
45.1
76.7
93.9

2021 f
2.5
18.4
5.7
12.0
4.2
3.4
3.5
8.6
-1.2
1.8
1.4
-2.3
1.1
-5.5
46.2
-4.0
45.6
77.0
93.9

2022 f
5.2
8.3
3.3
-4.4
4.0
5.2
5.2
4.6
4.9
5.8
2.1
-2.7
1.1
-4.6
46.9
-2.8
44.0
75.9
93.7

2023 f
5.0
8.3
3.3
-4.4
4.0
5.2
5.2
4.6
4.9
5.8
2.0
-3.6
1.1
-3.6
47.1
-2.0
42.9
75.2
93.4

MAURITANIA
Table 1

Key conditions andchallenges

2020

P o pulatio n, millio n

4.7

GDP , current US$ billio n

7.6

GDP per capita, current US$

1645.0Internatio nal po verty rate ($ 1.9)

a

6.0
a

24.1

a

58.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

32.6

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

100.4
64.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

The COVID-19 pandemic severely impacted the economy, leading to the firstever contraction since 2008 and reversing
years of poverty reduction. Despite thecrisis, the external and fiscal balances
remained resilient in 2020, supported byincreased donor financing and improved
terms of trade. Growth and poverty reduction are expected to gradually recover.
Risks are tilted to the downside stemmingfrom a sustained COVID-19 outbreak,climatic hazards, delayed structural reforms, and regional insecurity.

Despite improved macroeconomic stability over the past five years, with prudent
fiscal and debt policy after the end of thecommodity super cycle in 2014-2015,
Mauritania did not manage to build a diversified and inclusive economy nor makesignificant progress on its development
agenda. As a result, the country's per capita GDP growth averaged only 0.4 percent
between 2016 and 2019. This low growth
per capita reflects a weak business environment impaired by limited competition
and underdeveloped financial markets,poor human and physical capital, andover-reliance on extractive resources.
COVID-19 has exacerbated existing economic and social challenges, reversing
some gains made in poverty reduction
over the past few years. It has also underscored the urgent need to enact deeper
structural reforms to build back a stronger, faster, and more inclusive growthmodel. The new priority program(PROPEP) launched in September 2020 tosupport the recovery and boost long-term
inclusive growth in 2021–22 will requirelarge financing and significant commitment on the political and administrative
levels to materialize. Given the high riskof debt distress, the Government should
maintain its prudent borrowing plans
based on concessional financing. At thesame time, it should utilize its fiscal space
generated over the past years to ramp-up

FIGURE 1 Mauritania / Evolution of main macroeconomic
indicators
Percent

efficient social and capital spending. Thereis also a need to develop a simple andclear rule-based fiscal framework to effectively manage the significant gas inflows
expected starting 2023. Finally, Mauritania
is exposed to climate shocks (floods anddroughts), which could reduce agricultural productivity.

The COVID-19 pandemic severely impacted the economy, leading to a contraction of 1.5 percent in 2020 (-4.2 in percapita terms). While extractive industries
held up well, domestic non-extractive
activity was severely affected by the
pandemic. Retail and transportation services were hit by the lockdown and thefishing sector contracted due to a drop in
global demand. Inflation remained low
at 2.4 percent in 2020, consistent with alarge negative output gap and contained
food prices.
The current account deficit (CAD) remained almost unchanged at 11 percent of
GDP as lower fishing exports were offset
by resilient mining production and improved terms of trade (higher gold/iron
export prices and lower oil import prices).
The CAD was financed by strong extractive-related FDI, increased donor financing and a suspension of debt service
through the Debt Service Suspension Initiative (DSSI). As a result, international
reserves increased to 4.9 months of imports in 2020 and the exchange rate remained stable.

FIGURE 2 Mauritania / Actual and projected poverty rates
and real GDP per capita
Figure 2: Poverty rate and GDP per capita

Percent of GDP

8

Recent developments0

Poverty rate (%)
Poverty rate (%)

Real GDP per capita (LCU constant)
Real GDP per capita (LCU constant)

100

54000

-2

6

-4

4

-6

2

-8
-10

0

53000
80

52000
51000

60

50000

40

49000

-12
-2

-14

47000

-16

Sources: Mauritanian authorities and World Bank staff calculations.

International poverty rate
Upper middle-income pov. rate

Lower middle-income pov. rate
Real GDP pc**Source:
Legendwill
be Notes:
adjustedin the2. final chart.
World
Bank.
see Table
This is not the final chart. It is a preliminary version.
MPO 258 Apr 21

2023

2022

2021

2020

2019

2018

2017

2016

2015

2014

2013

2012

2011

46000
2010

0

GDP growth (%)
Primary fiscal balance (% of GDP)
Current account balance (% of GDP, rhs)

20092015 2016 2017 2018 2019e 2020p 2021p 2022p 2023p

2008

-4

48000

20

Despite the pandemic and the resulting
large drop in tax revenues, the fiscal balance (excluding grants) registered a surplus of 0.3 percent of GDP in 2020. Thiswas driven by two factors. First, non-tax
revenues surged thanks to higher SOE
dividends (reflecting last year’s profits)
and increased gasoline excise revenues
due to the price differential between thelower international oil prices and the fixed
domestic retail prices. Second, the increasein current transfers was offset by a combination of reduced public investments due
to under-execution partly reflecting the
COVID-induced lockdown. The robust
fiscal position and high nominal growthreflecting improved terms of trade helped
maintain the debt-to-GDP ratio around73.5 percent of GDP in 2020.
To mitigate the impact of the crisis, thecentral bank eased its monetary policy by
reducing its reserve requirement and policy rate. This has, however, not translated
in lower lending rates nor increased lending to the private sector, thus reflecting
the limited effectiveness of the monetary
policy. While banking regulations weretightened with the implementation of Basel III standards, NPLs remain high at 21.5
percent in 2020.
The pandemic-induced crisis has impacted the labor market, particularly in urban
areas where social distancing measures

reduced economic activity in services andaffected widespread-informal jobs. As aresult, urban workers experienced job
losses and a drop in their income. This has
reversed years of poverty reduction andpushed the poverty rate (US$ 1.9/day in2011 PPP) from 5.4 percent in 2019 to 6.3
percent in 2020.

Outlook
Assuming the vaccine roll-out starts in thesecond quarter of 2021, growth would
recover to 2.7 percent in 2021. This ushaped recovery will be driven by a rebound in services, particularly, as households and businesses adapt to operatingin the pandemic. Growth is expected toaccelerate in 2022-2023, assuming a continued recovery in private consumption, arebound in key export markets and theonset of gas production in 2023. Despite
this acceleration, real GDP per capita will
not return to its 2019 level before 2024 dueto the high population growth.
The CAD is expected to increase and remain elevated at 14 percent of GDP in
2021-2022 fueled by high capital investment imports and worsened terms oftrade. It is then expected to shrink to 6.8
percent as hydrocarbon exports come on

TABLE 2 Mauritania / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

stream in 2023. External financing would
be met by extractive related FDI and concessional financing. As a result, international reserves would remain above 4months of imports.
Fiscal pressures will slightly increase in
2021 as the Government ramps up its social spending and public investments inline with its recovery plan. Higher spending, coupled with lower non-tax revenues,
will offset the pick-up in tax revenues as
the economy recovers, leading to a primary deficit (excluding grants) of 1.1 percent
of GDP in 2021. As the Government unwinds COVID-19 spending measures, theprimary balance will return to a surplus,
putting the debt-to-GDP ratio back on a
downward trend starting 2022.
Monetary policy is expected to remain
prudent to ensure price stability in the
short run. In the longer-term, the authorities are aiming to implement reforms formore effective liquidity management anddeepen the interbank forex market.
The slow economic recovery that will be
driven by the low-labor intensity extractive sector coupled with household uncertainty about the future will undermine
poverty reduction. Consequently, the poverty rate would continue to increase to 6.4
percent in 2021 before taking a downward
trend to reach 6 percent in 2023.

(annual percent change unless indicated otherwise)
2018
2.1
2.7
4.5
4.1
-4.0
0.5
1.7
2.1
-8.4
7.7
3.0
-13.8
11.0
2.5
76.9
3.7
5.9
23.8
58.3

2019
5.9
2.4
5.0
5.5
6.0
0.7
5.9
1.4
7.2
7.1
2.2
-10.8
11.6
2.1
73.4
3.0
5.4
22.5
56.6

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2014-EP CV. A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2014) with pass-thro ugh = 0,87 based o n GDP per capita in co nstant LCU.

MPO 259 Apr 21

2020 e
-1.5
-5.7
6.5
2.4
0.7
0.3
-1.5
-0.8
0.4
-2.9
2.4
-11.0
11.5
2.4
73.5
3.8
6.1
24.3
59.1

2021 f
2.7
1.6
8.5
3.5
2.0
3.4
2.7
0.7
4.9
2.3
2.6
-14.6
13.3
-1.4
73.1
-0.4
6.1
24.3
59.1

2022 f
3.7
3.0
2.3
5.4
4.5
4.3
3.7
1.2
5.7
3.6
3.0
-13.5
12.7
-0.4
71.7
0.6
5.9
23.8
58.5

2023 f
6.0
2.8
5.5
3.9
10.4
3.4
6.0
2.3
10.6
4.8
3.5
-6.8
9.2
0.0
68.1
0.9
5.4
22.4
56.6

MAURITIUS
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio n

1.3

GDP , current US$ billio n

11.2

GDP per capita, current US$

8807.6
a

2.2

a

12.7

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

36.8

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

99.5
74.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 7), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Covid-19 has led to a steep recession in2020 despite heavy government intervention. Gradual recovery in 2021 is hampered by a new lockdown in March, andremains subject to significant downside
risks, including a prolonged pandemic or
failure to address longstanding structural
constraints to investment, competitiveness, and skills development. The fiscal
outlook depends heavily on a timely unwinding of Covid-support measures and areform of the public pension system. The
effects of Covid-19 have reversed recent
gains in poverty reduction and female
labor force participation.

On July 1 2020, Mauritius became a High
Income Country. It reached this milestone
in one of the worst years in its history due
to the global Covid-19 pandemic. Even
pre-Covid, a number of structural constraints had arisen in the Mauritian economy that put sustainable inclusive growthat risk. These include stagnating private
investment, declining external competitiveness, and a rising debt to GDP ratio.
These trends reflect shortcomings in policy coherence and implementation capacity
to deploy public resources towards innovation and skills development as Mauritius transitions to a knowledge-based
economy.
Mauritius responded to the Covid-19
shock with one of the largest support
packages in the world as a share of GDP.
The country relied heavily on its Central
Bank, including through a non-refundable
transfer to government of 13 percent of
GDP and the creation of the Mauritius
Investment Corporation (MIC) with abudget of up to 17 percent of GDP to finance strategic companies in distress andinvest in new priority industries. As public sector activity in the economy reachedunprecedented heights, a challenge will beto retract measures in a way that restoresfiscal and monetary policy sustainability
while resisting the temptation of openended support to firms that were unviable
before the pandemic.

Achieving inclusive growth in the futureis also linked to the challenge of overcoming constraints to a more inclusive labormarket. This includes increasing the participation of youth and women with low
educational attainments. Over 50,000
youth aged 16 to 29 are neither in education nor in employment, and about 1 outof 3 has obtained at most a certificate ofprimary education. Similarly, only 1 in 2
women participates in the labor market,
and only 1 in 3 among women with low
education. The impact of Covid-19 reversed recent gains in labor force participation of women.

Recent developments
After an outbreak in March that claimed
10 lives, Mauritius curbed the transmission of Covid-19 through a hard lockdown and had been Covid-free sinceApril 2020 when a new outbreak occurred in March 2021 and the country
went back on lockdown. Tourism arrivals
have been near zero since the onset of thepandemic. As a result, service exports
dropped 45 percent over the first threequarters of 2020. Merchandise exports
contracted sharply during the second
quarter but recovered in the third for an
overall 15 percent drop in the first threequarters. Air cargo remains a critical constraint given limited passenger traffic.
GDP contracted 15.6 percent in 2020.
While government supported consumption and firm survival, the fiscal deficitrose to 13 percent of GDP in fiscal year

FIGURE 1 Mauritius / General government balance anddebt

FIGURE 2 Mauritius / Actual and projected poverty rates
and real GDP per capita

Percent of GDP

Poverty rate (%)
25

Percent of GDP

2
0
-2
-4
-6
-8
-10
-12
-14
-16
-18

100
95
90
85
80
75
70
65
60
55
50

2012/13 2014/15 2016/17 2018/19 2020/21f 2022/23f

300000202500001520000010150000100000

5

50000

0

0

2006 2008 2010 2012 2014 2016 2018 2020 2022

General government balance (lhs)
Primary balance (lhs)
General government debt (rhs)
Sources: Statistics Mauritius, World Bank staff estimates.

Real GDP per capita (LCU constant)
350000Lower middle-income pov. rate
Real GDP pc
Source: World Bank. Notes: see Table 2.

MPO 260 Apr 21

Upper middle-income pov. rate

2019/20 and public debt reached 78 percent of GDP (up from 68 percent the previous year). Merchandise exports contracted sharply during the second quarterbut recovered in the third for an overall 15
percent drop in the first three quarters. Air
cargo remains a critical constraint given
limited passenger traffic.
The current account deficit widened to11.7 percent of GDP, financed by a combination of surpluses in the financial account that are linked to the offshore sector
and new external financing from bi- andmultilateral partners. The CB intervened
for close to USD 1 bln to stabilize the Mauritian Rupee after permitting an initial 10
percent depreciation at the onset of thepandemic. Reserves remain ample at 14
months of imports, and concerns overpotential financial flow reversals in theoffshore sector after the country’s addition
to the EU’s AML watchlist in October
have not materialized so far. Inflation was
2.5 percent in 2020.
Poverty (Upper-MIC threshold of $5.5 a
day 2011 PPP) fell from 18 to 10 percent
between 2012 and 2019. However, given
the dramatic contraction of GDP in 2020,
poverty is estimated to have increased byalmost 6 percentage points as resultsfrom phone surveys (carried out in May,
June and July 2020) show a significant
drop in informal employment during the

lockdown. Levels of informal employment in July remained 21 percent below
those at the beginning of the year, with alarge proportion of women exiting thelabor market.

Outlook
GDP is expected to grow 3.6 percent in
2021 under a baseline that assumes abrief lockdown in response to the newoutbreak, a successful rollout of vaccines,
and reopening of borders in time for themain tourist season in November / December. Initial recovery is led by industry, while the services sector resumes itsrole as driver of growth from 2022 onwards. The main downside risk remains
a prolongation of the Covid-pandemic
and border closures that further delay
recovery in tourism. In light of pre-Covid
trends, strong and coherent policy actions to revive competitiveness, stimulate
private investment, and address skills
shortages will also be critical to medium
term recovery.
Fiscal pressures and debt levels werealready on the rise pre-Covid, and a 15.7
percent deficit is expected under the
2020/21 budget. Debt would reach 90
percent of GDP, even though most of the

TABLE 2 Mauritius / Macro poverty outlook indicators

Real GDP growth, at constant market prices a
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)b
Debt (% of GDP)b
Primary Balance (% of GDP) b
Lower middle-income poverty rate ($3.2 in 2011 PPP) c,dUpper middle-income poverty rate ($5.5 in 2011 PPP) c,d

deficit is financed by a non-refundable
transfer from the Central Bank and stabilize at that level under the baseline. This
assumes withdrawal of most Covid related measures combined with gradual increases in revenue starting in fiscal year
2021/22. Downside risks are related tothe timely withdrawal of Covidmeasures, resisting the temptation for
additional Central Bank financing andlimiting the role of the MIC. A key factor
for fiscal sustainability in the medium
term are the outcomes of an ongoing reform of the public pension system.
Projections indicate that poverty will only
fall back below 12 percent, just above thepre-COVID-19 level, well into 2023.

(annual percent change unless indicated otherwise)
2018
3.8
3.2
4.2
10.9
2.7
-0.2
3.6
-1.3
2.6
4.1
3.2
-3.9
10.3
-3.3
67.6
-0.6
2.0
11.4

2019
3.0
3.2
2.0
6.2
-4.1
2.5
3.2
4.1
2.4
3.3
0.5
-5.4
14.3
-12.8
77.7
-10.0
1.8
10.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Histo rical demand-side data is being revised due to a co nsistency pro blem.
(b) Fiscal balances are repo rted in fiscal years (July 1st - June30th).
(c) Calculatio ns based o n 2017-HB S. A ctual data: 2017. No wcast: 2018-2020. Fo recast are fro m 2021 to 2023.
(d) P ro jectio n using neutral distributio n (2017) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 261 Apr 21

2020 e
-15.6
-11.8
-7.3
-22.4
-29.4
-22.8
-15.7
3.5
-7.8
-18.8
2.5
-11.7
8.9
-15.7
90.2
-13.2
2.7
15.9

2021 f
3.6
6.9
4.1
-8.3
9.6
9.4
3.1
5.1
11.7
0.5
2.8
-10.7
15.3
-7.4
93.2
-4.7
2.5
14.8

2022 f
5.9
6.2
5.6
3.7
8.3
7.1
6.0
1.1
1.7
7.8
3.3
-8.8
15.4
-5.4
90.4
-2.2
2.3
13.1

2023 f
4.3
4.1
4.9
5.0
8.0
7.1
4.3
1.0
1.5
5.4
3.3
-6.1
14.2
-6.0
90.9
-2.9
2.1
11.7

MOZAMBIQUE
Table 12020

P o pulatio n, millio n

31.3

GDP , current US$ billio n

13.8

GDP per capita, current US$

441.9

Internatio nal po verty rate ($ 1.9)

a

63.7

Lo wer middle-inco me po verty rate ($ 3.2)

a

82.4

a

54.0

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

116.4

b

60.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

The economy contracted by 1.3 percent in
2020, as the global pandemic reduced
domestic activity and external demand.
The poverty rate is estimated to have increased from 61.9 percent in 2019 to 63.3
percent in 2020 owing to loss of income
and employment, pushing an estimatedone million people into poverty. Economic
recovery is expected to start in 2021, but
this is subject to risks including rising
COVID-19 cases, spots of military instability and delayed rollout of the
COVID-19 vaccine.

Key conditions andchallenges
The impact of COVID-19 has been exacerbated by Mozambique’s fragile economic
structure. Despite the relatively low number of infections in 2020, the economy saw
its first contraction in almost 30 years. The
existing growth model, characterized byhigh dependence on large investments inthe extractive industry and exports of commodities, with weak domestic linkages,
amplified the effects of the crisis. The services and extractives sectors, main growth
drivers, lost steam as disruptions in global
markets reduced demand for commodities
and Foreign Direct Investment (FDI) flows.
Prior to 2020, Mozambique experienced aprolonged slowdown. Between 2016-2019,
growth averaged 3 percent, with GDP per
capita contracting by an average of 5 percent. While the slowdown was triggeredby the hidden debt crisis and climatic
shocks, low labor productivity and highinfrastructure deficit remain persistentconstraints to growth. This, together witha private sector dominated by capital intensive megaprojects and informal enterprises, have undermined the economy’s
ability to generate jobs and support poverty reduction. As a result, economic disparities have increased, which, combinedwith pre-existing political tensions, fueled
the fragility that has led to sporadic military insurgencies. While government strategic plans recognize the need to promote
productivity and diversification, fiscal

capacity is limited. Adding to the challenge is Mozambique’s vulnerability to
climatic shocks, which has recurrently
reversed gains in poverty reduction.
Growth prospects rely mainly on developments in the Liquefied Natural Gas (LNG)
sector, which are expected to push average annual growth to above 8 percent
from 2024. However, rising uncertainty
associated with COVID-19 and military
insurgency pose considerable risks to future growth. Poverty incidence is expected
to decrease slightly, from 63.3 to 62.2 percent between 2020 and 2023, but the number of poor is projected to increase by 1.3
million, due to population growth.
The pandemic highlighted the urgency of
structural transformation to reduce vulnerability to global shocks. In the shorterterm, focus should be on recovery to
avoid scarring and the loss of productive
capacity. This includes measures such as
employment subsidies to firms to encourage worker retention, and expansion ofsocial protection programs to support
informal entrepreneurs. In the medium
and long-term, Mozambique needs todiversify away from the current megaproject-driven growth toward a more interconnected and competitive economy.

Recent developments
The global pandemic has substantiallydisrupted economic activity. Real GDP
contracted by 1.3 percent in 2020, from 2.3
percent growth in 2019. While favorable
weather conditions supported agricultural

FIGURE 1 Mozambique / Real GDP growth and sectoral contributions to real GDP growth

FIGURE 2 Mozambique / Actual and projected poverty
rates and real GDP per capita

Percent, percentage points
8%

Poverty rate (%)
100

6%

80

20000

60

15000

40

10000

20

5000

Real GDP per capita (LCU constant)
25000

4%
2%
0%
-2%
-4%
2013 2014 2015 2016 2017 2018 2019 2020e 2021f 2022f 2023f

Agriculture
Services
Source: World Bank Staff Estimates.

Extractives
Tax

0

0

2008

Manufacturing
GDP

2010

2012

2014

2016

International poverty rate
Real GDP pc
Source: World Bank. Notes: see Table 2.

MPO 262 Apr 21

2018

2020

2022

Lower middle-income pov. rate

production, which grew by 3 percent, allother sectors recorded weak performance.
Extractives sector production dropped by
17 percent due to low commodity prices
and demand. The decline in domestic demand with the introduction of lockdown
measures constrained manufacturing andservices output. The hotel and restaurants
subsectors were particularly hit, contracting by 23 percent. To support the economy, the policy rate was cut from 12.8 to10.3 percent, but demand remained subdued. Annual average inflation stood at
3.1 percent, below the government projection of 4 percent. However, average foodinflation, which affects the poor most,reached almost 9 percent. As a result, poverty is expected to increase from 61.9 in2019 to 63.3 percent in 2020.
The external position remained largely
stable in 2020. The current account deficit(CAD), excluding one-off capital gains,reached 27.3 percent of GDP in 2020, compared to 25.5 percent in 2019. Despite thedrop in exports, given low global demand,
the CAD improved as imports declined,
largely reflecting low domestic demand,currency depreciation and delayed implementation of LNG projects. The CAD was
financed by FDI, private debt and donor
support. The external reserves reached
US$ 3.9 billion, equivalent to 7 months ofimports (excluding megaprojects).

Public finances remain under significant
pressures. COVID-19 response measuresand increased military spending pushed
total government expenditure from 29.8
percent in 2019 to 32.5 percent of GDP in
2020. Despite weak economic activity, tax
revenue collection, excluding capitalgains, slightly rose from 19.4 to 20.9 percent of GDP between 2019 and 2020. This,
combined with higher donor support, putestimated primary deficit at 1.3 percent of
GDP in 2020 from 2.1 percent in 2019(excluding capital gains). Total public debt
increased from 108 percent of GDP in 2019
to 122 percent in 2020, due to rising financing needs and currency depreciation.

Outlook
Recovery is anticipated to be slower than
expected. Growth is projected at 1.7 percent in 2021, down from the pre-COVID
estimate of 5 percent, given the slow
rollout of the COVID-19 vaccine, risingvirus cases and deaths, and tighter containment measures. Despite the expected
increase in commodity prices, muted global demand will likely keep exports low.
The service sector is set to recover, but
slowly, considering the still limited mobility. Agriculture will also contribute to

TABLE 2 Mozambique / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)a
Debt (% of GDP)b
Primary Balance (% of GDP) a
International poverty rate ($1.9 in 2011 PPP) c,dLower middle-income poverty rate ($3.2 in 2011 PPP) c,dgrowth recovery, as ongoing investments
in irrigation, improved seeds, and distribution systems yield returns. However,unfavorable weather conditions, poseconsiderable risks. In the medium-term,
growth is anticipated to gradually pickup, reaching 6 percent by 2023, as the
LNG sector develops. However, high population growth will continue to drag per
capita growth. Poverty would increase to
63.8 percent in 2021, but decline to precrisis level by 2023.
The CAD is projected to reach around 60
percent in the medium-term as LNG investments advance. FDI and private debt
would remain the main financing sources
with the external reserves position expected to remain at comfortable levels.
The fiscal outlook will likely remain challenging. Fiscal consolidation is set to resume in the medium-term. However,
COVID-19, military insurgencies, andnatural disasters may impede fiscal adjustment. Additionally, slower than anticipated implementation of LNG projects
could delay the expected revenue. This
reinforces the need for an adequate fiscal
framework anchored in appropriated fiscal targets, complemented by sustainablemedium-term debt objectives, and improved investment management in linewith the regulatory framework.

(annual percent change unless indicated otherwise)
2018
3.4
3.7
-5.7
12.4
36.5
43.7
3.4
3.0
3.9
3.4
3.9
-30.3
18.1
-4.1
110.1
0.3
61.6
81.0

2019
2.3
4.1
6.1
-8.1
-5.5
-2.5
1.4
1.6
-0.6
2.2
2.8
-19.7
14.5
0.3
108.2
3.6
61.9
81.1

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Figures include o nce-o ff capital gains revenues in 2019, estimated at 5.8 percent o f GDP .
(b) Calculatio ns based o n 2014-IOF.A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(c) P ro jectio n using neutral distributio n (2014) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.
(d) A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.

MPO 263 Apr 21

2020 e
-1.3
-9.9
42.2
106.1
-41.1
28.5
-1.3
2.6
-3.6
-2.4
3.1
-27.3
16.9
-4.7
121.7
-1.2
63.3
82.2

2021 f
1.7
12.2
-35.8
-10.7
80.7
0.1
1.7
1.1
0.8
2.4
4.0
-44.5
18.9
-5.8
126.9
-2.6
63.8
82.4

2022 f
4.2
9.3
-1.1
31.7
14.5
23.4
4.2
1.6
4.9
5.3
4.4
-60.6
25.9
-4.8
120.4
-1.8
63.3
82.1

2023 f
6.3
2.3
-71.4
23.7
27.0
1.4
6.3
3.3
8.0
7.1
4.8
-62.4
22.4
-3.6
119.8
-0.7
62.2
81.3

NAMIBIA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

2.5

GDP , current US$ billio n

10.8

GDP per capita, current US$

4265.5Internatio nal po verty rate ($ 1.9)

a

13.8
a

30.3

a

51.0

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)
a59.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

124.2

b

63.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Namibia’s economy has been hard hit by
the pandemic which has triggered the
sharpest contraction in recorded history.
After an estimated 7.3 percent decline in
2020, GDP growth is projected to rebound to 1.8 percent this year. The adverse welfare effects of the pandemic arelikely to linger, especially as the growthrecovery remains hampered by prepandemic structural constraints, andpoverty is at risk of increasing further.
Growth-friendly fiscal consolidation willbe essential to preserve debt
sustainability.

Namibia’s growth challenge predates the
COVID-19 crisis and structural constraints are likely to limit the postCOVID recovery. The economy has beenin recession in three of the last four years,
indicating deep-rooted economic difficulties even before the COVID-19 shock. Per
capita growth has been negative for several years. Namibia is largely dependent
on investments in mineral extraction andgovernment spending, and has sufferedfrom falling commodity prices, weakgrowth in key trade partners (Angola,
South Africa) and tight fiscal policy on
the back of government’s effort to rebalance public finances. Weak demandand skills mismatches have constrained
job creation with the unemployment rate
hovering at around 20 percent over thelast 5 years.
The ongoing COVID-19 pandemic andstructural rigidities have resulted in elevated macroeconomic vulnerabilities. The
room for additional fiscal stimulus is significantly reduced. Global and regional
developments will remain an importantdriver of Namibia’s fiscal and external
positions as the country is highly reliant
on commodity exports and SACU transfers. Volatility in prices of Namibia’s export commodities, particularly diamonds
and uranium, presents risks as do growthprospects in key trade partners (e.g. South
Africa).

FIGURE 1 Namibia / Importance of SACU transfers

Uncertainty regarding the outlook thisyear combined with an uncompetitive
business environment will continue toconstrain private investment, leading to
weak growth and job creation. While
COVID-19 vaccinations are set to begin,
the possibility of recurrent restrictive
measures domestically will remain adownside risk to the recovery until the
spread of the virus is sufficiently lowered.
The pandemic has further exacerbated
Namibia’s disparities in economic opportunities and access to services. Globally,
Namibia remains one of the most unequalcountries and about 64 percent of the population live with less than US$5.5 daily(real PPP).

Recent developments
The pandemic has exacerbated preexisting challenges. Real GDP is projected tohave contracted by 7.3 percent in 2020.
The mining sector, an important earnerof foreign exchange, contracted by 12.2
percent y-o-y over Q1-Q3 affected bydomestic factors (insufficient supply ofwater for uranium production, depletingzinc deposits), and falling global demand (especially diamonds). The hospitality industry recorded a large contraction of 46.5 percent y-o-y following local
and foreign restrictions. 200,000 more
people fell into poverty bringing thenumber of poor to a record-high 1.6 million. On the back of depressed domestic
demand, inflation averaged 2.2 percent
in 2020.

FIGURE 2 Namibia / Actual and projected poverty rates andreal GDP per capita

Percent
45

Poverty rate (%)
80

40

70

35

60

Real GDP per capita (LCU constant)
70000
60000
50000

50

30

40000

40

25

30000

30

20

20000

20

15

10000

10

10

0
2018

2019

2020

2021f

2022f

2023f

0

2009

2011

2013

2015

Taxes on int. trade as a share of current account receipts
Taxes on int. trade as a share of fiscal revenues

International poverty rate
Upper middle-income pov. rate

Sources: Ministry of Finance, Central Bank and World Bank staff estimates.

Source: World Bank. Notes: see table 2.

MPO 264 Apr 21

2017

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

The fiscal situation deteriorated as the
pandemic delayed fiscal consolidation
efforts and the COVID-19 crisis added to
expenditure pressures. The government
implemented a stimulus package of
NAD8.3 billion (4.5 percent of GDP) that
included spending on health, an emergency income grant, wage subsidies in affected sectors and loan guarantees for SMEs.
As a result, expenditures are expected toreach 41.2 percent of GDP this fiscal year
(ending in March 2021). At the same time,revenues declined due to fiscal relief
measures and the economic contraction.
The fiscal deficit is projected to widen to10.2 percent of GDP in 2020/21 and thedebt-to-GDP ratio to go up to 74.4 percent.
Most of the deficit is financed throughdomestic market issuances and use of cash
reserves. The government also approached the AfDB and IMF for budget
support.
On the external side, the current accountbalance swung to a surplus of NAD3.6
billion over the first nine months of 2020
on the back of a smaller trade deficit –driven by lower imports – and higher
SACU inflows. It is expected to havereached a small surplus of 0.6 percent of
GDP in 2020, the first since 2007. Reservesrose to about US$2.1 billion at the end of2020 and cover more than 5 months ofimports.

OutlookNamibia’s potential for recovery depends
on the evolution of the pandemic globallyand domestically and the government’s
ability to address long-lasting challenges
to higher economic growth. Improvementin global demand for commodities should
support a rebound in exports but othersectors like tourism will remain hamperedby global restrictions. Overall, GDP is
expected to grow by 1.8 percent in 2021.
The authorities are committed to restoring
fiscal sustainability, but public finances
will remain under pressure. In a context ofdeteriorated social outlook and the persistence of the pandemic, additional spending pressures are likely to materialize,
including vaccine expenditures. The government has secured some vaccines
through the COVAX facility to coverabout 20 percent of the population and islooking to scale up the program to cover
60 percent of Namibians. However, lower
SACU transfers expected for the upcoming fiscal year will limit room for maneuver in the budget and translate into persistently high financing requirements. The
fiscal deficit is projected to hover around 9
percent of GDP in 2021/22 and debt willcontinue to rise. Financing needs will be

TABLE 2 Namibia / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)a
Debt (% of GDP)b
Primary Balance (% of GDP) a
International poverty rate ($1.9 in 2011 PPP) c,dLower middle-income poverty rate ($3.2 in 2011 PPP) c,dUpper middle-income poverty rate ($5.5 in 2011 PPP) c,dfilled primarily in the domestic market.
Namibia is also planning to roll-over its
upcoming maturing Eurobond. Reduced
SACU transfers and a larger trade deficit
from next year will keep international
reserves under pressure over the medium
term. Monetary policy will remain driven
by the peg to the Rand.
Reversing the social impact of the pandemic and putting Namibia on a higher
and more sustainable growth trajectorythat allows for higher job creation andpoverty-reduction will require unlocking
structural constraints that predate thecrisis. Needed reforms include improving
the business environment to foster private
investment and boost productivity anddiversifying the economy. Preserving social spending will also be important tolimit the risks of further worsening ofpoverty and inequality.

(annual percent change unless indicated otherwise)
2018
1.1
-0.9
-0.1
-5.2
16.5
0.9
1.2
3.3
6.3
-1.2
4.3
-3.4
0.8
-5.2
54.4
-1.3
15.6
33.8
54.7

2019
-1.6
3.6
0.4
-4.2
-2.0
2.4
-1.5
-5.7
-3.2
-0.1
3.7
-1.8
-1.5
-5.5
62.2
-1.2
16.9
36.2
57.2

2020 e
-7.3
-4.7
5.2
-26.6
-27.0
-18.0
-7.3
7.4
-14.2
-5.8
2.2
0.6
-1.8
-10.2
74.4
-5.7
20.5
42.9
63.9

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Fiscal balances are repo rted in fiscal years (A pril 1st -M arch 31st).
(b) Refers to P ublic and P ublicly Guaranteed debt.
(c) Calculatio ns based o n 2009-NHI ES and 2015-NHIES. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(d) P ro jectio n using annualized elasticity (2009-2015) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 265 Apr 21

2021 f
1.8
4.1
-2.4
3.0
8.0
7.0
1.8
1.3
2.7
1.5
3.8
-5.4
0.9
-9.0
80.4
-4.4
20.5
42.9
63.9

2022 f
1.8
4.2
-2.2
2.7
5.6
5.8
1.8
1.3
2.5
1.6
4.5
-4.5
1.5
-8.7
85.8
-3.9
20.5
42.9
63.9

2023 f
1.5
3.5
-1.7
2.9
4.5
5.0
1.5
1.4
2.7
1.1
4.5
-4.5
1.6
-7.4
89.7
-2.0
20.6
43.1
64.1

NIGERKey conditions andchallenges

Table 12020

P o pulatio n, millio n

24.2

GDP , current US$ billio n

13.3

GDP per capita, current US$

549.4

Internatio nal po verty rate ($ 1.9)

a

45.4
a

77.2

a

93.6

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

34.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

66.4
62.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Despite Niger’s relative isolation from theglobal economy, the impact of the COVID-19 pandemic pushed the economy to a
standstill in 2020, which translated into a
3 percent reduction in per capita income
and 1.3 percentage points increase in poverty. While the outlook is fraught withdownside risks related to the sanitary,
security, and climatic conditions, economic growth is projected to recover in 2021
and the main macroeconomic and poverty
indicators to slowly improve over the
medium term.

The new government that will take officein April is confronting enormous challenges of creating the conditions for a selfsustaining process of rapid per capita income growth. This requires addressing
the challenges and implementing structural reforms that have eluded the country
for so long. The challenges include unfavorable geographic and weather conditions, extremely high fertility rates, lowhuman capital (health and education), a
large informal sector, underdeveloped
private and financial sectors, large infrastructure gaps, poor governance, insecurity and other drivers of fragility, all exacerbated by weak institutions. Over the last
decade Niger has consistently ranked at
the bottom of the UNDP Human Development Index.
These structural challenges have been
compounded by the global effects of the
COVID-19 crisis. While the rates of confirmed cases and fatalities due to COVID19 have been low by international standards and the lowest in the region, the pandemic has derailed the timid economic
and social progress registered in recent
years, despite Niger being prevalently arural economy where the role of trade andremittances flows is lower than in the
WAEMU average and the touristic sector
underdeveloped.
Furthermore, floods across the country insummer2020 exacerbated the humanitariancrisis with some 600,000 people adversely affected. Vaccine rollout is expected to
begin in May 2021, and to reach a criticalmass of the population by end-2021,
clearing the way for a gradual recovery
in economic and social indicators.
With US$558 per capita GDP (2010 constant prices, PPP), 42 percent of the population lives on less than US$1.9 a day.
Progress in the fight against poverty,
food insecurity, unemployment, and thelack of public service delivery is undermined by a fast-growing population,
which is expected to increase by 25 percent by 2025.

Recent developments
Real growth fell to 0.8 percent in 2020 (-3percent in per capita terms). Restrictions
on movement and business hours, theclosure of the border with Nigeria andthe halting of some investment projects
undermined economic activity. External
and internal shocks put pressure on inflation and strained public finances.
Food shortages and speculative behaviors have pushed CPI inflation from -2.5
percent in 2019, to 3.4 percent in 2020.
The fiscal deficit widened to 5.4 percent
of GDP, due to a drop of 1 percent of
GDP in tax revenues and the rise on 1.3
point of GDP in current spending to mitigate the effects of the pandemic, mainly
through cash transfers. The current account deficit hit 16.7 percent of GDP in
2020, with a sharp drop in exports andhigher imports of health products.

FIGURE 1 Niger / Real GDP growth and contributions to real
GDP growth

FIGURE 2 Niger / Actual and projected poverty rates andreal GDP per capita

Percent, percentage points

Poverty rate (%)
120

14
12

Real GDP per capita (LCU constant)
400000350000100

1030000080

8625000060200000415000040

2100000

0

20

50000

-2

2018

2019

2020

Agriculture
Services
Actual GDP growth
Sources: INSN and World Bank staff estimates.

2021

2022

2023

0

0

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

Industry
Net Taxes

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 266 Apr 21

Lower middle-income pov. rate
Real GDP pc

WAEMU pooled external reserves
reached an estimated 5.5 months ofimports in 2020 due to large donor support and reduced imports. Between
March and October, the REER appreciated by 6.4 percent y/y, reflecting thenominal appreciation of the Euro vis-àvis the USD. The BCEAO has implemented a set of monetary and macroprudential measures since March 2020,
including a policy rate cut and extended refinancing operations of the 3month COVID-19 bonds.
The share of the population living below the international poverty line wason a declining trend and reached an
estimated 41.6 percent in 2019. The
COVID-19 and related economic andsocial distancing measures have reversed some of these recent gains. Simulations suggest that poverty has increased by 1.3 percentage point to 42.9
percent in 2020, drawing an additional
685,000 people into extreme poverty.
The COVID-19 pandemic is negatively
impacting households through income
losses due to job layoffs, and a deterioration of human capital endowments;for example, due to school closures thatare expected to increase drop-out rates,
especially for girls and the most vulnerable.

OutlookIn 2021, economic growth is expected torebound to 4.7 percent with the reopeningof the border with Nigeria and the resumption of large investment projects.
The large import content of these projects
will cause the current account deficit tofurther widen. The completion of the oilpipeline by 2023 should boost growth andexports over the medium term. GDP per
capita will surpass its 2019 level in 2022 In
2021, the number of extreme poor is expected to increase by an additional
300,000 people, due mainly to population
growth. In 2022, thanks to a projected
strong economic performance, the poverty
headcount will renew with its downward
trend. It is important to note that the
COVID-19 crisis will have long-lasting
effects on the non-monetary dimensions of
wellbeing, such as education (particularlyof girls), health, and food security.
Higher economic growth will lead to anincrease in fiscal revenue while the 2021
budget has kept spending constant innominal terms. As a result, the fiscal deficit should decline to 4.5 percent of GDP
with public debt peaking at 42.9 percent of
GDP. The risk of external and overall debt

TABLE 2 Niger / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

distress is projected to remain moderate,
although the space to accommodate further shocks has narrowed considerably.
The successful transfer of power in the
recent general elections could increase thecountry's attractiveness to investors. Yet,
overall risks to growth remain tilted on
the downside. The duration and depth of
the COVID-19 outbreak and availability ofvaccines represent key short-term risks.
Medium-term risks stem from adverse
weather conditions and a further worsening of the security situation while highpopulation growth will continue to pose a
key challenge for the medium term. The
surge in oil production calls for an adequate governance and fiscal framework to
manage these flows in a stable, transparent and accountable manner.

(annual percent change unless indicated otherwise)
2018
7.2
7.3
7.2
11.4
-3.9
7.1
6.5
7.1
6.0
6.4
2.8
-12.6
3.3
-3.0
37.0
-2.1
42.5
73.4
92.3

2019
5.9
6.7
0.5
11.4
5.6
10.3
6.4
5.1
8.0
6.7
-2.5
-12.7
3.7
-3.6
39.9
-2.6
41.6
72.3
91.9

2020 e
0.8
2.8
8.2
6.3
-21.5
7.1
0.8
3.0
1.6
-1.7
3.4
-16.7
4.8
-5.4
41.8
-4.3
42.9
74.0
92.5

2021 f
4.7
6.0
6.5
7.6
15.0
15.0
4.7
5.0
4.5
4.6
1.7
-18.5
7.5
-4.5
42.9
-3.4
42.5
73.5
92.3

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2011-ECVM A and 2014-ECVM A . A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using annualized elasticity (2011-2014) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 267 Apr 21

2022 f
8.9
7.0
8.3
-3.9
24.0
-4.2
8.9
5.5
34.0
-1.7
2.0
-13.7
3.1
-3.1
42.4
-1.9
40.3
70.7
91.3

2023 f
12.1
7.9
10.0
-7.2
51.0
-4.2
12.1
5.5
34.0
2.6
2.0
-7.9
2.7
-1.8
41.7
-0.8
37.0
66.2
89.6

NIGERIA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

206.1

GDP , current US$ billio n

440.9

GDP per capita, current US$

2139.1

Internatio nal po verty rate ($ 1.9)

a

39.1
a

71.0

a

92.0

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

35.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

84.7
54.3

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 8), 201 1 PPPs.
(b) WDI for school enrollment (201 6); life expectancy (201 8).

In 2020, Nigeria plunged into a recession
due to the combined COVID-19 and oil
price shocks. The number of people below
the international poverty line is projected
to rise by 12 million between 2020 and
2023. The economy is expected to recovermodestly in 2021. Reforms to enhanceexchange rate management, fiscal management and the business climate would
position the economy on a stronger andsustainable recovery path.

In 2020, Nigeria’s economy entered into a
recession due to COVID-19-related disruptions, notably lower oil prices and remittances, enhanced risk aversion in global capital markets, and mobility restrictions. The crisis is far from being over
and a “second wave” has started in Nigeria, with the number of daily cases averaging 407 in the first week of March, although below the 642 daily peak cases recorded in June 2020.
Still recovering from the 2015- 2016 recession, COVID-19 struck the Nigerian
economy while the business environment
remained inadequate due to double-digit
inflation, multiple foreign exchange rates
practices, trade restrictions. Nigeria’s
economy remains highly dependent onsales of crude oil. In 2019, while it only
represented about 10 percent of total
GDP, oil accounted for more than 80 percent of exports and more than 50 percentof consolidated fiscal revenues. Its performance has a direct effect on job creation and revenues in related manufacturing and services sectors. It also impacts
unrelated sectors, mainly through an
income effect. Given these macroeconomic vulnerabilities, 4 in 10 Nigerians lived
below the poverty line before the COVID-19
crisis struck.
Following the COVID-19 shock, the federal government took important steps to set
the foundations for fiscal sustainability:

FIGURE 1 Nigeria / Oil price shock transmission channels

Percent

Recent developments
GDP contracted by 1.8 percent in 2020
driven by a decline in oil industry (due tolower oil prices and production disruptions), non-oil industry (as a result of lockdown measures and the contraction ofdomestic demand), and services (due to a
decline in trade, accommodation and foodservices, and transportation). The contraction of economic activity has stopped in
2020Q4, as recovery in services and agriculture counterbalanced sustained contraction in industrial production. Annual
inflation increased from 11.4 percent in2019 to 13.2 percent in 2020 driven byhigher food prices due to pre-COVID border closures and rising FX restrictions,and rapidly increasing broad money
growth (32 percent by the end of 2020),
partly to finance the fiscal deficit. In the
December 2020 round of phone survey
data, 83 percent of households reported
experiencing an increase in the price ofmajor food items between July 2020 and

FIGURE 2 Nigeria / Actual and projected poverty rates andreal GDP per capita

US$/Brl20

reducing fuel and electricity subsidies,increasing oil sector and debt transparency, and proceeding with implementation
of VAT, business environment, and administrative reforms. Revenue-driven
fiscal consolidation remains an urgent
priority, as with the mounting debt service costs (including from higher central
bank deficit financing) and low andshocked revenues, the interest-to-revenue
ratio at the federal government level exceeded 90 percent.

110

Real GDP per capita (LCU constant)
370000

Poverty rate (%)
100

360000

90

15

70
10

50

5

30
10

0

80

35000034000060

33000040

320000

-10

-5

-30

310000203000002013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Real GDP growth (%)
Goods and services exports (% GDP)
General Government Revenue (% GDP)Oil price – Bonny Light (US$/Brl, rhs)
Sources: Nigeria Authorities and World Bank.

0290000

2018

2019

2020

International poverty rate
Upper middle-income pov. rate
Source: World Bank Notes: Table 2.

MPO 268 Apr 21

2021

2022

2023

Lower middle-income pov. rate
Real GDP pc

December 2020, up from 18 percent ofhouseholds between January 2017 andJanuary 2019.
The pandemic severely disrupted the labor market. While many workers havesubsequently returned to work, income
loss vulnerabilities remain and are contributing to food insecurity. During thesecond half of 2020, 58 percent of households that experienced a shock reported
they reduced their food consumption.
The fiscal deficit widened to 5.8 percent of
GDP following a sharp revenue fall, buttimely passage of the amended budgets at
both federal and state government levels
helped limit the recourse to central bankfinancing (which, nevertheless, remained
significant at 2.8 percent of GDP).
In the first three quarters of 2020 exports
declined by 44 percent due to lower oil
prices, while imports declined by 16 percent due to trade disruptions, FX scarcity
and lower domestic demand. Resilient
during the previous shocks, remittances(5 percent of GDP) have declined by 33
percent in the same period as the Nigerian diaspora experienced income shocks.
While the central bank devalued the key
FX rate twice during the year in the faceof oil and capital inflow shocks (capital
inflows declined by 59.6 percent in 2020),
the movement was not sufficient toequilibrate the market. The intensified
capital control measures led to FX scarcity, evidenced by the increasing parallelexchange rate premium (22 percent on
average in the H2).

Outlook
Nigeria’s growth is expected to recovermodestly in 2021, averaging 1.4 percent, led
by telecommunication services, trade due
the gradual opening of borders, agriculture
thanks to an additional influx of labor, andconstruction, in a context of higher oil prices and fewer mobility restrictions. Yet,
growth will remain constrained by low
public and private investment.
This baseline scenario assumes that theauthorities maintain and strengthen current macroeconomic reform efforts thatare essential to managing the shockinduced fiscal and external financing
needs. Particular priorities include revenue-based fiscal consolidation, the reprioritization of spending and the strengthening of expenditure and debt management,
reforms for financial sector stability, andthe adoption of a more flexible and transparent foreign exchange management
regime.

TABLE 2 Nigeria / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

Given the combined effects of the COVID19 crisis and population growth, the number of Nigerians living in poverty could
rise by 12 million between 2020 and 2023,
and by 2023 the absolute number of poor
Nigerians will be close to 100 million withmillions more vulnerable to falling below
the poverty line if further shocks occur.
Nigeria’s economic outlook remains highly uncertain. Uncertainty around the paceof vaccination and duration of the COVID-19 pandemic persists and will continue toimpact household consumption and private investment. Moreover, oil sector volatility, including an unexpected shock to
oil prices, and weaknesses in the soundness and growth of the financial sector,
despite recent forbearance measures by
the central bank, could threaten this modest projected recovery. Adequate exchange management reforms could bring
portfolio flows back and foster private
investment and employment creation.
Even in the most favorable global context,
the policy response of Nigeria’s authorities will be crucial to set the foundationsof a robust recovery path.

(annual percent change unless indicated otherwise)
2018
1.9
5.2
33.2
9.7
-1.4
49.2
1.9
2.1
1.9
1.8
12.1
1.0
0.2
-4.1
19.3
-2.2
39.1
71.0
92.0

2019
2.2
-2.4
15.0
11.8
15.0
27.3
2.3
2.4
2.3
2.2
11.4
-3.8
0.4
-4.6
21.7
-2.6
39.3
71.1
92.1

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2018-LSS. A ctual data: 2018. No wcast: 2019-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2018) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 269 Apr 21

2020 e
-1.8
1.3
13.6
19.0
-32.2
-23.5
-1.9
2.2
-5.9
-2.2
13.2
-2.4
0.2
-5.8
25.2
-4.1
42.2
73.5
93.1

2021 f
1.4
2.7
1.5
0.2
-0.2
3.5
1.4
1.4
1.0
1.5
15.5
0.4
0.2
-4.5
25.8
-2.6
43.2
74.3
93.4

2022 f
2.1
1.7
0.7
5.4
2.1
5.0
2.1
2.1
3.4
1.6
13.0
1.0
0.2
-3.7
26.2
-1.6
43.9
74.8
93.6

2023 f
2.3
0.5
3.4
5.4
8.4
10.7
2.3
2.3
3.6
1.8
11.0
0.7
0.2
-4.3
34.0
-2.5
44.6
75.3
93.7

RWANDAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

13.0

GDP , current US$ billio n

10.1

GDP per capita, current US$

780.8

Internatio nal po verty rate ($ 1.9)

a

56.5
a

80.2

a

91.9

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

43.7

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

131.3
68.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Rwanda’s economy fell into recession in2020 as the COVID-19-induced crisis
severely hit tourism, education, and mining sectors. The twin deficits deteriorated—requiring more external financing—
and are expected to remain at above theirpre-crisis levels in 2021. The adverse
effect of the crisis on output and employment means that poverty is expected toincrease between 2019 and 2021. Real per
capita GDP is expected to return to its
pre-crisis level in 2022.

The global pandemic has exposed limitations in Rwanda’s growth model. Its
heavy emphasis on public investment
spending (which increased by 14 percent
annually between 2010 and 2020) helped
Rwanda become one of the world’s fastest-growing economies. But public debt grew
rapidly as well—more than tripling relative to GDP since 2010—raising concerns
about its long-term sustainability. In June
2020, Rwanda’s risk rating of debt distressshifted from “low” to “moderate” as the
pandemic severely hit growth, exports,
and tax revenues. This underscores theneed to adopt a credible fiscal consolidation path, strengthen debt management
capacity, and shift from large public investments to growth that is led by theprivate sector and increased productivity.
Inclusive growth remains a challenge, as
the responsiveness of poverty reduction
to growth has declined since 2010/11. In
terms of the international poverty line of
US$1.90 (2011 PPP), poverty rate declined from 69 percent to 55.4 percent
over 2005–2019, but due to COVID, poverty is projected to increase in 2021 byalmost 4 percentage points with respect
to its 2019 value, adding close to 900,000
new poor in 2 years. This uptick in poverty increases the urgency to design amedium-term public investment strategy
to achieve a more efficient allocation of
resources geared toward projects critical

FIGURE 1 Rwanda / Fiscal balance and public debt

Recent developments
The COVID-19 pandemic has driven
Rwanda into its first recession since 1994.
Countrywide mobility restrictions andclosure of businesses caused almost all
sectors to contract in Q2 and Q3 of 2020.
GDP is estimated to have declined byabout 3.3 percent over the full year.
Heightened uncertainty weakened business sentiment, resulting in a large investment decline. Private consumption remained constant due to lower householdincome. The external position has deteriorated due to collapsed services exports,
partially cushioned by the exports fromthe new gold refinery. Nevertheless, theCAD widened in 2020 and was mainly
financed through external borrowing.
Containment measures also led to job losses, with the unemployment rate reaching
22 percent in May (from 13 percent before
COVID-19). The job market showed some
improvements in August, with the unemployment rate declining to 16 percent as
economic activities started gaining somemomentum. These job losses are expected
to result in poverty increases (using theinternational poverty line of US$1.90) of
1.8 percentage points in 2020, or morethan 400,000 Rwandans falling into poverty. Rwanda reinstated containment policies in early 2021 following renewed

FIGURE 2 Rwanda / Actual and projected poverty rates andreal private consumption per capita

Percent of GDP

Percent of GDP

for broad-based and inclusive economic
recovery following the pandemic (e.g.,
supporting agriculture economy and rural
livelihood, etc.).

1080

Poverty rate (%)
100

Real private consumption per capita (LCU constant)
60000050000080

86040000060

63000004040

4200000

2

0
2011

2013

2015

Fiscal deficit (lhs)
Source: World Bank staff estimates.

2017

2019

2021f

20

20

0

0

10000002005 2007 2009 2011 2013 2015 2017 2019 2021 2023

2023f

International poverty rate
Upper middle-income pov. rate

Public debt (rhs)

Source: World Bank. Notes: see Table 2.

MPO 270 Apr 21

Lower middle-income pov. rate
Real priv. cons. pc

waves of infections. The government continues to implement its US$900 million
Economic Recovery Plan (ERP), reflectedin the FY21 budget, with policies focusing
on increased spending to contain the epidemic and to strengthen the health system, social protection, education, as wellas support for the private sector throughthe recovery fund. The government isrelying mainly on support from development partners to finance the ERP. BNR
continues to maintain an accommodative
monetary policy by keeping the policy
rate at 5 percent since April 2020. Credit
growth reached 21.8 percent in 2020,
mainly driven by loans restructuring
granted to borrowers whose activities
were negatively affected by the pandemic.
The banking sector remained wellcapitalized and well-positioned to withstand the pandemic.

Outlook
Rwanda’s medium-term outlook is clouded by COVID-19. With the pandemic likely to continue dampening business activity in 2021, GDP is projected to grow by 4.9
percent—below the pre-crisis trajectory ofaround 8.0 percent per year—with a gradual recovery by 2023. Real per capital GDP

is expected to remain below its 2019 level
until 2022. This outlook reflects the heightened uncertainty surrounding the second
wave of the coronavirus at global andAfrican levels—mainly fueled by new
COVID-19 variants—that weighs on investment decisions and external demand.
In addition, the elevated unemployment
rate and other weaknesses in the labormarket will continue to slow growth inprivate consumption. The recovery inprivate consumption will contribute to
reducing poverty slightly in 2022 compared to 2021, but still at a higher level
than in 2020.
Rwanda’s outlook also hinges on how
efficiently the government executes its
economic recovery plans, as well as on
the support of development partners.
Government spending is projected toremain relatively high over the next few
years. The fiscal deficit is expected tonarrow in 2021 and 2022 as domestic
revenue recovers but remain above thepre-crisis level. Besides higher financing
requirements, the government will reallocate fiscal resources to priorities as defined in the ERP. The CAD is expected toremain elevated in 2021 due to lower
trade and tourism activities, as global
demand remains subdued. Inflation is
expected to remain within the central
bank’s target range of 5±3 percent.

TABLE 2 Rwanda / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

Even though Rwanda managed the second wave of COVID-19 relatively welland recent vaccine approvals have raised
hopes of a turnaround, delays in obtaininga vaccine would imply longer border closures and a slower economic recovery in
2021.A downside scenario could see a 2.5
to 3 percent growth in 2021.

(annual percent change unless indicated otherwise)
2018
8.6
9.1
5.1
6.0
10.6
8.1
8.5
6.1
8.7
9.7
1.4
-10.2
3.6
-4.8
52.4
-3.6
55.3
79.6
91.6

2019
9.4
2.4
17.5
32.1
19.9
18.0
8.9
5.0
16.6
8.2
2.4
-11.0
3.7
-9.2
56.7
-7.7
55.4
79.6
91.6

2020 e
-3.3
0.9
2.2
-11.8
-6.5
-1.2
-3.3
0.9
-4.0
-5.2
7.4
-12.2
2.4
-10.0
67.5
-8.2
57.2
80.1
91.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2010-EICV-III and 2016-EICV-V. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using micro simulatio n fo r 2020 and 2021, and average elasticity (2010-2016)
with pass-thro ugh = 0.7 based o n private co nsumptio n per capita in co nstant LCU fo r 2022 and 2023.

MPO 271 Apr 21

2021 f
4.9
1.7
15.7
7.3
11.0
8.5
5.0
3.6
7.4
4.9
2.5
-12.5
3.6
-8.6
73.2
-6.8
59.1
80.6
92.0

2022 f
6.4
3.5
9.7
7.8
14.7
8.5
6.5
5.5
10.7
5.3
4.1
-11.4
3.6
-7.7
75.7
-6.0
58.8
80.4
91.9

2023 f
7.5
5.2
1.9
10.5
16.7
8.5
7.5
5.5
10.7
7.3
5.0
-9.3
3.8
-5.8
75.6
-4.1
57.7
79.8
91.7

SÃO TOMÉAND PRÍNCIPE
Table 12020

P o pulatio n, millio n

0.2

GDP , current US$ billio n

0.5

GDP per capita, current US$

2159.4

Internatio nal po verty rate ($ 1.9)

a

35.6
a

65.4

a

86.4

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)
a

56.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

106.8
70.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 7), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

São Tomé and Príncipe (STP)´s economy
has offset recessionary effects of the COVID-19 pandemic through exceptional international support. Public expenditures boosted
growth to 3.1 percent but poverty is estimated to have hardly changed in 2020.
Maintaining such levels of public spending
will be a challenge in 2021 and growth willneed to come from the expansion of commercial agriculture and tourism. STP
needs to implement structural reforms toaddress macro-fiscal vulnerabilities andpromote greater private sector development.

Key conditions andchallenges
STP is a small island country constrainedby remoteness, weak private sector, andlow human capital. Growth in STP has
long been driven by public expenditures,
especially grant- and debt-financed public investment. Such public expendituredriven growth is no longer sustainable
due to the structural decline of grants
and concessional external financing inrecent years, combined with historicallylow domestic revenue mobilization. Persistent fiscal and current account deficits
have led to debt accumulation that put
the country in debt distress and present
an ongoing challenge to the fixed exchange rate. Key reforms, especially onenergy and taxation, are critical to maintain stability and create conditions forprivate sector growth. Most Sao
Tomeans work in low-productivity andsubsistence self-employment and extreme poverty remains high, with about
one-third of the population living on
less than $1.90 per day (in 2011 PPP
terms). Malnutrition and deprivations inessential goods and services are prevalent and reduce human capital andproductivity growth.
The near-halt in international tourism, agrowing industry accounting directly for
2.4 percent of GDP and about 5 percent
of employment, and public healthmeasures implemented to curb the
spread of disease were the main channels

through which the pandemic affected
STP’s economy. In July 2020, most workers reported lower earnings due to business closures, reduced demand, and reduced business hours. The ongoing economic and health crisis along with presidential elections expected in 2021, could
cause delays to reforms. Additional risks
stem from the fragile energy sector thatneeds urgent investment and governancereforms. Risks to the reform agenda arepartially mitigated by the support of themultilateral development partners.

Recent developments
Despite the pandemic-related freeze intourism and the curfew, the government
estimates real GDP growth at 3.1 percent in
2020, driven by the expansion of the industrial and services sectors underpinned by a36.5 percent increase in government primary spending, much of which on salaries,
goods and services, and public investment.
This included a four-fold increase in support to vulnerable households. Industrial
activity expanded by 4.4 percent boosted
by construction, which benefited from anincrease of externally-financed public investments. A palm oil mill began production in end-2019, contributing to industrial
growth. The services sector grew 2.2 percent sustained by public administration.
Consequently, poverty is expected to haveremained stable.
The current account deficit widened froman estimated 12.5 percent of GDP in 2019
to 16.5 percent of GDP in 2020. The trade

FIGURE 1 São Tomé and Príncipe / Twin current accountand primary fiscal deficits

FIGURE 2 São Tomé and Príncipe / Actual and projected
poverty rates and real GDP per capita

Sources: Government authorities, IMF and World Bank staff estimates andprojections.

Source: World Bank. Notes: see Table 2.

MPO 272 Apr 21

deficit has improved from 26.5 to 21.7 percent of GDP, explained by increased goods
exports (e.g. palm-oil), while imports declined mostly due to lower costs of oil
products. Net international reserves increased to US$37 million in end-2020 from
US$32 million at end-2019, bolstered byemergency lending.
Reflecting the public spending increase andsupply constraints, inflation stood at 9.4
percent in 2020. Also, the tight monetary
policy stance was relaxed to provide emergency liquidity support to the banking sector, which increased money supply (M2) by
9.4 percent YoY in November 2020.
The pandemic response has widened thebudget deficit. Despite the higher domestic
revenues, the additional public expenditures to address the pandemic contributed
to an estimated primary deficit of 5.5 percent of GDP in 2020, which was financed
mostly by grants. Public debt decreased to90.7 percent of GDP, and STP remains indebt distress due to unsettled long-standing
external arrears although debt is deemedsustainable under programmed policies.

Outlook
Growth is expected to moderate to 2.7
percent in 2021 as the public spending

impulse wanes. Agricultural activity is
expected to expand due to higher palm oiland cocoa production, while increased
public investment and implementation of
externally financed projects are expected
to support industrial activity. The services
sector will benefit from fewer mobility
restrictions, which will contribute to increased trade and tourism activity. However, this is conditional on the COVID-19
outbreak being controlled and progress invaccination.
With a recovery of the tourism sector andgains in palm oil exports, the current account deficit (excluding grants) should
decline to below 15.0 percent of GDP in
2021–22. The trade balance is projected to
improve, despite higher oil prices. FDI, oil-related and other, is expected to increase
as global oil prices recover and the government implements structural reforms to
attract private investors.
Inflation is projected to moderate to 9.0
percent in 2021 as the lifting of the pandemic-related disruptions relieves inflationary pressures. Additionally, fiscal consolidation and tighter monetary policy are
expected to reduce inflation in the medium-term, although the planned introduction of
VAT in 2021 may create additional inflationary pressures. To mitigate the impact
on poverty, coverage of the transfer program will increase to 15,000 households.

TABLE 2 São Tomé and Príncipe / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

2018
2.9
2.1
-3.3
0.8
3.1
7.9
-12.4
-2.9
96.2
-2.5
35.5
65.2
86.2

The fiscal balance is expected to improvein the medium-term as the government
resumes fiscal consolidation, improves
tax collection, and adopts measures toreduce losses in the electricity sector.
These should contribute to a gradualdecline in public debt. Additionally, theauthorities have committed to borrowexternally only on concessional terms
under the IMF program.
The reintroduction of travel restrictions,and slow progress in vaccination could
delay the recovery of tourism in STP. In
addition, a weak global recovery could
undermine the agricultural sector due tolower exports, while delays in externally-financed projects can subdue industrial
activity. Under such a downside scenario, real GDP could contract by around
4.8 percent.

(annual percent change unless indicated otherwise)
2019
2.2
2.5
1.0
0.7
3.2
7.8
-12.5
-1.3
97.7
-0.6
35.4
65.2
86.1

2020 e
3.1
2.3
-1.1
4.4
2.2
9.9
-16.5
-4.7
90.7
-4.3
35.2
65.0
85.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2017-IOF. A ctual data: 2017. No wcast: 2018-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 273 Apr 21

2021 f
2.7
2.7
1.7
3.0
2.7
9.3
-10.3
-2.9
89.4
-2.5
35.0
64.8
85.7

2022 f
3.5
3.5
2.0
3.3
3.7
7.8
-8.2
-1.1
86.3
-0.7
34.8
64.7
85.4

2023 f
4.0
4.0
2.8
3.5
4.2
6.1
-7.3
-0.7
81.9
-0.3
34.4
64.3
85.0

SENEGAL

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

16.7

GDP , current US$ billio n

24.2

GDP per capita, current US$

1447.1

Internatio nal po verty rate ($ 1.9)

a

38.5
a

68.4

a

88.4

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

40.3

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

82.1

b

67.7

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 1), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Senegal experienced its first contraction
since 1990 as COVID-19 induced global
and local demand shocks hit the service
sector. Growth fell from 4.4 percent in2019 to -0.7 percent in 2020, resulting in
the incidence of extreme poverty increasing from 35.9 to 36.6 percent along with awidening of the twin fiscal and current
account deficits. Recovery is expected to
be gradual, with downside risks stemmingfrom a sustained pandemic, climatic hazards, terms of trade shocks, and delayed
structural reforms.

Over the past decade, Senegal benefited
from enhanced international competitiveness, a demographic transition and structural transformation. Average annual
growth of 5 percent between 2011-2019
reduced the poverty rate by 5 percentage
points (using the national poverty line).
However, Senegal’s track record falls
short of top performing Sub-Saharan African countries, which reduced poverty
rates between 1 and 3.4 ppts per year.
Worryingly, inequality has stagnated overthe same period, with a Gini coefficient
stable at 0.35 and persistent spatial andsocio-demographic disparities, including
gender gaps.
The combination of a COVID-19 induced
global recession, disruptions in supply
chains and containment measures havetaken a heavy toll on the economy. The
pandemic also highlighted structural vulnerabilities hampering Senegal’s potential
for resilient and equitable growth. On the
one hand, insufficient and unevenly distributed human capital and structural inequalities constrain labor supply. On theother hand, the private sector has been
unable to generate enough productive jobs
to keep up with high population growth,
stifled by insufficient competition and inadequate financing. The crisis also aggravated emerging fiscal vulnerabilities, underlining the importance of transparent,
effective fiscal and debt management as a

FIGURE 1 Senegal / Real GDP growth and contributions toreal GDP growth and fiscal balance

15

Recent developments
The COVID-19 outbreak halted years ofstrong economic performance. The economy is estimated to have contracted by
0.7 percent in 2020, from growth of 4.4
percent in 2019. This first recession since1990 was driven by weak activity in realestate, the hospitality and tourism industry, and ICT. Despite a negative output
gap, inflation increased from 1 percent in2019 to 2 percent in 2020 due to higher
transport and food prices stemming from
confinement measures and supply chain
disruptions.
The Current Account Deficit (CAD) widened from 7.8 percent of GDP in 2019, to
10.7 percent in 2020, as weak demand in
key export markets affected export performance, particularly tourism services.
The CAD was financed by strong hydrocarbon related FDI and increased development assistance.
While public debt remains sustainable, thecrisis aggravated pre-existing fiscal imbalances. After widening to 3.8 percent of GDP
in 2019, the fiscal deficit deteriorated further
to 6.5 percent of GDP in 2020. This reflects a
combination of lower tax revenues resulting
from the slowdown in economic activity
and increased spending to mitigate the

FIGURE 2 Senegal / Actual and projected poverty rates andreal GDP per capita

Percent of GDP

Percent

foundation of inclusive growth. Finally,
Senegal is exposed to coastal erosion andclimate shocks (floods, droughts, and associated health hazards), which could affectrecovery in key sectors such as tourism andreduce agricultural productivity.

0

Poverty rate (%)
100

Real private consumption per capita (LCU constant)
580000

-1

10

-2
5

-3

0

-4
-5

-5

5600008054000060

52000040

500000

-6

-10

-7
2011

2013

2015

Private consumption
Public investment
Exports
Growth

2017

2019

2021p

4600002023p

Public consumption
Public investment
Imports
Fiscal deficit (rhs)

Sources: Senegalese authorities and World Bank staff calculations.

4800002004400002005 2007 2009 2011 2013 2015 2017 2019 2021 2023
International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 274 Apr 21

Lower middle-income pov. rate
Real priv. cons. pc

impact of the crisis. As a result, the debt to
GDP ratio maintained its pre-crisis upward
trend and increased from 64.5 percent of
GDP in 2019, to 67.6 percent in 2020.
Senegal’s monetary and exchange rate
policies are managed by the Central Bankof West African States (BCEAO), which
maintains a fixed peg between the CFA
Franc and the Euro. Its reserves reachedan estimated 5.5 months of imports in2020 due to large donor support and reduced imports during the pandemic. Between March and October 2020, the REER
appreciated by 6.4 percent y/y, reflecting
the nominal appreciation of the Euroagainst the USD. To support the regional
economy and COVID-19 related extra
spending, the BCEAO announced a set ofmonetary and macroprudential measuressince March 2020, including a policy rate
cut and extended refinancing operationsof the 3-month COVID-19 bonds to help
governments and businesses.
As a result of COVID-19, and the relatedhousehold income loss, the poverty rate
(US$ 1.9/day in 2011 PPP) increased from35.9 percent in 2019, to 36.6 percent in2020. This increase was more pronounced in urban areas where social distancing measures reduce economic activities in service sectors and informality is
widespread.

Outlook
Assuming the pandemic gradually recedes (helped by the roll-out of vaccines in
2021Q2), real GDP growth should recover
to 3.1 percent in 2021. This u-shaped recovery would be driven by a rebound inservices as households and businesses
adapt to operate in the pandemic. Growthis expected to accelerate in 2022-2023 to an
average of 6.9 percent, building on stronger exports, a pick-up in private investment
and the resumption of major extractive
projects with first gas coming onstream by
end 2023. Given the high population
growth, the current projections indicatethat per capita GDP will not return to its
2019 level before 2023. Prudent monetary
policy and exchange rate stability should
keep inflation around 2 percent.
The CAD is expected to remain elevatedat about 10.5 percent of GDP in 2021-2022
fueled by high capital investment imports
and worsened terms of trade (for oil andgold). It is then expected to sharply shrink
to about 4.5 percent as hydrocarbon exports come on stream in 2023. Financing
needs would be met by access to regional
and international capital markets increased external (concessional) borrowing

TABLE 2 Senegal / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

and hydro-carbon related FDI. WAEMU
reserves would reach about 5 months ofimports by 2021 as member countries digest the COVID-19 crisis, helped by a normalization of fiscal spending and capital
inflows.
Fiscal pressures will gradually ease ascontinued tax revenue mobilization efforts– supported by a medium-term revenue
strategy– help to rebuild fiscal space. This
will be coupled by the unwinding of
COVID-19 spending to pre-crisis levels.
As a result, the fiscal deficit will converge
to the WAEMU criterion of 3 percent of
GDP by 2023, putting the debt-to-GDP
ratio on a downward trend starting 2022.
With the expected recovery over 20212023, the international extreme poverty
rate will start declining slowly to reach
36.7 percent by 2023, however, staying
above 2019 levels. At the same time, percapita GDP is set to return to pre-crisis
levels by 2023, suggesting deeper scarring
among the poor.

(annual percent change unless indicated otherwise)
2018
6.2
4.7
3.5
13.7
8.2
9.0
6.1
8.1
6.5
5.4
0.5
-9.1
-3.9
62.4
-1.9
36.1
66.4
85.8

2019
4.4
3.4
5.5
8.4
11.2
5.3
4.3
4.5
3.7
4.6
1.0
-7.8
-3.9
64.5
-1.9
35.9
66.3
85.6

2020 e
-0.7
-0.5
10.7
3.6
-5.0
4.0
-0.7
6.3
2.9
-4.2
2.0
-10.7
-6.5
67.6
-4.3
36.6
66.9
86.4

2021 f
3.1
1.5
1.9
11.4
-2.0
3.5
3.1
3.2
3.8
2.8
1.7
-10.3
-4.9
68.9
-2.9
36.9
67.1
86.7

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2005-ESP S-I and 2011-ESP S-II. A ctual data: 2011. No wcast: 2012-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 0.87 based o n private co nsumptio n per capita in co nstant LCU.

MPO 275 Apr 21

2022 f
4.9
3.2
4.8
8.7
2.0
3.7
4.9
2.6
5.2
5.5
2.0
-10.1
-4.0
68.2
-1.9
36.8
67.0
86.6

2023 f
8.9
3.2
5.0
17.8
13.1
8.0
8.9
2.0
20.5
5.4
2.0
-6.6
-3.0
67.4
-0.9
36.7
66.9
86.4

SEYCHELLES
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio n

0.1

GDP , current US$ billio n

1.2

GDP per capita, current US$

12313.9

Internatio nal po verty rate ($ 1.9)

a

0.5
a

1.1

a

5.2

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

32.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

100.4
72.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 8), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Real GDP declined by 13.3 percent in2020 and is projected to increase to 1.8
percent in 2021 as the tourism industry
recovers in the second half of the year. In
the medium-term, economic growth isexpected to rebound, but the fiscal burden
attached to the government’s response
package is expected to linger and substantially delay the country’s ability to reachits debt target. Poverty increased in 2020
due to the impact of COVID-19.

A lack of economic diversification and thehigh dependence on the tourism and fishing sectors as well as imports, exposes Seychelles to external shocks. These shocks aretransmitted through disruptions in international travel and tourism demand; fluctuations in fishing stocks and instabilities in
the price of essential commodities such as
food and fuel prices. Seychelles is also exposed to fiscal risks emanating from theshare of short-term domestic debt in total
government debt and fiscal risks from State-owned enterprises (SOEs), particularly Air
Seychelles, whose financial difficulties has
been exacerbated by the decline in the global travel industry.
As the pandemic continues to unfold, theSeychelle’s economy will continue to feelthe effects of the decline in the global travel industry. Also, unemployment may
increase as the government winds down
the financial assistance for job retention
program to the private sector. While thecountry’s attempts to increase the benefitsof various social protection programs in
the last few years have partly contributed
to a decline in poverty between 2013-18,
the impact of COVID-19 have tempered
the gains made. Majority of low-income
workers are employed in accommodationand food service activities, health services,and business support activities. As a result, they have been significantly impacted by COVID-19.

Recent developments
Seychelles economy is still grappling with
the negative effects of COVID-19 since its
onset in early 2020. The spread of the virus led to a 60 percent decline in the tourism industry and a decline of 13.4 percent
in economic activity. In addition to thecontraction in economic activity, the year
was characterised by financial difficulties
in the private sector and frictions in thelabour market. Given the significant decline in the performance of the tourism
industry, the fisheries and manufacturingsectors are currently the leading drivers of
the economy. However, income generated
from these two sectors was insufficient tooffset the loss in income from the tourism
industry.
The Government of Seychelles responded
to COVID-19 with measures to mitigate
the economic fallout on businesses andhouseholds. As a result, expenditures
increased drastically to 52 percent of
GDP in 2020 from 37.7 percent of GDP in
2019. At the same time, revenue declined
to 34 percent of GDP from 37.6 percent of
GDP in 2019 due to lower aggregate demand as tourism activities declined. Consequently, the fiscal deficit increased to17.8 percent of GDP in 2020 from 1 percent in 2019. The financing gap that arose
was financed with increased borrowing
from both the domestic and external markets. This resulted in an increase in thedebt to GDP ratio to 102.3 percent of
GDP from 58.7 percent in 2019. The
shock to GDP and the deprecation in the

FIGURE 1 Seychelles / Fiscal balance and public sector debt

FIGURE 2 Seychelles / Actual and projected poverty rates
and real GDP per capita

Percent of GDP

Percent of GDP

10

140

Poverty rate (%)
16

5

120

14

100

0

80
-5

Real GDP per capita (LCU constant)
120000100000

12
80000

10
8

60

-10

40

-15

20

-20

0
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Primary Balance (LHS)
Public Sector Debt (RHS)
Sources: WDI and staff estimates.

60000

6

40000

4
20000

2
0

0
2006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Upper middle-income pov. rate

Overall Balance (LHS)

Source: World Bank. Notes: see Table 2.

MPO 276 Apr 21

Lower middle-income pov. rate
Real GDP pc

exchange rate also contributed to increasing debt levels.
Vulnerable households linked to economic
sectors affected by COVID-19 face a substantially elevated risk of falling into poverty, at least in the short-run. While thefull impact of COVID-19 on poverty in2020 is not yet known, poverty is projected
to rise to 6.5 percent in 2020. The unemployment rate jumped to 4 percent in thethird quarter of 2020, from 2.3 percent in
the last quarter of 2019. This was primarily
driven by a decline of 1.7 percent in employment in tourism related industries dueto the drastic drop in visitor arrivals. However, the unemployment rate peaked at 4.8
percent in the fourth quarter of 2020 andstarted to decline since then due to the mitigating impact of the financial assistance forjob retention program implemented by thegovernment of Seychelles.

Outlook
Economic growth is projected to recover
to 1.8 percent in 2021 contingent on therecovery of the tourism sector which isheavily reliant on external developments
such as the revival of the global economy
and the rate of vaccination, particularly in
key tourism markets. The performance ofthe economy in 2021 is also dependent on
the government reaching its target of vaccinating 70 percent of the population. In
the medium-term, economic growth isexpected to recover as global travel resumes. Inflationary pressures are anticipated to be higher in the short to medium
term on account of the depreciation of thedomestic currency, a trend that is expected to persist if foreign exchange demand continues to exceed supply.
The fiscal deficit is expected to contractover the medium-term, as the increase in
spending associated with COVID-19 subsides. Revenue collection will increase in
the medium-term driven by a resumption of economic activities although generous loss-carry forward provisions andgradual recovery in tourism will likely
continue to suppress VAT and businesstax collection below pre-crisis levels forseveral years to come. Meanwhile, expenditure is projected to remain higher
than pre-crisis levels in 2021 as the
spending associated with COVID-19 continues until the end of the first half of theyear. The debt to GDP ratio will remain
above the debt target <50 percent of GDP
in the medium-term (that was to bereached by 2021), by several years. The
fiscal position faces risks from interlinked
domestic factors such as fiscal and debt
sustainability.

TABLE 2 Seychelles / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

Poverty is projected to slowly continue todecline to 5.9 percent by 2022 ($5.5 a day
per capita line), following an increase to
6.5 percent in 2020 due to COVID-19. Nevertheless, this depends on the ability of the
tourism and services sectors to bounceback over the next few years. Finally, thehigh level of social spending undertakenby the GoS is expected to become unsustainable in the wake of a rapidly aging
population and in the context of COVID19 which has led to an increase in fiscalpressures. Thus, a cut in social spending islikely to lead to an increase in both poverty and inequality in the post-COVID
stage.

(annual percent change unless indicated otherwise)
2018
4.1
3.3
8.8
3.8
2.9
4.0
4.1
0.9
2.4
4.4
3.7
-19.6
17.2
-0.2
59.7
2.9
0.5
1.1
5.2

2019
2.0
4.8
-0.2
-2.7
2.0
0.9
1.8
1.1
2.1
1.7
2.0
-18.8
17.7
1.0
58.7
3.6
0.5
1.1
5.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2018-HB S. A ctual data: 2018. No wcast: 2019-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2018) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 277 Apr 21

2020 e
-13.3
-10.8
4.3
-37.7
-39.6
-38.2
-13.4
-0.2
0.7
-15.4
1.2
-29.7
10.1
-17.8
102.3
-14.3
0.7
1.5
6.5

2021 f
1.8
6.7
4.1
22.1
30.9
38.2
1.8
1.0
2.0
1.8
3.7
-36.9
16.3
-15.7
114.3
-11.3
0.6
1.5
6.4

2022 f
4.3
5.8
2.3
3.1
7.5
6.5
4.3
1.1
2.4
4.7
2.5
-34.9
18.7
-12.4
112.1
-7.8
0.6
1.3
5.9

2023 f
4.2
5.3
-1.5
8.3
7.4
6.5
4.2
1.1
2.0
4.6
3.0
-29.2
22.6
-9.0
106.4
-4.6
0.5
1.2
5.6

SIERRA LEONE
Table 12020

P o pulatio n, millio n

8.0

GDP , current US$ billio n

3.8

GDP per capita, current US$

471.8

Internatio nal po verty rate ($ 1.9)

a

43.0
a

76.0

a

92.7

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

35.7

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

143.7

b

54.3

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 8), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

Sierra Leone’s economy contracted by 2.2
percent in 2020, reversing recent poverty
reduction gains. Despite monetary accommodation, inflationary pressures eased as
nonfood prices fell. The current accountdeficit narrowed with increased officialtransfers to support government’s response to the COVID-19 pandemic. But
the fiscal deficit widened on revenue
shortfalls and health-related spending
pressures. Spurred by investments inmining and agriculture, the economy isexpected to recover over the medium-termwith growth averaging 3.6 percent supporting a gradual decline in poverty.

Key conditions andchallenges
Sierra Leone’s long-term growth performance has oscillated due to its vulnerability to both domestic and external shocks.
Growth averaged 4.4 percent over the past
decade, despite sharp economic contractions in 2015 and 2020 following the 2014
Ebola and COVID-19 pandemics, respectively. The country’s reliance on commodity exports has caused economic growth tobe highly volatile. The collapse of commodity prices in 2014/15 due to weak
global demand resulted in closure of thetwo largest iron ore mines and a 74.6 percent reduction in mineral exports. Income
per capita grew by just 2.8 percent per
annum during the last ten years, reflecting
low investments in physical and humancapital and faster population growth (at2.2 percent per annum), indicating that theeconomy is not growing fast enough tosignificantly reduce poverty. At the current rate it would take a generation to
double income to substantially reduce therate of poverty. Low human and physicalcapital accumulation due to low nationalsavings and limited access to long-term
capital have resulted in negative total factor productivity (TFP) growth. Over the
past decade, Sierra Leone made significant
progress in reducing extreme poverty(living on less than $1.9-a-day in 2011
PPP) from over 60 percent in 2009 to 40.5
percent in 2019. However, the global pandemic reversed these gains and in 2020,

poverty increased sharply to 43.4 percent.
Economic growth and incomes fell in 2020
following disruptions in supply chains,travel restrictions and border closures,and lower demand in advanced economies and emerging markets. In the first
three months of the pandemic, the vast
majority of households saw decreases inself-employment, wage, and non-labor
income. Between July and November
2020, self-employment and wages saw arebound, while non-labor income continued to decline. The government developed a Quick Action Economic Response
Program (QAERP), which combined monetary and fiscal stimulus measures tomaintain macroeconomic stability andhelp mitigate the COVID-19 impact on
businesses and households.

Recent developments
Sierra Leone’s economy contracted by 2.2
percent in 2020 – 0.9 percentage point lessthan the World Bank’s October 2020 forecast, reflecting easing of COVID-related
restrictions in the second half of the year
and the implementation of the QAERP.
The contraction was driven mainly by a
10.0 percent decline in services, especiallytrade, travel and tourism. The pandemic
related restrictions and supply chain disruptions also slowed activities in agriculture. Industry also declined by 1.8 percent
largely reflecting the deceleration of mining activities due to the pandemic. On the
demand side, lower gross fixed investments and net-exports out-weighed the

FIGURE 1 Sierra Leone / Real GDP growth and contributions
to real GDP growth

FIGURE 2 Sierra Leone / Actual and projected poverty rates
and real GDP per capita

Percent, percentage points
20

Poverty rate (%)
100

10

80

Real GDP per capita (LCU constant)
2000000

1500000

60

0

100000040-10500000

20

-20
2017

2018

2019

Statistical discrepancy
Change in inventories
Public Consumption
Real GDP growth

2020

2021

2022

2023

Net Exports
Gross fixed capital formation
Private Consumption

Sources: Sierra Leone authorities and World Bank staff estimates andprojections.

0

0

2011

2013

2015

2017

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see table 2.

MPO 278 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

increase in public consumption attributable to government’s COVID-19 response.
Average inflation fell to 13.5 percent in2020 from 14.8 percent in 2019, as nonfood
prices declined, reflecting lower demandduring the pandemic. Food inflation increased to 13.8 percent from 8.8 percent in
2019, indicative of the prolonged impact
of COVID-19 on domestic food supply.
The Bank of Sierra Leone (BSL) lowered its
policy rate by 100 basis points to 14.0 percent in December 2020 to support aggregate demand. This followed the 150 basis
points cut in March 2020 and the roll out ofa US$50 million Special Credit Facility toease supply chain problems. Interest rate
fell as monetary conditions eased with theinterbank rate falling below the policy rate
for the first time since December 2018.
Money supply (M3) grew by 35.8 percent(yoy), reflecting a sharp increase in net
foreign asset (NFA) as gross external reserves rose sharply with increased budgetary and balance of payment support fromdevelopment partners. The current accountdeficit narrowed to 14.9 percent of GDP in2020 from 22.3 percent in 2019, driven
mainly by increased official transfers, as thetrade deficit widened on account of lower
exports. The Leone depreciated by 5.9 percent against the US dollar compared to the15.2 percent depreciation in 2019, reflecting
the central bank’s intervention to provide

forex for the importation of essential commodities (food and fuel). However, forex
restrictions imposed by the BSL early in2020 helped push transactions to the parallel market, widening the premium between
the official and parallel exchange rates. On
the fiscal front, the budget deficit increased
to 5.5 percent of GDP in 2020 from 3.1 percent in 2019, reflecting shortfalls in tax andnontax revenues as the economy contracted
and increased spending on health to respond to the crisis and support households
and businesses under the QAERP. Public
debt increased to 72.0 percent of GDP from70.0 percent in 2019 reflecting borrowings
to finance the larger fiscal deficit. A recent
joint World Bank and IMF Debt Sustainability Analysis assessed the risks of externaland overall debt distress to be “high” while
public debt was deemed sustainable overthe medium-term.

Outlook
Sierra Leone’s economy is expected torecover over the medium-term with an
anticipated uptick in domestic and external demand as the COVID-19 pandemic
recedes. Economic growth is projected toreach 4.0 percent by 2023, driven mainly
by investments in mining (gold and iron

TABLE 2 Sierra Leone / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,bore) and agriculture. The outlook assumes
the resumption of iron ore production in
2021 along with large-scale investments inagriculture following government’s policy
to promote private sector participation.
The COVID-19 pandemic will continue toaffect Sierra Leone’s growth outlook. New
COVID-19 strains have caused a resurgence of the pandemic, which could hinder recovery of external demand and prolong the disruptions in supply chains,
increasing domestic food prices. An outbreak of the Ebola Virus Disease (EVD) in
Guinea in February, 2021 poses additionalrisks to the economic outlook. Inflation is
expected to decline gradually to single
digits by 2023, supported by increased
domestic food production. The current
account deficit is expected to remain large,
declining slightly to 13.0 percent of GDP
by 2023, as higher mineral exports areoffset by increased demand for imports ofcapital goods and fuel. Restoring fiscal
consolidation in 2021 could prove challenging with depressed revenues, but the
fiscal deficit is expected to decline gradually to 2.4 percent of GDP by 2023 as
COVID-19 related spending is reduced
and revenue mobilization improves as the
economic recovery gains momentum.
Against this improved backdrop, the poverty rate is expected to gradually decline
over the medium term.

(annual percent change unless indicated otherwise)
2018
3.4
13.5
-1.3
-22.0
-34.9
-11.5
3.3
3.9
-2.5
4.1
16.0
-18.5
-5.6
69.0
-4.7
43.0
76.0
92.7

2019
5.6
4.5
2.7
-10.9
64.6
16.5
5.4
5.6
10.9
3.8
14.8
-22.3
-3.1
70.0
1.1
40.5
74.7
92.1

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2018-SLIHS. A ctual data: 2018. No wcast: 2019-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2018) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 279 Apr 21

2020 e
-2.2
4.1
14.9
-8.5
-21.8
-3.0
-2.2
3.2
-1.8
-10.0
13.5
-14.9
-5.5
72.0
-1.5
43.4
76.3
92.9

2021 f
3.0
8.0
9.5
24.9
19.8
24.6
3.0
3.2
4.1
2.4
11.8
-14.2
-4.3
71.6
0.3
43.0
76.0
92.7

2022 f
3.7
8.5
18.3
34.8
12.1
22.2
3.7
3.4
4.5
4.0
10.2
-13.6
-2.8
70.6
1.4
41.5
75.4
92.4

2023 f
4.0
7.8
6.2
10.8
23.2
19.0
4.0
3.6
4.7
4.5
9.6
-13.0
-2.4
69.0
1.3
40.2
74.6
92.1

SOMALIA
Table 1

Key conditions andchallenges
2020

P o pulatio n, millio na

15.0

GDP , current US$ billio n

4.9

GDP per capita, current US$

327
69

Internatio nal po verty rate ($ 1.9)bGini co efficient b

37.0

Scho o l enro llment, primary (% gro ss)c

33.0Life expectancy at birth, years d

57.1

Sources: World Development Indicators (WDI), IM F, UNFPA
Notes:(a) Estimates based on 201 3 population estimatesby UNFPA and assumes an average annual
population growth of 2.9%.
(b)M ost recent value (201 7).
(c) Somali Poverty and Vulnerability Assessment
Report (World Bank, 201 9).
(d) Life expectancy for 201 8 from WDI.

The Somali economy was affected by atriple crisis of COVID-19, locust’s infestation and floods, which caused an economic contraction to the tune of 1.5 percent in 2020, pushing more people intopoverty. The economy in 2021 is showing
signs of a tenuous recovery, with growth
projected at around 2.9 percent, supported by the continuous flow of remittancesand official development assistance. However, the prolonged preparation of elections may have implications for external
grant financing and broader stability.

Somalia is continuing to rebuild economic
governance institutions amidst challenging circumstances. Continuous reform
implementation enabled Somalia to reachthe Decision Point of the Heavily Indebted
Poor Countries (HIPC) Initiative in March
2020, facilitating full reengagement with
the international community. The federal
structure created under the 2012 Provisional Constitution remains incomplete,with discussions on resource and power
sharing ongoing. As Somalia prepares forelections, the strength of institutions andintergovernmental cooperation is being
tested in a context of rising security tensions.
Not with standing progress, economic
growth has been persistently low. Between 2012 and 2019, Somalia only
reached average growth levels of around 2
percent, insufficient to keep up with population growth. A projected growth rate of
3.2 percent in 2020 was interrupted by a
combination of floods, locust’s infestation
and COVID-19—a ‘triple crisis’ thatcaused the economy to contract by an estimated 1.5 percent. The economic downturn has placed further pressure on joblessness and poverty, in a country where
healthcare and education systems are
weak. In 2020, 21 percent of Somalis had
to stop their work activity following theoutbreak of COVID-19 and 78 percent ofhouseholds reported some reduction in

their income from wages. The slower paceof growth in 2019 and contraction in 2020
has pushed more people in to poverty.
The international poverty estimate(measured using the $1.90/person/day
poverty line) was 71 percent in 2020, 2
percentage points higher the latest actual
data in 2017.
The latest shocks in an election context
expose Somalia’s dependence on volatile
external financial flows to support therecovery from fragility. With limited exports and only nascent investment plans,
Somalia’s economy is driven by consumption financed largely by remittances andofficial grants—which together average
more than 75 percent of GDP (Table 2).
Limited revenue mobilization constrains
the government from financing more thanbasic security and administration from its
own resources. This leaves Somalia dependent on external grants for responding
to shocks as well as long-term investments
in human capital and public infrastructure.

Recent developments
The Somali economy is tenuously rebounding from the crisis, supported by
the easing of mobility restrictions in August 2020 and rising credit to the private
sector. While official remittance inflows
have risen y-o-y by an estimated 18 percent in 2020 largely due to improvementsin the recording of official flows, it is likely that informal remittances have declined. With limited domestic production

FIGURE 1 Somalia / Domestic revenue performance

FIGURE 2 Somalia / Actual and projected poverty rates andreal private consumption per capita

Percent of GDP

Poverty rate (%)
100

450

Real private consumption per capita (USD constant)
470

400
350

465

80

460

300
250

200
150
100
50
0

60

455

40

450
445

20
2019
Actual

2020
2020
2020
Budget Budget Actual(original) (revised)

2021
2022
2023
Budget Forecast Forecast

Domestic revenue
Sources: FGS (2021) and World Bank & IMF (2020).

440

0

435

2017

2018

2019

2020

International poverty rate
Upper middle-income pov. rate

External grants

Source: World Bank. Notes: see Table 2.

MPO 280 Apr 21

2021

2022

2023

Lower middle-income pov. rate
Real priv. cons. pc

capabilities, overall import values were
estimated to have risen 3.8 percent y-o-yin 2020, although food imports fell by 25
percent, signaling lower household consumption. With the added effects of thefloods and locust infestation, approximately 2.7 million people are experiencing
rising food insecurity.
While import spending has risen, Somalia’s export receipts have declined, as demand fell for Somalia’s major export commodity—livestock. The trade balance isestimated to have reached 91 percent of
GDP in 2020, which is financed by remittances and grants. However, it may bepossible that a reversal of a Saudi importban of Somali livestock could provide aboost to livestock exports. These data remain subject to change in a context of continuous efforts to improve the quality andreliability of statistics.
The government responded to the crisis
through approving a budget which estimated lower tax revenues (partly reflecting tax exemptions introduced on basic
staples) and higher grants. Domestic revenue mobilization surpassed expectations,reaching around 90 percent of original
2020 budget targets, as trade-related taxes
were boosted by imports. External grants
increased to support the crisis, coming
close to 60 percent of total revenue, compared to 32 percent in 2019. Higher grants

have supported the roll-out of pro-poor
programs, including the “Baxnaano” cashtransfer scheme and the “Gargara” lending facility to small and medium enterprises. However, the central bank has limited monetary policy instruments to respond to shocks, as widespread dollarization supports price stability.

OutlookA moderate economic recovery is projected over the medium term with growth
anticipated to reach 3.2 percent in 2022
and 3.4 percent in 2023. This outlook isbased on the continuous flows of remittances and official development assistance. Planned investments in sectors suchas energy, ports, and the financial sector
are expected to gradually shift the driversof growth from consumption to investment, to harness Somalia’s potential insectors such as fisheries, agriculture andrenewable power generation, which canhelp to diversify the export base. The outlook assumes that a vaccine will be rolledout in mid-2021.
With a modest recovery, per capita private
consumption is projected to stagnate in
2021. The international poverty rate is
projected to remain at 71 percent; a trend

TABLE 2 Somalia / Macro poverty outlook indicators

expected to continue in 2022 and 2023.
Accelerating the pace of poverty reduction
will require policy interventions to raise
productivity, create jobs, and expand propoor programs.
However, there are risks to the growth
outlook, which are largely related to political developments. If agreements on electoral modalities are further protracted
there may be waning support from theinternational community to provide official development assistance at comparable
levels, especially in the absence of improvements to the security situation. If the
COVID-19 crisis further affects diaspora
communities, remittance flows could start
to decline, while further delays to therollout of the vaccine may undermine
planned investment activities. In thisdownside scenario, the economy could bein a low growth scenario of around 0.5 to
1 percent. However, if election-related
challenges are overcome, there is an upside scenario of greater stability, which
could increase trade and cooperation in
the region.

(percent of GDP unless indicated otherwise)

Real GDP growth, at constant market prices
CPI Inflation, annual percentage change
Current account balance
Trade balancePrivate remittances
Official grants
Fiscal balance a
Domestic revenue
External grants
Total expenditure
Compensation of employees
External debt

2018
2.8
3.2
-7.5
-84.8
31.4
46.6
0.1
3.9
1.8
5.7
3.0
112.8

2019
2.9
3.1
-10.5
-83.0
31.9
41.3
0.5
4.6
2.2
6.3
3.3
108.8

2020 e
-1.5
3.0
-12.8
-91.4
31.4
47.9
0.2
4.3
6.0
10.1
4.6
40.7

2021 f
2.9
2.5
-12.9
-86.8
31.0
43.7
0.3
5.0
7.7
12.4
4.7
38.0

2022 f
3.2
2.2
-12.9
-88.2
31.4
44.6
-0.2
5.0
5.2
10.3
4.0
36.7

2023 f
3.4
2.2
-13.2
-85.0
30.8
41.6
-0.2
4.9
6.5
11.6
3.8
30.5

International poverty rate ($1.9 in 2011 PPP) b,c
Lower middle-income poverty rate ($3.2 in 2011 PPP) b,c
Upper middle-income poverty rate ($5.5 in 2011 PPP) b,c

69.2
89.2
97.9

68.4
88.8
97.8

70.8
90.0
98.1

70.9
90.0
98.1

70.7
90.0
98.1

70.6
89.9
98.1

So urce: Wo rld B ank and IM F (2020) and FGS (2021).
No tes: e = estimate, f = fo recast, (a) Federal Go vernment o f So malia (FGS).
NA(b) Calculatio ns based o n 2017 SHFS-wave 2. A ctual data: 2017. No wcast: 2018-20. Fo recast are fro m 2021-23.
(c) P ro jectio n using neutral distributio n (2017) with pass-thro ugh = 1based o n private co nsumptio n per capita in co nstant US$ .

MPO 281 Apr 21

SOUTH AFRICA
Table 12020

P o pulatio n, millio n

59.3

GDP , current US$ billio n

301.9

GDP per capita, current US$

5090.7

Internatio nal po verty rate ($ 1.9)

a

18.7
a

37.3

a

56.9

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a63.0

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

b

98.5
63.9

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

South Africa has started to recover but
momentum remains fragile as uncertainty
about the pace of vaccination and vaccine
effectiveness to the local COVID-19 variant persist. Pre-existing structural constraints also weigh on the recovery. GDP
contracted by 7 percent in 2020 and is
projected to rebound by 3.0 percent thisyear. Public finances deteriorated significantly, and fiscal consolidation will be
critical to preserve macroeconomic stability. An additional 1.9 million people fell
into poverty in 2020 and poverty risks
increasing further.

Key conditions andchallenges
South Africa’s economy has started torecover from the crisis, but growth willremain hampered by pre-existing structural constraints. GDP growth averaged
0.8 percent annually over 2015-19. Business confidence has been low for several
years, driven by a deteriorating fiscal outlook and a weakening business environment, and recurrent electricity shortages.
This and high uncertainty around the evolution of the pandemic are likely to resultin persistently weak private investment.
Long-term damage from the pandemic
could also limit South Africa’s growthpotential as the future of sectors like tourism remains highly uncertain. Inequalities
in terms of access to quality education andhealth services, jobs and decent living
conditions have been further exposed by
the pandemic.
The COVID-19 crisis has put additionalpressure on public finances which havebeen on a deteriorating trajectory for several years and has made restoring fiscal
sustainability more urgent. Revenue collection – which is relatively high as ashare of GDP – has suffered from weakeconomic growth. At the same time, government’s expenditures have increased,leading to growing deficits and debt. Interest payments have been the fastest
growing budget expenditure. Politicalconsensus on expenditure consolidation
has proved difficult to achieve, especiallyon public sector compensation and transfers to SOEs.
South Africa witnessed a second wave of
infections
overDecember-January
2020/21. Daily cases were brought undercontrol rapidly allowing the government
to ease restrictions to their lowest level
since the start of the pandemic endFebruary. However, the death toll of thesecond wave was significant: more thanhalf of total COVID-19-related deaths
have happened since early-December.
There is uncertainty around the outlook.
Repeated infection waves and longer
than expected vaccination timelines globally and domestically will weigh negatively on the global and domestic recovery. The strength and sustainability of
the recovery will depend on these evolutions as well as domestic policies andtheir implementation.

Recent developments
The economy contracted by 7 percent in2020. All sectors contracted except agriculture and government services. Manufacturing, trade and hospitality, and transportation services sectors had the largest
negative contributions to growth (-1.4, -1.3
and -1.3 percent respectively). PMI releases early-2021 have stayed above but close
to 50, signaling that the recovery continues but is moderate. Although fiscal outcomes are set to outperform mid-year
forecasts on the back of higher revenue,
the fiscal situation remains very weak.
The deficit is expected to reach 14 percent

FIGURE 1 South Africa / Real GDP growth and employment
to working-age population ratio

FIGURE 2 South Africa / Actual and projected poverty rates
and real GDP per capita

Percent

4

Poverty rate (%)
16

2

14

Percent, annual change

42
41
40

Real GDP per capita (LCU constant)
120000100000

12

0

39

38
37

-2

8

-4

6

36

80000

10

60000
40000

4

-6

35
34

-8
2016

0

2017 2018 2019 2020 2021 2022 2023
Employment to working-age population ratio (lhs)Real GDP growth (rhs)

Sources: Stats SA and World Bank staff.

20000

2

0
2006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Upper middle-income pov. rate

Source: World Bank. Notes: see table 2.

MPO 282 Apr 21

Lower middle-income pov. rate
Real GDP pc

of GDP and public debt 80.5 percent of
GDP at the end of 2020/21.
Inflation slowed to 3.3 percent last year
allowing the Reserve Bank to adopt anaccommodative monetary policy stance,
lowering the key repo rate to a historical
low of 3.5 percent last July. Amid unprecedented global liquidity and decreasing risk aversion, the rand has been resilient and government bond yields havebeen hovering close to pre-pandemic
levels. However, after having recorded
portfolio outflows throughout 2020,
South African financial markets haveremained volatile and affected by shifts
in risk sentiment at the global level. In acontext of depressed domestic demandand favorable export prices (gold, platinum), the current account registered asurplus – the first since 2002 – at 2.2 percent of GDP.
The economic and social impacts of thepandemic are high. The unemployment
rate reached 32.5 percent in 2020. RealGDP per capita is back to its 2005 leveland 60.2 percent of the population isestimated to live in poverty, with lessthan $5.5 daily (2011 PPP). The numberof poor in the past year increased by 1.9
million people. In response to the severesocial impact of the crisis and the persistence of the global pandemic, the government extended the Special COVID-19

grant and the Temporary EmployerEmployee Relief Scheme benefit until April.

Outlook
The persistence of the pandemic at the
global and domestic levels will continue
to constrain economic recovery during
the first half of 2021. In addition, as economic activity restarts, pre-existing structural constraints, such as electricity shortages, are becoming binding again. GDP
growth is expected to rebound to 3.0 percent in 2021 driven by the easing of restrictions on economic activity and favorable base effects. This moderate recovery
will be insufficient to counter the social
impact of the crisis as job creation is likely to remain muted.
South Africa does not have a lot of room
for maneuver to provide additional stimulus to the economy. While monetary policy
is likely to remain accommodative as longas inflationary pressures are contained, theoverall policy mix will be constrained by
the deteriorated fiscal position. The government will continue to face spending pressures related to the persistence of the pandemic, the public service compensation
triennial agreement negotiation andfinancially weak SOEs. With some

TABLE 2 South Africa / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

containment of these pressures, the deficit is expected to reach 9.6 percent of
GDP in 2021/22 and public debt is projected to increase to 83.4 percent of GDP.
Interest payments are estimated to rise to
5.4 percent of GDP this year.
Accumulated cash balances and favorable global liquidity conditions, if they
persist, will reduce the pressure on thegovernment’s high financing requirement. However, sound implementationof planned reforms – in particular muchneeded reforms to boost growth – will be
key to maintain investors’ confidence inthe government’s ability to restore debt
sustainability. In addition, given the social toll of the pandemic, preserving social spending and improving its effectiveness in the context of a constrained budget envelope will be necessary to mitigate
the risk of additional increases in poverty
and inequalities.

(annual percent change unless indicated otherwise)
2018
0.8
1.8
1.9
-1.4
2.6
3.3
0.7
-4.8
-0.1
1.3
4.5
-3.5
0.4
-4.0
56.7
-0.1
19.3
38.1
57.6

2019
0.2
1.0
1.5
-0.9
-2.5
-0.5
0.2
-6.9
-1.5
1.2
4.1
-3.0
0.4
-6.4
63.5
-2.4
19.7
38.5
57.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2014-LCS. A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2014) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 283 Apr 21

2020 e
-7.0
-5.4
0.5
-17.5
-10.3
-16.6
-6.8
13.1
-12.0
-5.4
3.3
2.2
0.2
-14.0
80.5
-9.3
21.9
41.3
60.2

2021 f
3.0
2.5
-0.5
5.5
5.0
13.2
3.0
3.3
3.0
2.9
4.0
-1.0
0.2
-9.6
83.4
-4.2
21.4
40.7
59.8

2022 f
1.9
3.5
-2.2
5.0
1.0
3.5
1.9
3.0
1.5
2.0
4.5
-2.0
0.3
-7.8
87.3
-2.2
21.3
40.5
59.6

2023 f
1.5
3.0
-1.8
4.1
1.0
3.5
1.5
3.0
1.0
1.6
4.5
-2.5
0.4
-6.8
90.2
-1.0
21.2
40.4
59.4

SOUTH SUDAN
Table 12020

P o pulatio n, millio n

11.2

GDP , current US$ billio n

5.1

GDP per capita, current US$

459.8

Internatio nal po verty rate ($ 1.9)

a

76.4
a

91.6

a

97.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a44.2

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

73.0

b

57.6

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) WDI for school enrollment (201 5); life expectancy (201 8).

South Sudan’s economy is set to contract
by 3.4 percent in FY2020/21 as concurrent shocks including COVID-19, floods,
and subnational conflict have constrained
economic activity. Low oil prices have led
to large fiscal and external imbalances.
Living standards have deteriorated. Morethan 6 million people are facing crisislevel food insecurity, with 1.4 million
children under 5 years expected to beacutely malnourished in 2021. Long term
economic growth prospects critically depend on sustainability of peace andcommitments to reform.

Key conditions andchallenges
A decade after independence, South Sudan
remains caught in a web of fragility, economic stagnation, and instability. Poverty
is ubiquitous and has been reinforced by ahistory of conflict, displacement, andshocks. The signing of the latest truce in
September 2018 and subsequent formationof a unity government in February 2020
had provided hope for recovery and peacebuilding. Conflict events decreased significantly in 2019, allowing some refugees previously dispersed in the region to return.
At the same time, a resumption of oil production in oil fields previously shutdown
due to conflict had raised hopes for an oilled recovery. However, the country faces
the risk of reversal of these gains, with increasing incidents of subnational violencein 2020 and COVID-19 pandemic exacerbating an already dire situation.
Legacy of economic mismanagement andresistance to reform have resulted in a
distorted macroeconomic environment.
Monetization of the fiscal deficit led tosoaring inflation and widening exchange
rate premium. At the same time, recurring cycles of internal conflict and violence have eroded the economic base, with
output contracting for consecutive years
during 2015 - 2018. Consequently, realhousehold disposable income declined,
contributing to an increase in poverty
headcount ratio from 44 percent in 2009 toabout 76 percent in 2016.

The authorities have accelerated dialogue on key economic and public financial management reforms amidst a double health and economic crisis. Discussions with the IMF have included thepossibility of a Staff Monitored Programwith a focus on macroeconomic stabilization, exchange rate and monetary policy reform, and public financial management support. Coupled with economic
diversification, strengthening service
delivery institutions will be critical as
the country seeks to build resilience tofuture shocks, providing building blocks
for an inclusive and sustainable growthpath.

Recent developments
The economy had picked up strongly
before the COVID-19 pandemic, withGDP real growth reaching 9.5 percent in
FY2019/20. The oil sector has continued
to be the primary driver of growth, withestimated oil production of 62.1 million
barrels in FY2019/20, representing a 26.5
percent increase on the 49.1 million barrels realized in FY2018/19. In the agricultural sector, cultivated area increasedby 6 percent in 2020 compared to theprevious year, but it is still far fromreaching the pre-conflict levels. However, living standards deteriorated as the
pandemic disrupted livelihoods. Highfrequency surveys conducted in June
2020 showed that 51.2 percent of respondents reported reduced earnings
from their main income source. The situ-

FIGURE 1 South Sudan / Real GDP growth and sectoral
contributions to real GDP growth

FIGURE 2 South Sudan / Actual and projected poverty
rates and real GDP per capita

Percent, percentage points
15

Poverty rate (%)
100

Real GDP per capita (LCU constant)
3500

12

3000

80

9

2500

6
3

60

2000

40

1500

0
-3

1000

-6

20

-9
-12
2016

2017

2018

2019

2020

Agriculture

Non-Oil industry

Oil

GDP growth

Source: World Bank.

2021

2022

2023

500

0

0

2009

Services

2011

2013

2015

International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 284 Apr 21

2017

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

ation has since improved somewhat,
with
50.7
percentoftherespondents reporting reduced incomesby October 2020.
The FY2019/20 budget deficit is estimated to have widened to 6.8 percent of
GDP compared to 3.2 percent of GDP
that was budgeted, driven by large
shortfalls for oil revenue. Budget planning and execution challenges have led
to persistence of expenditure arrears.
The authorities estimate cumulative outstanding obligations at the end of
FY2019/20 amounting to SSP 896 billion(108 percent of GDP) and salary arrears
estimated at SSP 18.45 billion (2.2 percent of GDP). The current account deficit is estimated to have increased to 6.1
percent in FY2019/20 from 5.0 percent in
FY2018/19 as export growth weakened
relative to imports.
Monetization of the fiscal deficit resulted in significant pressure on prices andthe exchange rate. Inflation rose to an
average of 72.2 percent during
FY2019/20 from 63.6 during FY2018/19.
The parallel exchange rate depreciatedby 36 percent from an average of SSP
297 during 2019 to SSP 404 during 2020.
By December 2020, the spread between
the official and parallel rates had widened to 242 percent from 100 percent in
December 2019.

OutlookSouth Sudan’s economy is set to contract
by 3.4 percent in FY2020/21 primarily
due to a decline in oil production andslower recovery of the non-oil economy.
The Covid-19 pandemic has delayed newinvestments in the oil sector, with oil
production expected to decline by 5.8
percent to 58.4 million barrels in
FY2020/21. The non-oil economy is expected to contract by 1.9 percent owing
to a combination of conflict and Covid19, with new lockdown measures imposed in early February 2021.
A gradual recovery is expected in the nearterm, assuming a rebound in the global
economy and domestic containment of thepandemic. In addition, commitment to acredible reform process, sustainability ofpeace, and resilience to climatic shocks willplay a critical role. Inflation is expected to
decline in the medium term as economic
and public financial management reforms
mature and government commits to a credible fiscal consolidation plan. Given thelarge economic fallout from Covid-19 andother concurrent shocks, poverty at $1.90
per person per day is projected to increase
to 78.2 percent in FY2020/21 from 76.8 percent in FY2019/20.

TABLE 2 South Sudan / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

The budget process has been significantly
delayed and complete fiscal data are notavailable. Nevertheless, fiscal revenue isprojected to decline to 25.8 percent of GDP
in FY2020/21 relative to the pre-pandemic
projection of 34.8 percent. However, thefiscal deficit is expected to reduce to about
2.4 percent of GDP in FY2020/21 from 6.8
percent in FY2020 as the authorities commit to fiscal prudence. Fiscal consolidation
will benefit from cuts to investment expenditures, which are expected to decline
from 3.0 percent of GDP in FY2019/20 to
1.8 percent of GDP in FY2020/21. The current account balance is expected to widen
to 6.3 percent of GDP from 6.1 percent in
FY2019/20 reflecting lower oil export performance.

(annual percent change unless indicated otherwise)
2018
-3.5
-3.5
-2.5
15.0
-14.6
121.6
-9.6
-0.5
-3.3
44.7
-3.0
79.5
92.8
98.3

2019
3.2
3.2
9.9
20.9
-12.1
63.6
-5.0
-1.6
-0.9
29.9
-0.4
78.9
92.6
98.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-HFS-W3. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 285 Apr 21

2020 e
9.5
9.5
6.0
27.5
-9.6
72.2
-6.1
-0.3
-6.8
42.9
-4.8
76.8
91.8
97.9

2021 f
-3.4
-3.4
3.5
-5.8
-1.3
32.2
-6.3
1.0
-2.4
40.8
-1.3
78.2
92.3
98.1

2022 f
1.5
1.5
3.5
0.5
2.5
24.4
-5.8
1.0
-1.1
33.1
0.3
78.4
92.4
98.1

2023 f
3.0
3.0
3.5
2.9
3.0
18.7
-3.5
0.9
2.9
30.0
3.8
78.2
92.3
98.1

SUDANKey conditions andchallenges

Table 12020

P o pulatio n, millio n

Following the popular revolt in 2019, a
new Government has been pursuing stabilization and structural reforms under exceedingly difficult circumstances. Over
US$ 50 billion in accumulated externalarrears continues to severely limit accessto external finance at a time when the
country is struggling to correct major macroeconomic imbalances. By 2019, the costof fuel subsidies alone reached the equivalent of 100 percent of all government revenues. The monetary financing of large
public sector deficits has pushed inflation
into triple digits. The Government took
important measures to reduce fuel subsidies in 2020, and pursued fiscal consolidation to slow the pace of monetary expansion, but these efforts were offset by the
impact of the COVID-19 pandemic andmassive flooding in parts of the country.
The economic recession in Sudan deepened in 2020, government revenues plummeted, and inflationary pressures mounted. While the current government hasenjoyed a significant level of political legitimacy in the eyes of the population, thepatience of the Sudanese people is being
tested, and social protests became widespread in early 2021.
Since July 2020, Sudan’s reform program
has been supported by an IMF staffmonitored program (SMP) and more recently by a World Bank Development Policy Financing Operation. These programs

43.8

GDP , current US$ billio n

21.2

GDP per capita, current US$

482.5

Internatio nal po verty rate ($ 1.9)

a

12.2
a

44.0

a

79.3

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a34.2

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

76.8

b

65.1

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 4), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

External shocks, including massive flooding and the COVID-19 pandemic, hindered stabilization efforts by the Government. The economy contracted by 3.6
percent in 2020. The monetization of thelarge fiscal deficit drove inflation into
triple digits. Living conditions continued
to deteriorate. A combination of key reforms, stabilization efforts, and external
support give hope for 2021.

FIGURE 1 Sudan / Fiscal Balance and inflation rate

Percent
P
275

can support Sudan toward a path to stabilization, resolution of the country’s external
debt problems and restoration of access todevelopment financing. Economic stabilization, together with measures to mitigate
the impact of the current economic crisis on
the welfare of the population, remain thehighest priorities in 2021. Given the current
level of distortions in the Sudanese economy, there is a potential for a strong revivalof economic growth provided that initialstabilization efforts will be successful. Major risks to economic outlook include therecent socio-political turmoil, uncertainty
around COVID-19, external shocks (badweather, flooding), and potential instabilityof money demand in the context of exceptionally high inflation.

Recent developments
GDP growth declined from -2.5 in 2019 to-3.6 percent in 2020 in the context of the
COVID-19 crisis and severe flooding that
disrupted economic activity. Despite someefforts to rein in excessive public expenditures, particularly on fuel subsidies, theeconomic downturn, COVID-19 crisis, andincreasingly overvalued exchange rate
had a very negative fiscal impact in 2020.
Delayed exchange rate adjustment pushed
foreign inflows, including grants, to record low levels, while the economic downturn also depressed tax revenues. At thesame time, additional emergency spending was needed in health care due to the
COVID-19 crisis. Given the current virtual absence of debt markets and con-

FIGURE 2 Sudan / Actual and projected poverty rates andreal GDP per capita

Percent of GDP
0

Poverty rate (%)
100

Real GDP per capita (LCU constant)
1000

-2

80

800

60

600

40

400

20

200

250

225
200

-4

175

150

-6

125
100

-8

75
50

-10

25

0

0
2012

2014

2016

2018

Fiscal Balance (RHS)
Sources: WDI, IMF and World Bank staff estimates.

2020E

2022f

-12

0

2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Inflation rate

Source: World Bank. Notes: see Table 2.

MPO 286 Apr 21

2017

2019

2021

2023

Lower middle-income pov. rate
Real GDP pc

strained access to external finances, thefiscal and quasi-fiscal deficit was monetized, adding to inflation pressures that
increasingly threatened destabilization.
The pace of annual CPI inflation accelerated to 269 percent in December 2020.
The current poverty level is unknown
because data from the latest household
survey (2014/15) do not reflect the impactof the recent economic decline, high inflation, and the impact of COVID-19 in Sudan. Poverty projections based on GDP
growth suggests that poverty rates may
have increased consistently in recent
years, to reach in 2020 an estimated 17.7
percent at $1.90/day PPP and 52.6 percent
at $3.20/day PPP. A new household survey, under preparation, would provide amore accurate estimate of poverty.

Outlook
Sudan has conducted major reforms, including exchange rate adjustment andfuel subsidy reduction, that put the country on a potential path toward recovery
and restoration of access to external financing in 2021. In this context, the decline in GDP of the past three years is
projected to stabilize in 2021, leading into
a period of positive economic growth. The

2021 budget envisions a reduction in thefiscal deficit to around 2 percent of GDP,
thus allowing for a significant slowdown
in the monetary expansion that has beenfueling inflation. Sudan aims to accomplish arrears clearance with IFIs in 2021
and obtain access to over US$ 2 billion inexternal support from development partners.
The risks to economic outlook in 2021 arehigh. As the country borders hyperinflation and the patience of the population is
being tested, the success of Sudan’s bold
efforts to achieve stabilization in 2021 isfar from guaranteed. The COVID-19 pandemic is still raging in the country andnegative external shocks, such as theflooding experienced in 2020, could compound what is already an exceedingly
difficult situation. 2021 should be decisive
year for the future of the country.
Poverty outlook remains negative. Poverty rates are projected to increase to 19.5
percent by 2022 at $1.90/day PPP, and54.8 percent at $3.20/day PPP. The continued rise in inflation, shortage of fueland other basic commodities and COVID-19 are expected to continue adversely
affecting living conditions. Results fromthe Bank’s ongoing high frequency survey on COVID-19, suggest that about one-third of respondents had stopped working in September 2020 mainly due to the

TABLE 2 Sudan / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)a
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) b,c
Lower middle-income poverty rate ($3.2 in 2011 PPP) b,c
Upper middle-income poverty rate ($5.5 in 2011 PPP) b,c

COVID-19pandemic; and that over 20
percent of households were unable to buy
bread and cereals as well as milk and milk
products as price increases were felt by
most households. The recent economic
stabilization reforms are expected to taketime to deliver positive results on poverty.
The Government has launched a family
support program that aims to reach a significant proportion of households withcash transfers to cushion the impact of thereform.

(annual percent change unless indicated otherwise)
2018
-2.3
-3.2
-4.9
3.8
10.7
11.9
-2.3
-1.5
-1.7
-3.2
63.3
-8.7
1.4
-7.9
186.6
-7.8
12.9
45.2
79.9

2019
-2.5
-2.5
-15.3
11.4
11.9
23.8
-2.5
-1.0
-0.7
-4.8
51.0
-11.5
3.0
-10.8
200.3
-10.6
14.9
48.3
82.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Debt pro jectio ns do no t include any restructuring achieved during the HIP C pro cess.
(b) Calculatio ns based o n 2014-NB HS. A ctual data: 2014. No wcast: 2015-2020. Fo recast are fro m 2021 to 2023.
(c) P ro jectio n using neutral distributio n (2014) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 287 Apr 21

2020 e
-3.6
-3.5
1.2
-13.1
5.2
-13.8
-3.6
-2.5
-5.7
-2.9
163.3
-13.2
4.7
-5.9
249.1
-5.9
17.7
52.6
84.7

2021 f
0.5
0.5
8.6
8.4
15.4
26.6
0.4
0.4
0.7
0.2
207.9
-7.2
6.7
-2.4
205.2
-2.1
18.7
54.0
85.4

2022 f
1.1
2.0
3.2
3.3
29.0
21.3
1.1
1.2
2.1
0.4
36.8
-9.8
4.2
-2.3
197.9
-2.1
19.5
54.8
85.8

2023 f
2.6
2.4
1.4
1.8
21.8
11.0
2.6
2.7
3.4
2.0
21.0
-7.5
1.9
-2.2
189.9
-2.1
19.4
54.7
85.8

TANZANIA

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

59.7

GDP , current US$ billio n

61.8

GDP per capita, current US$

1035.6

Internatio nal po verty rate ($ 1.9)

a

49.4
a

76.8

a

91.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

40.5

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

98.8

b

65.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 8), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Shocks from the global pandemic slowed
Tanzania’s growth to 2.0 percent in 2020.
Tanzania’s growth outlook is highly uncertain with risks tilted to downside. The
major risks are primarily external, though
delayed policy response and reform slippages could negatively impact the recovery. The international poverty headcountratio is estimated to have increased by 1.2
percentage points to 50.5 percent in 2020.
The pandemic has underscored the need toaccelerate inclusive private investmentdriven growth for achieving Tanzania’s
development vision.

Tanzania became a lower middle-income
country (LMIC) in July 2020 thanks to thesolid income growth over two decades,
averaging 6.5 percent per year, and macroeconomic stability. Inflation rates havebeen low, and fiscal and current-accountdeficits have remained manageable. Investment has been a key driver of growth,
consistently contributing two-thirds to it.
About three quarters of total investment
was from private sources, but lately thisratio has shifted with waning extractives
FDI and a more challenging business environment.
Poverty response to rapid economic
growth was moderate and has slowed inrecent years, and growth became lessinclusive. Half of Tanzanians live below
the international extreme poverty line of
US$1.90/day in 2011 PPP as compared to
30 percent average for the first-year
LMICs. Since 2012, income and consumption growth among the wealthiest households has outpaced growth among thepoorest. High population growth, insufficient level of education, low agricultural
productivity, and slow and uneven creation of more productive income earning
opportunities have hindered the inclusiveness of growth. The COVID-19 pandemic has further exacerbated existing
challenges, reversing some of the gains inpoverty reduction achieved over the last
decade.

National aspirations laid out in the Tanzania Development Vision 2025 are to become a middle-income country with welldeveloped human capital, an ample supply of high-quality livelihood opportunities, and broad-based gains in living
standards. Realizing the vision will require concerted efforts to restore the economy’s growth momentum while expanding access to economic opportunities for
low-income households. Policy priorities
include accelerating productive investments, prioritizing human capital development, enabling agricultural transformation, leveraging digital technologies,
and building public sector institutions andcapabilities. As the pandemic continues todepress global economic activity, Tanzania will need to endure a slump in external demand regardless of the effectivenessof its domestic health response.

Recent developments
Although Tanzania avoided a recession
in 2020, real GDP growth decelerated toan estimated 2.0 percent from 5.8 percent
in 2019. Tourism, a major contributor to
GDP growth, declined significantly despite the country reopening for tourism
in June, and exports of tourism-related
services fell by 44.4 percent in 2020. Private sector credit growth plunged to 3
percent in December 2020 from 11.1 percent a year earlier. Imports of capital
goods dropped by 14.8 percent in 2020
due to diminished orders for construction materials and machinery. Demand

FIGURE 1 Tanzania / Real GDP growth rate forecasts underalternative scenarios

FIGURE 2 Tanzania / Actual and projected poverty rates
and real private consumption per capita

Percentage change
8

Poverty rate (%)
100

7Real private consumption per capita (LCU constant)
1400000
1200000

80

1000000

6
5
4

60

80000040

6000004000003202000002
0102007 2009 2011 2013 2015 2017 2019 2021 2023
0
2015

2016

2017

2018

2019

Source: WB staff estimates based on NBS data.

2020

2021

2022

International poverty rate
Upper middle-income pov. rate

2023

Source: World Bank. Notes: see Table 2.

MPO 288 Apr 21

Lower middle-income pov. rate
Real priv. cons. pc

for durable goods weakened significantly,
and imports of services declined on theback of lower demand for travel andtransportation. The current-account deficit
narrowed to an estimated 1.6 percent of
GDP in 2020 due to the offsetting effects ofthe pandemic-induced shocks on Tanzania’s balance of payments. Higher gold
prices partially alleviated the decline inother exports and falling oil prices reduced the import bill. Official gross reserves dropped by 20 percent to US$4.8
billion but remained at a relatively healthy
level of 5.6 months of projected imports.
Tanzania’s policy response to COVID-19
in the first half of 2020 was moderate andrelatively short-lived. In the context of low
inflation and slowing economic activities,
the Bank of Tanzania pursued an accommodative monetary policy to boost liquidity in the financial sector. However, average commercial lending rates declined
only marginally. Fiscal policy response
included expediting clearance of domestic
arrears and expanding the coverage ofsocial security schemes. In the wake ofspending pressure and declining revenues, the government has tightened control over expenditures.
Real per capita GDP declined for the firsttime in over 25 years. The poverty rate
based on the international extreme poverty line is estimated to rise from 49.3

percent in 2019 to 50.5 percent in 2020.
The most affected households are thoserelying on self-employment and informal
microenterprises in urban areas.

Outlook
Tanzania’s real GDP growth rate is projected to rebound to 4.5 percent in 2021
conditional on successful global rollout of
a COVID-19 vaccine and improvement in
the business environment and prudent
fiscal management to foster a swift recovery. The global economic recovery is expected to bolster demand for Tanzanian
exports and financing of the infrastructure
projects. The current account is expected
to improve but remain at about 1.5 percent of GDP, as the growth of capitalgoods imports will outpace export
growth. The financing of capital projects is
expected to widen the fiscal deficit toabout 2.9 percent of GDP, while recurrent
expenditures are expected to remain controlled.
The current outlook is highly uncertain
with risks are tilted to the downside. GDP
is projected to grow by between 3.0 and
5.3 percent in 2021, below its long-run
potential growth rate of about 6 percent.
Even without an uncontrolled domestic

TABLE 2 Tanzania / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

outbreak, an ongoing global health crisis
would continue to undermine external
demand, especially for tourism. A persistently weak global economy would also
limit the availability of capital inflows,
including to private and financial sectors.
The international poverty rate is projected
to fall to 49.8 percent in 2021 but remain
above the pre-crisis level. To sustainably
reduce poverty, the recovery must create
jobs, including for the low-skilled workers, enable growth of small and medium
enterprises, and foster productivity ofagriculture, on which three-quarters ofpoor households depend. To bolster
household consumption and accelerate
poverty reduction, the government must
further strengthen the implementation ofsocial assistance programs such as Productive Social Safety Nets Program andensure adequate coverage in urban areas.
The government will need to maintain
prudent macroeconomic and fiscal management to ensure that adequate fiscal
space is available to finance major investments in physical, human, and institutional capital.

(annual percent change unless indicated otherwise)
2018
5.4
5.6
2.0
7.7
-1.7
16.7
5.4
3.4
9.7
3.8
3.5
-3.7
1.7
-2.5
39.7
-0.9
49.4
76.8
91.8

2019
5.8
3.1
2.3
8.0
19.0
-1.4
5.8
3.5
10.3
4.2
3.5
-2.3
1.6
-1.4
38.1
0.4
49.3
76.7
91.8

2020 e
2.0
1.0
7.4
2.4
-8.6
-7.6
2.0
3.1
2.5
0.9
3.4
-1.6
1.0
-2.0
38.1
0.2
50.5
77.6
92.2

2021 f
4.5
3.3
8.1
4.2
8.2
5.1
4.5
3.6
7.4
2.9
3.5
-1.5
1.2
-2.9
37.3
-0.8
49.8
77.1
92.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2007-HB S and 2018-HB S. A ctual data: 2018. No wcast: 2019-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using annualized elasticity (2007-2018) with pass-thro ugh = 1based o n private co nsumptio n per capita in co nstant LCU.

MPO 289 Apr 21

2022 f
5.5
3.8
8.0
9.5
8.5
14.2
5.5
3.5
8.2
4.6
3.7
-2.4
1.4
-3.2
36.9
-1.0
48.3
76.1
91.5

2023 f
6.0
4.1
7.8
10.0
8.7
13.3
6.0
3.5
9.4
4.7
4.0
-3.3
1.6
-3.5
36.5
-1.2
46.8
75.0
91.0

TOGO

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

8.3

GDP , current US$ billio n

7.4

GDP per capita, current US$

888.2

Internatio nal po verty rate ($ 1.9)

a

51.1
a

74.2

a

90.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

43.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

124.3

b

60.8

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 9); life expectancy (201 8).

Growth decelerated in 2020 as the containment and mitigations measures tocurb the spread of COVID-19 negatively
affected private consumption, tourism
and economic activity at Togo’s main
port. External and fiscal balances also
worsened, while poverty rose. Growth andpoverty reduction are expected to gradually recover over the medium term.
Downside risks to the outlook include
larger-than-expected COVID-19 effects,
political uncertainty, heightened insecurity in neighboring countries, and banking
sector vulnerability.

COVID-19 halted Togo’s strong growth
momentum and exacerbated structural
constraints that hinder economic growthand economic transformation. Between
2017 and 2019, growth was robust, averaging 5 percent (2.4 percent in per capita
terms), supported by stable macroeconomic conditions and significant improvements in the business climate. However,the country has yet to take full advantage
of its potential, as GDP growth was lower
than WAEMU peers and did not lead to
improvements in living standards. Whilecritical Doing Business reforms havebeen achieved, efforts to shift the development model towards private sector led
growth are constrained by poor infrastructure, notably in energy and telecommunications and weak governance. Burdensome custom procedures and logistics weaknesses also prevent Togo fromfully harnessing its potential as atransport and logistics platform. Finally,
the potential of digital technology remains untapped and prevents innovationin key economic sectors.
These constraints have been worsened by
COVID-19, which brought the economy toa near halt, reversing gains made in poverty reduction. The path to an inclusive
and sustained post-COVID recovery remains uncertain and depends on thedepth and the duration of the pandemic.
While the rollout of vaccines and a

FIGURE 1 Togo / Evolution of fiscal indicators

Percent of GDP

recovering global economy could help
GDP expand, several downside risks remain (including virus mutation and rising
security risks in neighboring countries),
which could weigh on investment, trade,and public finances. Also, unfavorable
weather conditions and the unavailabilityof inputs could negatively affect agricultural productivity, while the relative
weakness of administrative capacity could
limit the implementation of reforms andprivate investment. Finally, contingent
liabilities associated with a delay in restructuring two state-owned banks could
pose a risk to financial stability and fiscal
sustainability.

Recent developments
Growth decelerated sharply to 0.7 percent in 2020 (-1.7 percent in per capita
terms), as private consumption fell froma decline in household incomes and businessactivityassocial-distancing
measures were implemented. Also, travel
restrictions negatively impacted tourism,
while the agriculture sector remained
resilient, as the Government provided
subsidized agriculture inputs. Inflationrose to 1.8 percent in 2020, driven byhigher food prices from supply chain
disruptions.
The current account deficit widened to 3.7
percent in 2020 from lower exports andhigher imports of health products to combat COVID-19. Lower demand from key
trading partners, combined with a significant drop in the prices of Togo’s main

FIGURE 2 Togo / Actual and projected poverty rates andreal GDP per capita
Percent of GDP

2

62

1

60

0
-1

Poverty rate (%)
100

Real GDP per capita (LCU constant)
6000005000008058400000
60

-2

56

-3
-4

54

-5

52

-6
-7

50
2018

2019

2020

2021

2022

2023

30000040
20000020
002006 2008 2010 2012 2014 2016 2018 2020 2022

General Government Balance (lhs)
Primary Balance (lhs)
General Government Debt (rhs)
Sources: INSEED and World Bank staff estimates.

100000International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 290 Apr 21

Lower middle-income pov. rate
Real GDP pc

commodities (including phosphate andcoffee) lowered exports.
The fiscal deficit widened to 6.1 percent of
GDP in 2020, reflecting a significant contraction of government revenues, as economic activity declined and due to tax
breaks for firms, and a sharp increase in
expenditures to address the COVID-19
crisis and promote economic recovery.
Public debt as a percent of GDP increased
to 57.5 percent in 2020.
External reserves reached an estimated 5.5
months of imports in 2020 due to large
donor support and reduced imports during the pandemic. Between March andOctober 2020, the REER appreciated by 6.4
percent y/y, reflecting the nominal appreciation of the Euro against the USD. To
support regional economy and COVID-19
related extra spending, the BCEAO announced a set of monetary and macroprudential measures since March 2020, including a policy rate cut and extended
refinancing operations of the 3-month
COVID-19 bonds to support governments
and businesses.
Poverty remain high and concentrated inrural area. Although poverty has declined
in recent years, more than two fifths of the
population still live in poverty. The poverty rate (using the national poverty lineof 743.2 CFAF per day) was 45.5 percent
in 2018-19, suggesting a continued

decrease. Because of the COVID-19 pandemic, the extreme poverty rate is estimated to have increased to 46.3 percent
in 2020. Poverty worsened mainly in urban areas from job losses and increases inprices of basic consumption goods.

OutlookReal GDP is projected to grow by 3.4 percent (1 percent in per capita terms) in
2021, rising to 5.0 percent in 2023. Growth
will be supported by higher exports, as
economic activity gradually resumes in
key trading partners and by the continuous improvements in public infrastructure
and the business climate. Also, plans tobuild or rehabilitate rural roads will boost
activity in the construction sector, while
the re-opening of borders will improveaccess to agricultural inputs, thereby increasing productivity.
The current account deficit will improveslightly in 2021, from 3.7 percent of GDP in2020 to 3.6 percent of GDP in 2021, as recovering export growth outstrips rising
import demand. In the medium-term, theexternal deficit is expected to stabilize ataround 3.6 percent of GDP, balancing acontinual recovery of exports with increases in imports as investments and private

TABLE 2 Togo / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

consumption rebounds. The current account deficit will be financed by grants,savings from the Debt Suspension Initiative and concessional loans.
The fiscal deficit is projected at 6.1 percent
of GDP in 2021, before gradually declining
to reach the WAEMU convergence criteriaof 3 percent in 2023. Revenues are expected to rise in line with GDP growthand from an end of the tax holidays tosupport firms in 2020. Total expenditure
as a percent of GDP will remain unchanged, as the decrease in current expenditures is fully offset by the rise incapital expenditures. Public debt will increase to 60 percent of GDP in 2021, before
declining over the medium-term as theprimary fiscal deficit is gradually reduced.
The risk of external debt distress is moderate, while the risk of overall debt distressis high due to increases in regional debt.
Extreme poverty will remain high at 45.9
percent in 2021, as food prices remain
high, reflecting a rebound in consumption
demand and persisting supply chain disruptions. Extreme poverty is projected toreturn to the pre-COVID trajectory in 2022
and follow a downward trend in the medium-term supported by the scaling-up ofGovernment cash transfer programs to thepoorest and most vulnerable.

(annual percent change unless indicated otherwise)
2018
5.0
2.8
23.1
16.8
2.0
5.3
5.2
3.2
3.9
6.6
0.9
-1.9
3.5
-0.6
57.3
1.2
47.0
71.9
89.0

2019
5.5
3.0
-2.9
20.2
1.0
1.2
4.4
1.9
6.5
4.5
0.7
-2.5
4.0
-0.9
53.5
1.2
45.7
70.3
88.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2015-QUIB B . A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 0.87 based o n GDP per capita in co nstant LCU.

MPO 291 Apr 21

2020 e
0.7
-4.9
21.1
8.6
3.6
4.1
0.7
4.0
0.8
-0.7
1.8
-3.7
2.2
-6.1
57.5
-3.2
46.3
71.3
88.8

2021 f
3.4
3.7
-26.3
36.2
5.0
13.0
3.4
6.0
6.5
0.9
2.0
-3.6
2.7
-6.1
60.0
-3.6
45.9
70.5
88.7

2022 f
4.6
3.6
19.0
12.3
3.6
13.0
4.6
5.9
7.5
2.7
2.2
-3.6
2.0
-4.1
60.0
-1.9
45.3
69.5
88.3

2023 f
5.0
3.6
1.1
20.4
3.6
13.0
5.0
5.9
8.1
3.1
2.0
-3.8
1.9
-3.0
58.9
-0.5
44.3
68.5
87.7

UGANDAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

45.7

GDP , current US$ billio n

30.7

GDP per capita, current US$

671.8

Internatio nal po verty rate ($ 1.9)

a

41.3

a

42.8

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

102.7

b

63.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 6), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

The COVID-19 crisis pushed the economy into three consecutive quarters of
GDP contraction and revealed weaknesses
in Uganda’s path towards industrialization. Consequently, revenue shortfalls
deepened, while current spending rosecompared to last fiscal year, and inflationary pressures abated. Growth is expected
to worsen in FY21 before recovering in
FY22–23 with the rollout of COVID-19
vaccines. Extreme poverty is also expected
to rise, especially in urban areas.

Prior to the COVID-19 outbreak, structural transformation was driving a decline inpoverty, despite a slowdown in trend economic growth over the last decade. The
transformation was characterized by asizable reduction in the workforce employed in agriculture to between 60–
65 percent from 75 percent a decade ago,
and a take-off in industrial production,
largely in agro-processing. Notwithstanding shifts to higher productivity jobs, percapita real GDP growth decelerated to
1.3 percent in the five years prior to the
COVID-19 crisis, from 2.2 percent between
2010 and 2015, as population growthclimbed to 3.7 percent per year. Nevertheless, poverty is projected to have declined
from 41.3 to 40.2 percent between 2016
and 2019. However, the poor remain
highly vulnerable to shocks, as seen in thetemporary rise in poverty following the
2016/17 drought.
COVID-19 may reverse the declining
poverty trend from the past decade, withwidespread closures of firms, permanentlayoffs in industry and services, and a
rapid slowdown of economic activity,
especially in the urban informal sector.
The economic scarring is likely to persist
over the long run as real per capita income will struggle to catch up with levels
expected before the crisis (Figure 1). The
lack of social safety nets has resulted in
the displacement of labor from urban

employment back to low-productivity
farming. Meanwhile, rising debt vulnerabilities curtail fiscal measures to accelerate
growth and improve the quality of public
investment in human and physical capitalthat is needed to enhance productivity.
The government could use the crisis toreplace inefficient spending programs
such as, for example, Operation WealthCreation, with better approaches to boost
productivity. Furthermore, the agricultural supply chain would benefit from investments in post-harvest storage facilities
that would improve the quality and reliability of supply for the domestic manufacturing sector.

Recent developments
With the full impact of the COVID-19
shock in FY21, real GDP growth is expected to decline to 1–2 percent comparedto 2.9 percent in FY20. Growth contracted
in the first quarter of FY21 (July–
September 2020) by 2.2 percent (yoy)—thethird consecutive quarter of negative
growth—driven by a sharp decline in services, mostly tourism, and was offset inpart by a mild recovery in industrial production. Meanwhile, inflationary pressures have abated, despite expansionary
monetary policy and financial policies
aimed at easing liquidity for banks andbusinesses. Lower growth narrowed thecurrent account deficit by 1 percentage
point to 5.9 percent of GDP in FY20, as
both exports and imports declined by
US$3.3 billion and outflows of investment

FIGURE 1 Uganda / Evolution of real GDP per capita (US$)
as projected pre- and post-COVID

FIGURE 2 Uganda / Actual and projected poverty rates andreal private consumption per capita

Real GDP per capita (US$)

Poverty rate (%)
60

820
810

Real private consumption per capita (LCU constant)
2500000

50

800
790

2000000

40
1500000

780
30

770

1000000

760

20

750
500000

10

740

730

0

720
FY17

FY18

FY19

FY20

FY21f

FY22f

0

2005 2007 2009 2011 2013 2015 2017 2019 2021 2023

FY23f

Pre-COVIDInternational poverty rate

Sources: UBOS and UN, WB staff calculations through MFMOD.

Source: World Bank. Notes: see Table 2.

Post-COVID

MPO 292 Apr 21

Real priv. cons. pc

income and employee compensation decelerated.
Despite a near full recovery of employment after lockdown measures were liftedby August 2020, household incomes have
not returned to their pre-pandemic levels.
Private consumption per capita is projected to shrink 2.7 percent between 2019 and
2021, resulting in a 1.5 percentage point
increase in poverty by end-2021 (Figure 2).
The transmission channel for the impact
on household incomes is largely employment and income losses in service andindustry sectors.
The fiscal deficit is estimated to have widened to 9 percent of GDP in the first halfof FY21 from 6.6 percent during the same
period of FY20. The decline in direct taxes
reflects tax deferments and business closures, while the drop in VAT and excise
duties mirrors the slowdown in private
consumption and imports. The government’s spending response to the crisis has
included an acceleration in military expenditures, which rose 45 percent since
the start of the crisis (March to November)compared to the same period the year
before. Spending on health and education,
meanwhile, increased 30 and 15 percent,respectively, which included the hiring of
temporary workers to help manage thepandemic.

OutlookThe displacement of labor and an uncertain post-election period will slow therecovery from the ongoing COVID-19
crisis, with real GDP growth expected topick up in FY22–23. This rebound, averaging 5.6 percent in FY22–23, is predicatedon a pick-up in private consumption andinvestment, supported by higher growthin exports as the global economy recovers.
The latter is assumed to benefit from theglobal rollout of COVID-19 vaccines in
2021. A more prolonged downturn intourism revenues, further subdued inflows of remittances, and delays in the
final investment decision by companies in
the oil sector could result in growth dropping to 4.5 percent over FY22–23.
Accompanied by rising debt vulnerabilities over the medium term, the fiscal deficit is projected to remain above 5 percent
on average in FY22–23. Despite an expected correction in the primary deficit to
2 percent of GDP by 2023, public debt islikely to exceed 51 percent of GDP by
2023. Debt risks will become more pronounced if there is a bigger than expected
reliance on domestic borrowing, where
1-year treasury bill yields have averaged

TABLE 2 Uganda / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b

around 13 percent since July 2020. On theupside, oil prices have recovered morethan expected, with Brent crude above
US$60 in February 2021. This increases thelikelihood of oil companies taking thefinal investment decision, which would
unlock large FDI inflows and an investment boom.
The expected slow recovery in private
consumption means the poverty rate isunlikely to return to pre-COVID levels
before 2023. According to the WorldBank’s projections, poverty will be 40.6
percent in 2023, still 0.4 percentage points
higher than in 2019. The size of the increase in poverty may change given thatthe full impact of the pandemic is still
unknown and will also depend on government’s handling of the ongoing crisis.

(annual percent change unless indicated otherwise)
2018
6.2
6.0
11.6
5.5
9.3
8.8
6.2
4.4
6.5
7.1
3.4
-5.3
2.8
-4.1
36.2
-2.1
41.6

2019
6.8
6.2
6.9
9.9
6.8
8.1
6.8
5.3
10.1
5.7
3.1
-6.8
3.5
-4.9
37.3
-2.8
40.2

2020 e
2.9
1.2
6.0
0.7
0.4
-6.2
2.9
4.8
2.2
2.3
3.0
-6.1
2.6
-7.2
41.1
-4.5
41.4

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2016-UNHS. A ctual data: 2016. No wcast: 2017-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 0.87 based o n private co nsumptio n per capita in co nstant LCU.

MPO 293 Apr 21

2021 f
2.0
2.3
11.2
2.0
3.2
8.3
2.0
3.5
2.8
0.7
4.0
-8.3
2.3
-8.3
47.5
-5.5
41.7

2022 f
4.7
3.4
-1.6
8.9
14.6
10.2
4.7
4.1
5.3
4.6
4.5
-7.7
2.8
-5.6
50.6
-2.8
41.4

2023 f
6.4
4.0
5.6
10.1
14.2
9.1
6.4
4.2
7.6
6.9
5.0
-7.0
3.1
-4.9
51.4
-2.0
40.6

ZAMBIAKey conditions andchallenges

Table 12020

P o pulatio n, millio n

18.4

GDP , current US$ billio n

19.4

GDP per capita, current US$

1055.9Internatio nal po verty rate ($ 1.9)

a

58.7
a

75.4

a

88.1

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

57.1

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

98.7

b

63.5

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 5), 201 1 PPPs.
(b) WDI for school enrollment (201 7); life expectancy (201 8).

The COVID-19 crisis exacerbated Zambia’s fragile macroeconomic situation in
2020. The economy contracted by 1.2 percent, reflecting the impact of lockdown
measures and external shocks due to thepandemic. Poverty is estimated to haveincreased by just over 1 percentage point
to 59.7 percent. A weak rebound is expected in 2021, but prospects for a stronger and sustainable recovery hinge on progress on debt restructuring and fiscal
consolidation, the COVID-19 pandemic
outlook, and reforming the current
growth model.

Zambia’s economic challenges in recent
years have highlighted the need to diversify away from a mining-led development
model. Zambia experienced a period of
unprecedented growth averaging at 7.4
percent per annum over 2004-2014. This
raised GDP per capita levels by nearly 53
percent, with the country becoming a lower middle-income country in 2011. These
successes followed debt relief under HIPCin 2005, increased production in agriculture and mining along with rising global
copper prices and investment in the social
sectors. However, delays to unwind expansionary fiscal policies over the past
decade in the face of copper price fluctuations and weather vagaries led to increasing macroeconomic and debt vulnerabilities. Debt to GDP increased from 23.8 percent in 2014 to 141.3 percent by 2020.
The Zambian economy was already at its
weakest point at the onset of the COVID19 pandemic. Growth in 2019 slumped to
the lowest in two decades (1.4 percent),
with drought conditions impacting agriculture, electricity and copper production.
Expansionary fiscal outturn in 2019– anoverall deficit of 11.4 percent of GDP, further constricted the country’s fiscal space.
Inflation started rising above the authorities’ target band of 6-8 percent beginning
June 2019 and the Kwacha depreciated by
18.3 for the year, leading to a tightening ofmonetary policy. By 2019, Zambia’s debt

was assessed to be at high risk of debt
distress and unsustainable. Combined,
these macroeconomic pressures led to aliquidity crisis by the end of 2019 and underlined the need for significant fiscal
consolidation and diversification beyond
mining.

Recent developments
The COVID-19 pandemic pushed into
contraction an economy that was alreadyweakened by recent persistent droughts,
falling copper prices and unsustainablefiscal policies. Economic activity throughQ3 of 2020 contracted by 1.7 percent, as
declines in industry and services outweighed growth in agriculture. Mining
and services suffered from lower global
demand and social distancing measuresearlier in the year, respectively. However,relaxation of the lockdown measures insecond half and a global pick-up of copper
prices helped activity to recover. Overall,the economy is estimated to have contracted by 1.2 percent in 2020 - the first recession for Zambia since 1998. Inflation remained in double digits throughout 2020-averaging 15.7 percent --and reached ahigh of 21.5 percent in January 2021.
The COVID-19 pandemic has also deepened Zambia’s fiscal and debt vulnerabilities. Falling revenues and COVID-related
expenditures saw the fiscal deficit increase
to 10.3 percent of GDP compared to an
approved budget of 6.5 percent. The Kwacha depreciated by over 50 percent while
reserves declined to $1.2bn even as the

FIGURE 1 Zambia / Interest payments on debt as a share ofdomestic revenues

FIGURE 2 Zambia / Actual and projected poverty rates andreal GDP per capita

Percent of domestic revenue
35

Poverty rate (%)
100

30

80

8000

60

6000

40

4000

20

2000

25

Real GDP per capita (LCU constant)
10000

20

15
10

0

5

0

2006 2008 2010 2012 2014 2016 2018 2020 2022
0
2020

International poverty rate
Upper middle-income pov. rate

Sources: Zambian authorities and World Bank Staff estimates and projections.

Source: World Bank. Notes: see Table 2.

2014

2015

2016

2017

2018

2019

MPO 294 Apr 21

Lower middle-income pov. rate
Real GDP pc

government accumulated over US$840mn
in external arrears through December
2020—a clear reflection of increasing debt
service pressures (figure 1). By September
2020, the government stopped servicing
all external debt except for multilaterals
and some priority projects; this was followed by a default on the Eurobond repayments in November. As debt became
unsustainable, the authorities embarked
on a debt restructuring process in early2020 and in May hired legal and financial
advisors to help them with the negotiations. The country’s participation in the
Debt Service Suspension Initiative (DSSI)
has helped free up resources for the
COVID-19 response. The government has
also requested debt treatment under the G-20 Common Framework, agreement of
which could help frame and support the
debt restructuring process with all creditors. Restoring Zambia’s external debt tosustainable levels will require significant
debt restructuring, including debt reduction to reduce the present value of debt,
and fiscal consolidation.
Poverty and vulnerability have increased
due to the pandemic. The national poverty
headcount rate is expected to increase byaround 1.1 percentage points from 58.6
percent in 2019 to 59.9 percent by 2021.
This is largely driven by increases in poverty in urban areas, and among thoserelying on employment income from theinformal sector. A World Bank Household
Monitoring phone survey found that 4 in
5 households reported a drop-in income
from nonfarm business, and that 1 in 3
reported a reduction or disappearance ofwages. Core recurrent spending, including social benefits, has suffered in recent
years, with only about one third percentof the government’s budget on social cashtransfers (SCT) disbursed in FY20. While
the government has budgeted for a higher
amount in SCT in FY21, this could be further affected by the increasing fiscal pressures due to the crisis, with a substantial
impact on the most vulnerable households
in the population.

Outlook
A gradual recovery is expected, with GDP
growth projected at 1.8 percent in 2021 andaveraging 2.8 percent over 2021-23. Higher
copper prices, the commissioning of a newhydro power station, and a return to normal rainfall patterns are expected to support growth in agriculture and electricity
production, key contributors to Zambia’s
industry and service sectors. However, theimpact of COVID-19 will continue todampen activity, especially in tourism

TABLE 2 Zambia / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b(about 7 percent of GDP) and retail andwholesale trade (20 percent of GDP).
While the recent uptick in copper prices
could help in ramping up mining activity
in the short-term, a stable fiscal regime
and clarity on the role of the state will be
critical for regaining and increasing investment in the sector for longer-term
benefits. Absent decisive policy interventions and in the face of fiscal pressures,
poverty is expected to peak in 2022 at
60.0 percent.
The risks to this outlook are balanced.
Timely achievement of macroeconomic
stability will largely depend on progress
on debt restructuring and to fiscal consolidation and the availability of the COVID19 vaccines. However, a prolonged fallout
from COVID-19 could amplify fiscal anddomestic liquidity challenges, deepen
exchange rate pressures, further weaken
the base on which the Zambian economy
is expected to recover, and lengthen thetime for Zambia to embark on key macroeconomic and structural reforms. Rainfall
variability remains a key structural risk toZambia’s sustainable growth, affecting
key sectors like agriculture and electricity,and highlights the need to incorporate
climate-smart solutions in the country’s
long-term growth strategy.

(annual percent change unless indicated otherwise)
2018
4.2
1.2
-14.9
9.9
8.7
4.9
4.0
-21.2
4.6
7.3
7.5
-1.3
1.4
-10.1
77.8
-5.5
58.3
74.9
87.7

2019
1.4
2.3
-10.1
-14.3
-7.2
-13.7
1.5
7.7
-3.3
3.5
9.1
1.1
-1.0
-9.5
88.4
-5.6
58.6
75.3
88.0

2020 e
-1.2
3.1
10.8
-29.9
10.8
-9.8
-1.2
18.2
-1.5
-3.1
15.7
8.4
2.0
-10.1
84.2
-7.0
59.7
76.0
88.5

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2015-LCM S-VII. A ctual data: 2015. No wcast: 2016-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2015) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 295 Apr 21

2021 f
1.8
3.6
-15.8
8.9
8.6
16.1
1.8
4.5
1.0
1.8
21.0
6.5
2.0
-8.1
76.0
-3.7
59.9
76.2
88.6

2022 f
2.9
4.5
-11.4
6.1
9.8
14.3
2.9
4.0
1.8
3.3
19.0
5.9
3.1
-5.6
73.1
-2.2
60.0
76.4
88.8

2023 f
3.8
4.5
-4.4
12.6
6.9
13.1
3.8
4.0
3.6
3.9
10.0
3.5
3.0
-2.2
100.3
0.4
59.9
76.2
88.6

ZIMBABWE

Key conditions andchallenges

Table 12020

P o pulatio n, millio n

14.9

GDP , current US$ billio n

17.0

GDP per capita, current US$

1145.1

Internatio nal po verty rate ($ 1.9)

a

39.5
a

63.8

a

82.8

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)a

50.4

Gini index

Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

b

109.9

b

61.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) M ost recent value (201 9), 201 1 PPPs.
(b) M ost recent WDI value (201 8).

The economy is projected to rebound in
2021, driven by recovery in agriculture,
although output per capita will not reachpre-pandemic levels until after 2023. Inflation though declining is projected toremain high in 2021, responding to risinginternational oil and food prices. Fiscal
deficit is projected to be within sustainable limits, as revenue continues to recoverwhile non-wage expenditure is constrained by implementation challenges.
Poverty levels will remain high, amid
continued elevated prices, and a slow recovery of jobs and wages.

Macroeconomic challenges and natural
disasters have kept Zimbabwe’s growthvolatile. High inflation, unstable exchange rates, and unsustainable debt
have constrained macroeconomic stability and productivity growth. Trade integration has declined and foreign direct
investment (FDI) remained low, limitingtransfer of new technologies and investment in modernizing the economy. Increased frequency of unfavorable weather events, including a drought persisting
for almost three years and the devastating Cyclone Idai, downsized rain-fed
agriculture, electricity and water production with ripple effects to other economic
sectors and social conditions. As a result,after growing at 6.8 percent in 2010–14,
Zimbabwe’s economy contracted by 1.3
percent in 2015–20.
With no access to concessional externalfinancing, Zimbabwe has relied on mobilizing domestic resources, donor assistance, and expensive external loans to
mitigate the impact of natural disasters
and the pandemic. To contain inflation,
fiscal policy remained tight which has
weakened delivery of basic social services.
As a result of low or negative economic
growth and natural disasters, extreme
poverty has steadily increased over thelast decade, rising from 21 percent in 2011
to 39.5 percent in 2019 (based on $1.90
poverty line). With the onset of the

COVID-19 pandemic, the number of extreme poor is estimated to have reached42.3 percent in 2020 (based on $1.90 poverty line) of the population in 2020. Bringing the pandemic under control so that
economic activity can resume as normal
remains the priority in the near term. Zimbabwe’s recovery needs to be underpinnedby policies promoting productivity growth,such as reducing state intervention in theeconomy; lessening the regulatory burden;
strengthening governance and anticorruption efforts; lowering barriers toregional trade integration; and removing
forex retention requirements. Service delivery needs to be strengthened and household vulnerability reduced through robustsocial safety net programs.

Recent developments
GDP is estimated to have contacted by 8
percent for a second year in a row as the
pandemic
haltedeconomicrecovery. Containment measures depressed
manufacturing, non-mineral exports, andthe hospitality, trade, and transport sectors. Sales of manufacturing and services
firms in July 2020 were about half the levelof the previous year. Supply-side shocks
subsided after mobility restrictions wereeased, but domestic demand was weak in
an environment of triple-digit inflation,
loss of productive jobs and income losses.
Several years of drought necessitated increased imports of maize and electricity,while the pandemic presented new demands for lab equipment and medical

FIGURE 1 Zimbabwe / Official and parallel-market exchange
rates

FIGURE 2 Zimbabwe / Actual and projected poverty rates
and real private consumption per capita

ZWL$/US$120

Poverty rate (%)
100

100

80

Real private consumption per capita (LCU constant)
1600
1400

80

1200
1000

60

800

60
40

600

40

400

20

20
0
Jan-20200
0Mar-20May-20

Official exchange rateJul-20

Sep-20Nov-20Jan-21

2013

2015

2017

International poverty rate
Upper middle-income pov. rate

Parallel market exchange rate

Sources: Reserve Bank of Zimbabwe and World Bank Staff estimates.

0

2011

Source: World Bank. Notes: see Table 2.

MPO 296 Apr 21

2019

2021

2023

Lower middle-income pov. rate
Real priv. cons. pc

supplies. High inflows of remittances anda positive trade balance kept the current
account in surplus.
The need to contain inflation limited fiscal
and monetary policy responses to the pandemic. Fiscal policy remained tight—witha small deficit of 1.2 percent of GDP—
despite wage pressures and additional
spending needs to respond to the pandemic and growing number of poor. In
June 2020, the Reserve Bank of Zimbabwe
operationalized the reserve money targeting framework, floated the exchange rate,and introduced a foreign currency auction. These measures helped to stabilize
the parallel market exchange rate andreduce the parallel market premium (seeFigure 1), although the auction exchange
rate system remained distortionary. As aresult, inflation slowed to 322 percent in
February 2021 from its peak of 838 percent
in July 2020.
The economic disruption continues toundermine household welfare. Morethan a quarter of households were severely food insecure in July 2020, while
the coverage of the social assistance program remains low, and 28 percent of agricultural households are unable to sell
their farm products. Nationally, 16 percent of non-farm business owners reported temporary or permanent closure ofbusinesses in July 2020, and 58 percent

had no, or lower revenue compared tothe previous month.

OutlookAfter two difficult years, Zimbabwe’s
economy is set to return to positive
growth in 2021 amid downside risks.
GDP is projected to grow by 2.9 percent
in 2021, led by a recovery in agriculture,and due to base effects. The impact of asecond wave of the pandemic and uncertainty about the roll out of vaccines are
expected to weigh on recovery of domestic and external demand. Domestic demand is projected to remain weak on theback of continuing high inflation, limited
fiscal space for expansion, and weak labor market due to the pandemic. Economic recovery is expected to strengthen
in 2022 with GDP growing at around 5
percent as the deployment of vaccines
intensifies and consistent implementationof the recently approved National Development Strategy reforms start bearing
fruit. However, a more prolonged pandemic, weaker global demand, andheightened macroeconomic instability
could delay economic recovery, increase
poverty, and worsen human capital development outcomes. If risks materialize,

TABLE 2 Zimbabwe / Macro poverty outlook indicators

Real GDP growth, at constant market prices
Private Consumption
Government Consumption
Gross Fixed Capital Investment
Exports, Goods and Services
Imports, Goods and Services
Real GDP growth, at constant factor prices
Agriculture
Industry
Services
Inflation (Consumer Price Index)
Current Account Balance (% of GDP)Net Foreign Direct Investment (% of GDP)
Fiscal Balance (% of GDP)
Debt (% of GDP)
Primary Balance (% of GDP)
International poverty rate ($1.9 in 2011 PPP) a,b
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

economic growth could be lower than 2
percent in 2021. Recovery of tourism,
trade, and transport is unlikely to occur
until 2022.
Despite renewed economic activity, poverty is likely to remain high as the scars
from two years of recession, food insecurity, natural events, and the economic dislocations of the pandemic linger. The number of extreme poor is expected to remain
at 6.3 million in 2021 amid elevated prices,risk of more surges in coronavirus cases,
and a slow recovery of jobs and wages in
the formal and informal sectors. Given
limited social safety nets for protecting thegrowing number of poor, household vulnerability will likely remain high with
continuing negative coping strategies suchas depleting assets, compromising on
quantity and quality of food, forgoing
precautionary health care, and keeping
children out school. Delayed economic
recovery will further deepen poverty andsocial exclusion.

(annual percent change unless indicated otherwise)
2018
4.8
-6.7
9.2
25.8
-29.3
-25.3
5.1
18.3
3.2
4.0
10.6
-5.7
-3.0
-6.0
72.4
-4.6

2019
-8.1
-13.4
-19.2
-4.3
-5.1
-21.0
-8.1
-21.1
-10.2
-5.1
255.1
6.3
-1.5
0.3
88.5
1.3
39.5
63.8
82.8

2020 e
-8.0
-5.2
15.9
-18.9
-1.4
3.0
-8.0
-5.2
-2.7
-10.4
556.6
6.2
-0.9
-1.2
88.6
-0.2
42.3
66.2
84.2

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2017-P ICES. A ctual data: 2017. No wcast: 2018-2020. Fo recast are fro m 2021 to 2023.
(b) P ro jectio n using neutral distributio n (2017) with pass-thro ugh = 0.87 based o n private co nsumptio n per capita in co nstant LCU.

MPO 297 Apr 21

2021 f
2.9
3.0
4.7
3.2
3.0
4.5
2.9
6.8
6.7
0.8
150.0
4.2
-2.1
-2.2
87.2
-0.6
41.7
65.8
83.9

2022 f
5.1
6.4
22.2
-35.3
5.3
6.1
5.1
8.1
10.2
2.4
30.0
2.0
-2.7
-2.5
85.6
-0.5
39.8
64.0
82.9

2023 f
5.0
5.9
22.6
-70.4
5.5
5.8
5.0
9.3
11.8
1.2
20.0
0.9
-2.9
-3.0
81.7
-1.0
37.9
62.6
82.0

Macro Poverty Outlook

04 /2021