Sub-Saharan Africa

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

AnnualMeetings2020

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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 Oct 20

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

ANGOLA

Recent developments

Table 1

2019

P o pulatio n, millio n

31.8

GDP , current US$ billio n

89.3

GDP per capita, current US$

2806.9Internatio nal po verty rate ($ 1.9)

a

51.8
a

73.2

a

89.3

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’s economy and public finances
have been affected by the COVID-19 pandemic primarily through its negative impact on the oil sector. The result is a deepening of the recession that began in 2015.
COVID-19 measures are financed mostly
by expenditure re-prioritization, yet afiscal deficit in 2020 will further increase
the very high public debt. Exchange rate
depreciation is also adding to debt andinflation. A spike in food prices and reduced activity in services are expected toincrease poverty and food insecurity.

The COVID-19 crisis has pushed Angola
into a fifth year of recession, with GDP
projected to contract by 4 percent in 2020.
Although the spread of COVID-19 in Angola has been limited (10 per 100,000 as of
September 11), the pandemic has resulted
in lower oil prices and restrictive OPEC+
quotas. Oil production declined 17 percent
year-on-year in September 2020, standingat 1.2 million barrels per day. Services
activities dropped sharply in the first halfof 2020 as spillovers from the oil crisis andthe additional impacts of COVID-19 cause
a contraction of the non-oil sector. In contrast to 2019, when non-oil GDP expandedby 2 percent, in 2020, both oil and non-oil
sectors are contracting (by 6.8 percent and2.6 percent, respectively). The crisis is expected to increase unemployment above
the 31.8 percent rate recorded in late 2019.
Driven by the decline in the volume andvalue of oil exports, the current account is
expected to swing into deficit of 1.3 percent of GDP in 2020. Oil export revenues(in US dollars) declined by 39 percent in
the first half of 2020, compared to thesame period of 2019. In the context of theoil price decline and heightened debt vulnerabilities, the currency lost 37 percent of
its value vis-à-vis the US dollar by August
2020, relative to the average of 2019. Net
international reserves stood at US$9.3
billion in early September (6 months ofimports).
With the pass-through from currency depreciation, inflation accelerated, standing,as of August, at 23.4 percent, up from 16.9
percent at end-2019. Prices for food, muchof it imported, rose faster (by 29.9 percent). Without subsistence production andwith food accounting for 44 percent ofexpenditures, urban households are particularly vulnerable.
The central bank implemented small ratecuts and reduced reserve requirements in
response to the crisis. Financial institutions were instructed to grant a debt service moratorium of 60 days. Nonperforming loans remain very high at 34.5 percent
in mid-2020 but are concentrated in a few
banks that are undergoing restructuring.
A fiscal deficit of 2.8 percent of GDP is expected in 2020, after surpluses in 2018 and2019. The government has approved additional spending to fight the COVID-19 pandemic, with new health expenditures estimated at 0.2 percent of GDP. Spending onsocial protection is also expected to increase due to the rollout of the Kwenda
cash transfer program. However, in accordance with the supplementary budget for
2020, new spending will be more than offset by expenditure cuts in non-priority areas, responding to the drastic loss in current
revenues. Debt is expected to peak in 2020
at 120 percent of GDP.

Outlook
A partial recovery is expected in 2021,
with GDP projected to grow by 3.2 percent. The recovery is conditional on astronger oil sector, especially an end to
OPEC+ production cuts and resumption

FIGURE 1 Angola / Real GDP Growth, oil and non-oil sectors

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

Percent
12

Poverty rate (%)
100

Real GDP per capita (constant LCU)
52000

9

50000

80

6
48000

3

60
46000

0
40

-3

44000

-6

20

42000

-9
0

-12

2015

2016

Real GDP

2017

2018

2019

Oil sector

2020

2021

40000
2018

2022

2019

2020

International poverty rate
Upper middle-income pov. rate

Non-oil sector

Sources: National Statistics Institute of Angola. World Bank - Macroeconomics,
Trade & Investment Global Practice.

Source: World Bank. Notes: see Table 2.

MPO 202 Oct 20

2021

2022

Lower middle-income pov. rate
Real GDP pc

of investments to halt the structural decline in production. This is consistent
with a world economy gradually recovering from COVID-19 as vaccines are rolled
out in 2021.
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 be inbalance in 2021, aided by increased oil proceeds and compressed imports. Inflation is
expected to peak in late 2020 and retreat
gradually in the following years as the impact of currency depreciation wanes.
Fiscal and debt consolidation is critical toensure the sustainability of the recovery.
The fiscal deficit is expected to decline to
0.1 percent of GDP in 2021, with non-oil
taxes making up an increasing share ofrevenues. Debt is expected to decline to 94
percent of GDP by 2022 based on continued fiscal retrenchment, prudent debt
management, and debt reprofiling.
The combination of weaker employment
opportunities and higher food inflation
will increase food insecurity and poverty.
Projections, tentative due to limited data,suggest that 56.4 percent of the Angolan

population, or 18.5 million people, liveon less than $1.90 (2011 PPP) in 2020, an
increase of nearly 2.6 million people from2018. This rate is expected to remain stable through 2022. While the new cashtransfer program only reaches 5,800 families in September 2020 during its pilot
phase, its expected coverage of 1.6 million families by 2022 should have a significant impact on poverty.

Risks and challenges

Beyond short-term challenges of macrofiscal and debt sustainability, Angola’stransition to a more diversified, privatesector led growth model has become evenmore urgent in the face of COVID-19. Sectors ranging from agriculture to financial
services have large untapped potential,
which can generate the jobs crucial for
long-term poverty reduction in the face ofhigh unemployment. However continued
progress on structural reforms, including
fuel price adjustments, are needed to advance towards a more productive andinclusive Angola.

Fluctuations in oil price remain the main
risk factor, given the country’s continued
dependency on oil and precariously highdebt burden. A renewed decline in oil
prices, which could be caused by a more
prolonged pandemic, would require Angola to accelerate fiscal consolidation or
seek more debt reprofiling.
A more widespread COVID-19 outbreakin Angola could also extend the recession
in the non-oil sector, causing even more
hardship for the population. Impacts onpoverty can be mitigated by continued
strengthening of the social protection system. Additionally, steps to reduce foodinflation and reliance on imported food
could serve as an important short-term
tool to tackle food insecurity.

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(annual percent change unless indicated otherwise)
2017
-0.1
2.9
0.3
3.0
24.5
11.2
-1.0
0.5
-3.2
2.1
29.8
-0.5
-7.2
-4.3
69.3
-1.0

2018
-2.0
-3.4
-1.7
-5.5
-7.6
-16.0
-3.5
-7.7
-5.8
0.7
19.6
7.0
-6.1
2.7
89.0
7.2
51.8
73.2
89.3

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 2018-IDREA . A ctual data: 2018. No wcast: 2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2018) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 203 Oct 20

2019
-0.9
-2.1
-1.6
-1.0
0.8
0.0
-1.2
-5.5
-2.8
1.8
17.1
5.8
-2.0
0.8
109.3
6.0
53.6
74.4
90.0

2020 e
-4.0
-1.5
-6.6
-2.4
-6.8
-2.9
-4.0
-3.9
-5.0
-2.7
21.7
-1.3
1.7
-2.8
120.3
4.0
56.4
76.8
91.3

2021 f
3.2
2.1
-0.5
2.0
6.1
2.1
3.2
1.8
4.6
1.5
17.8
0.1
1.4
-0.1
107.5
6.1
56.4
76.8
91.3

2022 f
3.0
2.3
3.8
5.0
2.2
2.9
3.0
2.9
2.2
4.0
14.5
0.9
1.7
1.0
93.8
6.7
56.5
76.9
91.3

BENIN

Recent developments

Table 1

Following a robust 6.9 percent growth (4.0
percent in per capita terms) in 2019, economic activity decelerated in early 2020
due to the COVID-19. Growth reached 3.9
percent year-on-year (y-oy) in the firstquarter, down 2.8 percentage points (ppts)
on a yearly basis. On the supply side, thefall was due to disruptions in manufacturing (-2.9 percent y-o-y) while COVID-19
containment and mitigation measures
adversely effected the retail sector (-6.5
percent y-o-y). Inflation turned negativein 2019 (-0.9 percent), but the trend reversed in the first half of 2020 reaching 2.0
percent in August 2020, on the back ofhigher transport and produce prices.
The current account deficit (including
grants) shrank from -4.5 percent in 2018 to-4.3 percent of GDP in 2019. Boosted byhigh cotton production, formal exports
increased by 6.7 percent y-o-y in the firstquarter, but were down in the second (39.5 percent y-o-y seasonally adjusted)
due to the impact of COVID-19 on cottonand cashew prices. Imports were also
down (-36.2 percent y-o-y) as the Nigerianborder closure weighted on re-exports.
Still, the terms of trade improved in early2020 as a result of the drop in oil prices,
but the impact should be limited due toreliance on smuggled fuel from Nigeria.
The fiscal deficit (including grants) significantly narrowed, from 2.9 percent of GDP
in 2018 to 0.5 percent of GDP in 2019,
mostly due to the under-execution of externally-financed projects. During the first2019

P o pulatio n, millio n

12.0

GDP , current US$ billio n

14.4

GDP per capita, current US$

1193.7

Internatio nal po verty rate ($ 1.9)

a

49.6
a

76.3

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

122.0

b

61.5

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).

Following strong growth in 2019 (6.9
percent), driven by a pickup in manufacturing, the economy is expected to decelerate in 2020 due to the COVID-19 crisis
affecting trade and services sectors. The
external and fiscal balances will deteriorate. Growth and poverty reduction are
expected to gradually recover over the
medium term. The outlook is tilted to thedownside with risks stemming from asustained COVID-19 outbreak, the continued border closure with Nigeria, andthe 2021 Presidential elections.

half of 2020, the fiscal deficit increased (to2.4 percent of GDP) because of higher
spending associated with the crisis response and persistently lower customs
revenues linked to the border closure (-25percent y-o-y). Domestic revenues haveshown resilience however (+26.1 percent y-o-y) thanks to reforms on VAT. The debtto-GDP ratio was stable at 41.2 percent of
GDP in 2019.
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. Its reserves reached
5.4 months of imports in 2019, driven by
fiscal consolidation in member states andhigher net capital inflows. To support theregional economy and COVID-19 related
extra spending, the BCEAO has implemented a set of monetary and macroprudential measures since March 2020. These
include lowering its policy rate to a fixed
2.5 percent and extended refinancing operations of the 3-month “Covid-19 T-Bills”
at 2.5 percent for limited amounts.
The recent 2018-19 WAEMU harmonizedhouseholds survey confirms that 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). World Bank
estimates suggest that the $1.9 a day(2011 PPP) poverty rate declined from49.6 percent in 2015 to 45.4 percent in2019. Non-monetary poverty indicators
have improved as well. Inequality is estimated to be moderate based on consumption aggregates, with a Gini index
of 34.7 percent in 2019. The COVID-19

FIGURE 1 Benin / Fiscal deficit and government debt

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

Percent

Poverty rate (%)

Real GDP per capita (constant LCU)

100

10

8000007000008806000006450000060

400000

2
40

0

-2

30000020000020

100000

-4
0

-6
2011

2013

2015

Budget balance (%GDP)

2017

2019

2013

2015

2017

International poverty rate
Upper middle-income pov. rate

Change in debt (%GDP)

Sources: Beninese authorities and World Bank projections.

0
2011

2021

Source: World Bank. Notes: see Table 2.
MPO 204 Oct 20

2019

2021

Lower middle-income pov. rate
Real GDP pc

crisis is expected to reverse some of thesegains in the short-term.

Outlook
COVID-19 has led to a deterioration ofBenin’s economic outlook. GDP growthis projected to decelerate by close to 5
ppts to 2 percent in 2020 (-1.0 percent inper capita terms) driven by a slowdown
in services and manufacturing. Notwithstanding the high uncertainty, growth isexpected to recover slowly to potential
by 2022. Exports and private consumption could bounce back in 2021, as the
pandemic wanes. The gradual recovery
assumes a rebound in the global economy due to the rollout of vaccine in 2021
and a re-opening of the border with Nigeria. Inflation is expected to reach 2.5
percent in 2020 due to the impact of
COVID-19 on trade.
In the short-term, Benin’s external position will deteriorate. The current accountdeficit is expected to widen in 2020 (to5.3 percent of GDP) with a decline incotton exports and re-export activity with
Nigeria. The deficit will be increasingly
financed through concessional borrowing
and grants from development partners.
WAEMU reserves are expected to decline

to 4.5 months of imports in 2020 as member countries are hit by the COVID-19
crisis. Over the medium term, the current account deficit should gradually
decline to 4.8 percent of GDP by 2022, as
exports recover.
The fiscal deficit is projected to increase
to 3.7 percent of GDP (including grants)
in 2020, compared with the pre-COVID
estimate of 2.0 percent of GDP, due toincreased social and healthcare spending,and lower tax revenues due to subdued
economic activity, and persistent borderclosures and recession in Nigeria. The
wider deficit is expected to be financed
by grants, concessional financing, andadditional bond issuance in the regional
market. The deficit should gradually return to the WAEMU convergence criterion by 2022. The public debt to GDP ratio
is projected to decrease to 42.2 percent as
early as 2021, confirming the moderaterisk of debt distress.
Poverty is expected to decrease over the
projection period as the country recovers
from the crisis, despite increasing in 2020
as a result of the slowdown in per capita
growth. The pace of poverty reduction
will stumble however, due to the ongoing
COVID-19 pandemic. The $1.9/day PPP
poverty headcount rate would decrease
from 45.7 percent in 2020 to 43.1 percent
in 2022, while the $3.2/day PPP poverty

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

rate would decrease from 72.5 percent in2020 to 70.3 percent by 2022.

Risks and challenges
The outlook is highly uncertain with substantial downside risks primarily linked tothe duration of the COVID-19 pandemic
both globally and regionally. A prolonged
outbreak would compromise economic
recovery, increasing the fiscal and externalfinancing requirements and debt pressures. Additional containment measureswould also undermine poverty reduction
by threatening the livelihoods of the large
informal sector (85 percent of employed).
Lower cotton prices, weather fluctuations
and the persistence of the border closure
with Nigeria into 2021 are additionalrisks. Presidential elections in March 2021
could increase the risk of higher discretionary spending. Achieving economic
diversification and reducing the economic
and fiscal dependence from Nigeria remain medium-term challenges to accelerate economic transformation and poverty
reduction.

(annual percent change unless indicated otherwise)
2017
5.7
3.5
7.0
25.5
7.0
14.3
6.0
7.3
10.5
1.6
1.8
-4.1
1.1
-4.3
39.5
-2.8
48.3
75.3
90.4

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
46.8
73.8
90.1

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 2015-EM ICOV. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
6.9
3.5
5.8
10.2
8.6
3.4
6.9
7.2
6.2
7.1
-0.9
-4.3
1.3
-0.5
41.2
1.1
45.4
72.2
89.9

2020 e
2.0
2.9
10.0
4.4
-27.8
-16.5
2.0
4.2
1.0
0.8
2.5
-5.3
0.6
-3.7
42.7
-1.8
45.7
72.5
89.9

2021 f
5.0
3.4
1.1
5.9
27.2
16.1
5.0
6.7
5.7
2.9
2.0
-4.8
1.0
-3.4
42.2
-1.2
44.7
71.6
89.8

2022 f
6.7
3.7
3.3
14.2
27.8
22.3
6.7
7.8
7.4
5.0
2.0
-4.8
1.3
-2.8
40.7
-0.6
43.1
70.3
89.5

BOTSWANA
Table 1

Key conditions andchallenges
2019

P o pulatio n, millio n

2.3

GDP , current US$ billio n

18.3

GDP per capita, current US$

7894.6

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

a

36.5

a

59.1
53.3

Gini index

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

b

b

103.2
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 set to contract by arecord 9.1 percent this year as COVID-19
induced global demand shocks batter the
diamond and tourism industries. Poverty
is expected to increase to 60.2 percent in
2020, up from 56.7 in 2019, using theupper-middle-income country threshold.
While favorable developments in the global diamond industry are central to theshort-term recovery, COVID-19 has accentuated the need for a transformation in
Botswana’s growth model to develop adiversified and robust economy, and accelerate job creation.

Botswana’s diamond-cum-public sector-led
development model is showing its limitations: growth remains sluggish and ailingjob creation. Growth averaged at 3.6 percent over the last decade, below the 6 percent average between the early 1990s and2000s. Weakened global demand has kept
diamond proceeds below pre-global financial crisis levels. Increased competition
from synthetic diamonds and higher production costs have added further pressures.
Continued fiscal expansion to support
growth has created large fiscal deficits,
eroded buffers and weakened the external
position. Low capital accumulation andsluggish productivity has constrained
growth in the non-diamond economy.
Meanwhile, unemployment has remained
high, largely as the private sector struggles
to create jobs due to high costs/barriers todoing business, and inequality is stark.
COVID-19 has exacerbated existing economic and social challenges, setting backsome gains made in poverty reduction overthe past 5 years. It has also underscored theurgent need for a significant shift towards amore diversified economy. Botswana’s
2020/21 – 2022/23 Economic Recovery andTransformation Plan (ERTP), which focuses
on “building-back-better” by (i) supporting
the economic recovery, (ii) accelerating
structural transformation and (iii) building
resilience, provides the footing– but will
require significant financing and political

FIGURE 1 Botswana / Actual and estimated sectoral
contributions to Real GDP growthcommitment to materialize. Improving
public sector spending efficiency, rationalizing the SOE sector and addressing constraints that hinder private sector engagement in trade and investment are central to
the recovery.
The impact of the pandemic will dependon how it continues to unfold, both locallyand abroad. Botswana’s increase in cases
since July means more protracted travel
restrictions and lockdown measures could
be expected - ultimately slowing the paceof the recovery. Second waves of the pandemic in key export markets such as Europe and Central Asia, as well as a sluggish recovery in the diamond market
could challenge the recovery.

Recent developments
COVID-19 has pulled the breaks on economic activity. Global demand for diamonds has fallen sharply and containment
measures have reduced processing andpolishing capacity. Locally, inventories
have continued to accumulate as sales remain muted due to cancellations of sights
for diamond sales following travel restrictions. Production has also been limited:Q2 output narrowed by almost 70 percent
year-on-year. Travel restrictions have severely affected tourism, with surveyed
entities reporting a 72 percent revenue loss
in March - a trend likely to continue in
2020. Overall, business surveys point todeteriorating conditions including declines
in production, sales, profitability, investments and trade. Unemployment is on the

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

Percent, percentage points

Poverty rate (%)

12
10
8
6
4
2
0
-2
-4
-6
-8
-10

70

Real GDP per capita (constant LCU)

50000

60

40000

50
40

30000

30

20000

20
10000

10

2008

2010

2012

2014

2016

2018

2020f

2022f
0

Agriculture
Manufacturing
Public services
GDP at Constant Prices

MiningPrivate services
Net taxes

Sources: Statistics Botswana and 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 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

rise, and the youth have been disproportionally affected. The unemployment rate(based on individuals who were actively
seeking work) reached 23.2 percent in
Q1:2020, up from 22.2 percent in Q4 and20.7 percent in Q3 of 2019.
Government finances are under significant
pressure. Mineral revenues, which represent over a third of overall collection, narrowed by 96 percent in May (y/y) due tolow diamond production and sales. This,
along with measures introduced to alleviate the impact of COVID-19 on businesses(including tax deferrals) will lead to a 20
percent reduction in overall revenue collection (y/y). Efforts to strengthen healthservices and support households will create added spending pressures, with thebudget deficit widening to 7.2 percent of
GDP (from 4 percent last year). Financing
pressures are evident. The Government
Investment Account (GIA) shrank by 40
percent to US$ 1.2billion in the 12 months
to June. With 4 years of consecutive deficits eroding existing buffers, public debt
levels are set to pick up to 24 percent of
GDP (from 18 percent last year), with asignificant amount drawn from throughthe issuance of government bonds.
The COVID-induced shock to diamond
exports has severely weakened the external position. After slipping into negative
territory last year for the first time since2012, Botswana’s current account deficit is
set to widen due to a sharp decline in diamond exports (which account for 90 percent of exports). Exports were close to zeroin April and in May due to travel restrictions. While lower imports and expected SACU transfers could alleviate pressures on the external account, these are notenough to counter the significant decline inmineral exports. Notably, reserves havefallen by US400million between April andJune reflecting a widening trade balance.

Outlook
Output is set to contract by 9.1 percent thisyear as the economy (particularly mining,
hospitality and service sectors) contends
with the pandemic. Developments in the
global diamond industry will have a telling
impact on the short-term recovery given
dependence on the precious commodity.
The expected pickup in mining production
following the sharp contraction this year,
along with the easing of travel restrictions
and a resumption in diamond sales could
see the economy rebounding to 3.6 percent
in 2021. This said, and with the economic
impact of COVID-19 likely to be deep andlong-lasting, further catalysts for longer lasting growth will be required. The poverty

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,drate is projected to reach 60.2 in 2020, measured using the upper-middle-income country poverty line (US$5.5/person/day in
2011PPP). Consequently, an additional
110,000 people will be living in poverty in
2020, reaching a total of 1.5 million – a record-high for Botswana.
Fiscal pressures will remain a challenge,
particularly as Botswana embarks on the
much-needed ERTP to address structural
challenges and COVID-19’s long-term impact. With the ERTP expected to cost approximately US$ 1.7billion over a period of
2.5 years, and a similar amount of funding
required to cover the budget deficits overthe same period, Botswana’s fiscal positionis likely to remain under pressure in short-to-medium term. This, along with a sharp
decline in SACU transfers in 2021/22 due tothe deferred impact of COVID-19, will widen the budget deficit next year.
The anticipated recovery in diamond exports will help improve the trade balancenext year, but the gradual increase in imports from resumed economic activity
allied with lower SACU transfers will
likely keep the current account in a deficit
position over the medium term. Efforts todiversify exports and attract foreign investment could lead to an improvement in
the external position, although this could
take some time.

(annual percent change unless indicated otherwise)
2017
2.9
6.5
1.5
-8.8
-16.0
-21.4
2.8
1.9
-2.5
5.1
3.3
5.3
1.5
-1.1
18.3
-0.6
13.5
34.9
58.0

2018
4.5
4.1
3.7
8.1
7.1
12.3
4.5
2.6
5.5
4.1
3.2
0.6
1.1
-4.7
18.1
-4.1
12.7
33.7
57.1

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) 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: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
3.0
3.5
3.3
6.5
-16.6
6.7
3.2
-0.1
0.2
4.4
2.8
-7.6
1.2
-4.0
18.3
-3.5
12.4
33.3
56.7

2020 e
-9.1
-2.5
-10.4
6.8
-45.3
-24.7
-9.1
1.5
-13.8
-7.5
2.0
-6.9
0.5
-7.2
24.4
-6.4
16.0
38.2
60.1

2021 f
3.6
1.9
7.6
0.5
39.7
20.0
3.6
1.3
6.2
2.7
3.0
-9.9
0.6
-7.8
26.7
-7.1
15.2
37.3
59.5

2022 f
3.7
2.2
8.0
-8.4
29.8
10.5
3.7
1.1
3.1
4.0
4.0
-4.9
0.7
-5.7
26.9
-5.1
14.5
36.3
58.9

BURKINA FASO
Table 1

2019

P o pulatio n, millio n

20.3

GDP , current US$ billio n

15.2

GDP per capita, current US$

746.6

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

b

96.1
61.2

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).

Following 5.7 percent growth in 2019, theeconomy is projected to contract by 2 percent and the fiscal deficit to double to 6
percent of GDP in 2020, mainly due tothe COVID-19 shock. Reversing a longterm trend, poverty will also increase.
Over the medium term, growth and poverty reduction are expected to gradually
recover, although this outlook is subject touncertainty related to the speed of the
global recovery, the trajectory of domestic
COVID-19 infections, and insecurity.

Recent developments
The country’s real GDP growth decelerated to 5.7 percent in 2019 from 6.8 percent
in 2018, due to moderating growth in agriculture – driven by a 30 percent fall in
cotton production – and a worsening security situation that affected an important
gold mine towards the end of 2019. The
impact of the COVID-19 pandemic in thefirst six months of 2020 was also stronger
than anticipated. Real output contracted
by 1.4 percent and 8.6 percent (y/y) in thefirst two quarters, respectively. The contraction was broad-based with significant
losses in hotels and restaurants (-32 percent), commerce (-25 percent), and realestate activities (-13 percent).
The current account deficit (CAD) widened to 4.8 percent of GDP in 2019, driven
by the decline in cotton production combined with lower cotton prices. With FDI
inflows hardly covering a quarter of the
CAD, the bulk of the deficit was financed
through debt-creating portfolio flows andconcessional loans. In the first six monthsof 2020, the CAD narrowed by one percentage point of GDP due to lower imports of oil and higher prices of gold. With
COVID-19, FDI coverage of the CAD is
projected to decline in 2020.
The 2019 fiscal deficit narrowed by one
percentage point (to 3.2 percent of GDP)
mainly driven by a one-off revenue
windfall from 4G-license sales, combinedwith significant cuts in public investments. The fiscal deficit is expected tomore than double in 2020, compared to

2019. As of end-May 2020, only 35 percent of the revenue projected under the
post-COVID revised budget had beencollected, while 42 percent of total spending had materialized. In 2019, public debt
has increased for the fourth consecutive
year, to 40.0 percent of GDP and is projected to reach 47.7 percent in 2020, witha further compositional shift towards
more expensive domestic borrowing. The
country remains at moderate risk of external and overall debt distress, as assessed by the latest joint Bank-Fund debt
sustainability analysis from August 2020.
Burkina Faso’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 5.4 months of imports in 2019,
driven by fiscal consolidation in member
states and higher net capital inflows. To
support the regional economy and COVID-19 related spending, in March the
BCEAO implemented a set of monetaryand macroprudential measures. These
include lowering its policy rate to a fixed
2.5 percent and extending refinancing
operations of the 3-month “Covid-19 TBills” at 2.5 percent for limited amounts.
The latest household poverty survey,
carried out in 2014, indicated that 40.1
percent of the population lived below
the international poverty line of US$ 1.9
PPP per person per day. Subsequentcalculations suggest a consistent decline,with 36.0 percent estimated in 2019. The
Covid-19 pandemic has partially reversed this progress. High-frequency
data collected in the second quarter of

FIGURE 1 Burkina Faso / Fiscal Outlook (present)

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

Percent of GDP

Poverty rate (%)

20
15
10
5

Real GDP per capita (constant LCU)

100

5000008040000060

30000040

20000020

100000

0

-5
-10
-15
-20

0

-25
2000

2003

2006

2009

Budget balance (%GDP)
Source: World Bank

2012

2015

0
2009

2018

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Change in debt (%GDP)

Source: World Bank. Notes: see Table 2.

MPO 208 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

2020 reveal that poverty has been increasing for the first time in over a decade, driven by direct income losses due
to layoffs, the economic slowdown, or areduction in remittances inflows.

Outlook
The COVID-19-related economic shutdown during the second quarter of 2020
will have a significant impact on growthin 2020. Economic activity is projected tocontract by 2 percent. Only public consumption (3.1 percentage points) and agriculture (0.4 percentage points) are projected to positively contribute to growth, with
COVID-19 related spending measures anda weather related rebound, respectively.
Inflation is projected to rebound to 3.2
percent by end-2020 as food prices recoverfrom 2019 deflationary pressures. A gradual recovery is projected in 2021, with
inflation remaining above 2 percent.
The CAD is projected to narrow to 3.8
percent of GDP in 2020- 2021 mainly due
to gold exports benefiting from record
high prices and a lower oil import bill.
FDI coverage of the CAD is projected to
decline from 25 percent in 2019 to about
14 percent in 2020-2021. Over the medium
term, the CAD is projected to increase

moderately and stabilize slightly above 4.0
percent as oil prices rise and the services
deficit remains high.
Compared to the initial 2020 budget, thefiscal deficit is expected to almost double
to 6.0 percent of GDP and will be mostly
financed through domestic borrowing (57percent). Tax revenue collection is projected at 17.7 percent of GDP—2.9 percent
lower than anticipated under the initialbudget. On the expenditure side, compared to the initial budget, the wage bill
will be kept unchanged and some nonpriority spending will be cancelled (-0.4
percent of GPD) to accommodate COVID19-related transfers and health expenditures (+1.1 percent of GDP). Moreover,non-urgent investments will be postponed(-1.2 percent of GDP) in favor of COVID19-induced health investments (+1.7 percent of GDP). Public debt will rise to 47.7
percent of GDP in 2020 and remain on an
upward trajectory over the medium term,
although the country’s debt rating is expected to remain at “moderate”. On themonetary front, WAEMU reserves are
expected to fall to about 4.5 months ofimports in 2020 as member countries increase fiscal spending while also facing
lower net capital inflows.
The US$ PPP 1.9 poverty rate is expected
to rise by 2 percentage points from 2019
to 2020, drawing an additional 400,000

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

people into extreme poverty. In 2021, theeffects of the COVID-19 shock will persist, and extreme poverty could affect50,000 new people. Poverty reduction
would resume in the medium term as
economic growth gradually returns to its
pre-COVID path.

Risks and challenges
The post-2020 outlook is clouded by uncertainty and exposed to downside risks.
Firstly, subsequent waves of COVID-19
would increase pressure on firms andindividuals and require stronger mediumterm adjustment efforts to maintain fiscal
sustainability. Second, the spreading security crisis—with over 1 million internallydisplaced persons—could affect gold exports, agricultural production and services
output. Third, the country is constantly
exposed to risks of locust attacks and extreme weather events such as the floods of
September 2020 have shown.

(annual percent change unless indicated otherwise)
2017
6.2
2.8
-10.1
15.2
15.9
4.1
5.5
-1.1
9.3
6.7
0.4
-5.0
-0.1
-6.8
33.5
-6.0
39.6
74.6
91.5

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
40.0
-1.9
36.0
72.7
90.7

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 2009-ECVM and 2014-EM C. A ctual data: 2014. No wcast: 2015-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202020 e
-2.0
0.0
19.1
-17.8
-7.1
-2.4
-2.0
1.5
-3.1
-3.0
3.2
-3.8
0.9
-6.0
47.7
-4.7
37.9
73.7
91.1

2021 f
2.4
3.5
-2.4
7.9
4.6
7.0
2.4
2.5
1.3
2.9
2.1
-3.8
0.9
-4.6
50.7
-2.9
38.2
73.9
91.2

2022 f
4.7
6.2
-3.2
9.0
5.2
6.2
4.7
3.7
3.1
5.9
2.4
-4.1
0.7
-4.0
53.9
-2.2
37.3
73.4
91.0

BURUNDI

Recent developments

Table 1

2019

P o pulatio n, millio n

11.6

GDP , current US$ billio n

3.0

GDP per capita, current US$

260.7

Internatio nal po verty rate ($ 1.9)

a

72.8
a

89.6

a

96.9

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

38.6

Gini index

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

b

121.4

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 projected to fall to
0.3 percent in 2020 from 1.8 percent in2019 due to the COVID-19 outbreak.
Macroeconomic challenges include alarge external imbalance and fiscal pressures. With rapid population growth, percapita GDP is contracting while poverty
is expected to reach 85.9 percent in 2022.
The medium-term growth outlook isclouded by downside risks weighed downby the uncertainty around the magnitude of impact of COVID-19.

The COVID-19 shock is interrupting Burundi’s fragile economic recovery. RealGDP growth has been revised to 0.3 percent in 2020, which is 1.7 percentage
points lower than the pre-COVID projection and a sharp decline from growth of
1.8 percent in 2019. Although Burundi
has fewer confirmed COVID-19 cases—
508 cases with only one death officiallyreported to September 29—the global
crisis has hit Burundi through trade. The
economy is facing a twin demand andsupply shock while Burundi has limited
fiscal, monetary and financial buffers.
Since March 2020, the government has
introduced measures to mitigate healthrisks stemming from the movement ofgoods and people. These include thequarantine of passengers and the suspension of international commercial
flights, international official missions
and of granting entry visas. Services areprojected to contract as a result of thesecontainment measures. The small GDP
growth would be supported by foodcrops production in agriculture and beverages in industry. Higher government
consumption is expected to support
growth from the demand side. Public
and private investments are projected to
be weaker due to economic slowdown
and fiscal constraints.
The fiscal deficit is projected to widen to
6.8 percent of GDP in 2020 from 4.9 percent of GDP in 2019, due to a fall in fiscal
revenues and higher spending on health.

FIGURE 1 Burundi / Public debt and fiscal deficit

Percent of GDP

The COVID-19 contingency plan includes
actions such as coordination, laboratory,
etc. Available data show a nominal decline of 1.2 percent in revenues and 17
percent in spending in 2020 Q1 year on
year and a fiscal balance in deficit. As aresult, public debt is expected to increase
to 63.7 percent of GDP in 2020 from 58.5
percent in 2019. The deficit is mostly financed by borrowing from the banking
system, sharply exposing commercial
banks to the public sector. Inflation is
expected to rise to nearly 8 percent in
2020, mainly due to rising food prices
and disruption to imported consumer
goods. Nonetheless, the central bank will
likely pursue an expansionary monetary
policy to finance the fiscal deficit.
The current account deficit (CAD) is projected to remain large in 2020 at 13 percent of
GDP. Prices for coffee and tea exports declined by 4.4 percent and 10.4 percent, respectively, by the end of May 2020 compared to end of 2019. Exports declined by 51
percent in 2020Q2, year on year. An overvalued real exchange rate contributes tohigher external imbalance and persistenceof parallel market. As of March 2020, theparallel market premium averaged 60 percent while the depreciation of the official
exchange rate was limited to 3.9 percent
year-on-year owing to central bank interventions. International reserves remained
low covering 0.9 months of imports.
GDP growth per capita remains negative.
Poverty incidence has been estimated at
83.4 percent in 2019 (based on an international poverty line of $1.90/capita/ day, in2011 PPP), up from 72.8 percent in 2013
(last year with data availability). Progress

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

80

8

70

7

60

6

Poverty rate (%)

Real GDP per capita (constant LCU)

120

200000100

150000
80

50

5

40

4

60

30

3

40

20

2

10

1

0

0

100000

50000
20
0

2014

2017

2018 2019e 2020f 2021f 2022f

Public debt, % of GDP

2015

2016

Fiscal deficit, % of GDP

Sources: Official statistics and World Bank calculations.

02006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 210 Oct 20

Lower middle-income pov. rate
Real GDP pc

has been made in education and health,yet Burundi’s Human Capital Index remains low—with children in Burundi
today living up to only 38 percent of
their productive potential—compared tothe counterfactual if they had enjoyedfull health, including adequate nutrition,and education. Literacy rates remain particularly low among women and rural
residents. Food insecurity remains alarming, with 56 percent of children under 5stunted, with malnutrition rates evenhigher outside of the capital city.

Outlook
Growth is projected to rebound to 2.5 percent in 2022, supported by increased activity in all sectors, assuming the COVID-19
pandemic is brought under control. The
fiscal deficit will narrow in 2021 and 2022
to pre-COVID levels, driven by efforts tobolster revenue collection. A sharp increase is expected in mining revenue dueto the launch of a new coltan mine. Computerization and other tax administration
reforms should also increase tax revenue.
The government projects a cut in current
spending to favor capital spending. Despite narrower deficits, total public debt is

expected to increase to about 72 percent of
GDP by 2022 and will remain mostly composed of domestic debt. Inflation is projected at around 6 percent under persistent forex shortages and fiscal deficit monetization. The CAD is expected to remain
at around 13 percent of GDP in 2021–22.
Real growth in imports is expected to outstrip the projected return of export
growth, which should be driven by minerals. The CAD will continue to be primarily
financed through external aid, hopefully
with a gradual revival in external support
in the aftermath of the 2020 elections.
With demographic pressures, environmental shocks and degradation, as well as
limited diversification at the backdrop of
COVID-19, poverty is expected to continue rising to 85.9 percent in 2022—in linewith current growth projections. The full
impact of the pandemic is still unknown
due to the absence of a high-frequency
survey thus far. Yet, indirect effects of
COVID-19 are likely to have materialized
already into higher unemployment rates,
especially in the capital city, as services,
hospitality and tourism as well as commercial services (transportation, travel,
insurance) are likely to have seen important cutbacks due to aggregate demand shocks and imposed travel restrictions in the country.

TABLE 2 Burundi / 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

Risks and challenges
A much deeper than expected global
recession may lower Burundi’s exports
beyond what is anticipated in the outlook. Internal fiscal risks include even
weaker than expected growth and, therefore, less tax revenue. External fiscal risks
include a further deterioration in grants
revenue. Unanticipated drought or political uncertainty add to the downside
risks. On the upside, the recent elections
and a new administration could bringabout improved donor relations and resumption of aid.
COVID-19 presents additional risks tolivelihoods for households across theincome distribution, through both direct
and indirect effects. Particularly for thepoor this may entail long-lasting repercussions on human capital, being forced
to adopt harmful coping strategies, suchas selling productive assets or reducing
expenditures on education and food. This
comes on top of other long-standing
risks, such as the heavy reliance on rainfed agriculture that keeps Burundi’s vulnerability to adverse weather and climatechange elevated.

(annual percent change unless indicated otherwise)
2017
0.5
0.2
8.8
-2.5
32.2
13.0
0.5
0.3
0.7
0.6
16.1
-11.3
0.0
-4.5
44.2
-3.5
81.1
94.8
99.2

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
82.3
95.5
99.5

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
83.4
96.1
99.7

2020 e
0.3
0.3
11.6
-2.8
-4.0
5.6
0.3
2.8
1.8
-1.8
8.1
-13.0
0.0
-6.8
63.7
-6.2
85.0
97.0

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 2006-QUIB B and 2013-ECVM B . A ctual data: 2013. No wcast: 2014-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202021 f
2.0
3.0
0.8
12.8
4.6
6.7
2.0
3.1
2.0
1.2
6.5
-13.2
0.0
-4.9
67.9
-4.2
85.6
97.4

2022 f
2.5
3.4
1.0
9.8
4.7
6.0
2.5
3.2
2.0
2.1
6.0
-13.4
0.0
-4.0
72.0
-3.3
85.9
97.6

CABO VERDE
Table 1

Recent developments
2019

P o pulatio n, millio n

0.6

GDP , current US$ billio n

2.1

GDP per capita, current US$

3738.1

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).

Growth was robust in 2019, reaching 5.7
percent. Fiscal and external balances
strengthened, with surpluses achieved in
the primary balance and the current account. The COVID-19 crisis will lead to a
projected contraction of 6.8 percent in
2020, with growth gradually picking up
over the medium-term as tourism recovers. The outlook is subject to substantial
downside risks stemming from the speedof the global recovery and magnitude ofthe domestic COVID-19 outbreak.

Economic growth accelerated from 4.5
percent in 2018 to 5.7 percent in 2019.
Construction, retail, transport, and tourism services contributed to a dynamic
economy. Data for the first quarter of 2020
confirmed the strong macroeconomic performance prior to the COVID-19 crisis,with real GDP growth (year-on-year) estimated at 5.8 percent. The pandemic
brought tourism to a halt with leading
indicators suggesting a large reduction in
output in the second quarter, with imports
falling by 25.8 percent and exports declining by 45.5 percent.
The external current account deficit decreased from 5.2 percent of GDP in 2018 to
a 0.3 percent surplus in 2019 driven byexports of services, notably tourism, andprivate remittances. The current account
was financed largely through Foreign Direct Investment (FDI), which helped international reserves reach 7 months of imports. The external sector felt the initial
impacts of the crisis in the first quarter of
2020, with the current account balance
deteriorating to a deficit of 0.2 percent ofGDP, as exports of services contracted.
The primary fiscal balance was in surplus
for the first time in a decade in 2019, at 0.7
percent of GDP. The overall fiscal deficit
narrowed to 1.8 percent of GDP in 2019.
Central government fiscal consolidation
efforts included reforms of state-owned
enterprises (SOEs). The stock of public debt
remained stable at 125 percent of GDP in
2019, which is assessed as sustainable, but

FIGURE 1 Cabo Verde / GDP and Debt Outlook

the risk of external debt distress remains
high. The pandemic reduced both revenue
and expenditures, mainly due to underperformance in corporate income tax,
VAT, and non-tax revenue, while public
investments suffered significant delays.
The fiscal financing requirement rose to
9.4 percent of GDP.
Cabo Verde’s monetary policy is closelyaligned with Europe, with the local currency pegged to the Euro. With inflation expectations relatively low and limited pressure on the peg, monetary policy has beenaccommodative in the face of the crisis. The
policy rate was lowered to 0.25 percent inMarch, along with downward revisions to
the minimum reserve requirement, overnight deposit rate, and long-term liquidity
support for banks. Inflation remained subdued in 2019 at 1.1 percent in the context ofa stable and slightly negative output gap.
The unemployment rate reached a nineyear low, standing at 11.3 percent. Despite
the persisting effects of a 3-year drought,
the share of the population subsisting below the lower middle-income poverty line
(US$3.2 a day, 2011 PPP) fell 1.7 percentage
points from 9.6 percent in 2018 to 7.9 percent in 2019. As the pandemic reached thecountry, the government empowered existing social protection systems to support
interventions aimed at preserving the livelihoods of the most vulnerable.

Outlook
Cabo Verde is very exposed to the economic effects of the COVID-19 pandemic.

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

Percentage of GDP
170

Billions CVE
210

Poverty rate (%)

Real GDP per capita (constant LCU)

60

35000017050300000

150

40

190

160
150
140

250000

130
130

110

120

90

110

70

100

50
2017

2018

2019e

2020f

2021f

2022f

2000003015000020

100000

10

50000

0

0
2007

Public Debt (lhs)Real GDP: Pre-COVID-19 forecast (rhs)Real GDP: Post-COVID-19 forecast (rhs)

2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Sources: World Bank and IMF staff estimates. Note: Pre COVID-19 GDP forecast
refers to the 2019 Annual Meetings Macro-poverty Outlook.

Source: World Bank. Notes: see Table 2

MPO 212 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

The temporary shutdown of the tourism
sector and the associated impact to upstream sectors will impact growth significantly in 2020. The impact of mitigation
measures will be compounded by the
downturn in FDI inflows. The economy isprojected to contract by 6.8 percent in2020. The unemployment rate is expected
to double to 19.2 percent. Over the medium term, private consumption and investment in transport, tourism, energy and
ICT linked to planned structural reforms
is expected to jumpstart growth, with export of services continuing to be the leading contributor. Inflation is expected toremain contained, benefitting from lower
international fuel prices and subdued aggregate demand, reaching 1.4 percent in
the medium-term.
The fiscal deficit will be allowed to widen
substantially in 2020 to absorb the shock.
The overall deficit (including grants) will
increase from 1.8 percent in 2019 to 11.3
percent in 2020 owing to a loss of tax revenue, especially from tourism, and a large
increase of expenditure in response to thepandemic. Public debt will increase to140.3 percent of GDP in 2021 before reverting to a gradually declining path in
the medium-term as the government resumes a prudent fiscal stance.
The external current account deficit isprojected to increase substantially toaround 15.2 percent of GDP in 2020. Tourism receipts are expected to decline byapproximately 65 percent in 2020. Overthe medium-term the current accountdeficit is expected to decline, underpinned
by sustained growth in tourism receipts
and remittance inflows.
The country is expected to register anincrease in poverty in 2020, with thepoverty rate at the US$1.90 a day (2011
PPP) poverty line expected to rise to 2
percent, equivalent to 40,000 additional
people falling into poverty. The reduction in tourist arrivals will lead to direct
and severe income shocks for households that are active in the sector;
through loss of employment, drops incomplimentary income, and loss of domestic remittances. The pace of poverty
reduction would resume into the medium-term as economic growth gradually
returns, consolidating Cabo Verdeamong the countries projected to meetthe objective of eliminating extreme
poverty by 2030.

pressure on external and fiscal balances.
Furthermore, the speed of recovery of the
tourism sector, and consequentially most of
the economy, is directly linked to external
factors related to the evolution of the pandemic and its containment. Failure to contain the domestic outbreak would call for
additional reprioritization of government
expenditure and further revenue mobilization measures, thus impacting public debt.
This would increase fiscal unbalances andrequire stronger adjustment efforts in themedium-term to maintain a downward
trajectory for public debt.
Contingent liabilities, particularly in thetransportation sector, continue to increasefiscal risks over the short-term given thevulnerability of the sector to the crisis. As
such, the resumption of reforms to improve SOE oversight are crucial to enhance governance, transparency, mitigate
fiscal risks, and lay the groundwork for asustained recovery. These key structuralreforms could be jeopardized by domestic
political and social pressures against further fiscal consolidation in the aftermathof the crisis.

Risks and challenges
The emergence of subsequent waves of thepandemic, particularly in Europe, would
deepen the unfolding crisis and increase

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(annual percent change unless indicated otherwise)
2017
3.7
7.1
7.7
12.3
7.5
16.4
2.0
-12.5
11.9
1.5
0.8
-7.9
5.6
-3.0
125.9
-0.4
2.4
12.2
36.6

2018
4.5
1.5
2.2
5.8
11.9
6.7
2.4
-19.0
8.1
3.4
1.3
-5.2
4.1
-2.8
124.7
-0.3
1.7
9.6
32.4

2019
5.7
5.9
4.8
-4.0
8.6
0.9
5.7
-7.3
5.0
7.2
1.1
0.3
4.1
-1.8
125.0
0.7
1.3
7.9
29.3

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 2007-QUIB B and 2015-IDRF. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using po int-to -po int elasticity (2007-2015) with pass-thro ugh = 0,7 based o n GDP per capita in co nstant LCU.

MPO 213 Oct 202020 e
-6.8
-3.0
14.8
3.3
-47.3
-22.0
-6.8
3.0
-5.9
-7.9
1.0
-15.2
0.8
-11.3
139.4
-8.6
2.0
11.0
35.5

2021 f
4.5
4.5
-1.5
-3.7
23.9
6.1
4.5
3.5
3.0
5.0
1.2
-10.0
2.8
-9.6
140.3
-6.7
1.4
8.7
31.5

2022 f
4.8
5.0
-3.5
1.1
17.5
7.1
4.8
3.5
4.0
5.2
1.4
-7.3
3.7
-6.2
137.9
-3.3
1.1
7.4
29.1

CAMEROON
Table 1

Recent developments
2019

P o pulatio n, millio n

25.3

GDP , current US$ billio n

38.8

GDP per capita, current US$

1532.9Internatio nal po verty rate ($ 1.9)

a

26.0

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

a

47.0

a

71.1

a

46.6

Gini index

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

b

103.4

b

58.9

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).

Economic growth decelerated to 3.7 percent in 2019. While the current accountdeficit widened, fiscal consolidation efforts
narrowed the fiscal deficit in 2019. Poverty remains high at 24.4 percent. The
COVID-19 pandemic introduced significant uncertainty to the outlook with riskstilted to the downside. Real GDP is projected to contract in 2020 with deteriorating external and fiscal accounts before
recovering in the medium term.

Economic growth decelerated to 3.7 percent in 2019 compared to 4.1 percent in2018. On the supply side, this performance accounts for reduced activity inagribusinesses and the adverse impactof the fire at the national refinery(SONARA) on both industry and services sectors. On the demand side, both
lower external demand and investment
explain growth developments. Owing tothe ongoing anglophone crisis, inflationrose to 2.5 percent from 1.1 percent in2018 but remained below the CEMAC
regional target of 3 percent. The current
account deficit slightly increased by 0.1
percentage point to 3.7 percent of GDP
in 2019 reflecting higher import volume
than export. The new regional regulation to limit capital and to ensure adequate repatriation of export proceeds
helped Cameroon’s imputed official
reserves to reach 5.4 months of imports
at the end of 2019 from 5.1 months ofimports in 2018. Thanks to sustained
efforts towards fiscal consolidation in
the context of the three-year plan for
2017–19, the fiscal deficit narrowed from
2.5 percent in 2018 to 2.2 percent of GDP
in 2019. The deficit was financed
through budget support from donors,
domestic financing, and accumulation ofdomestic arrears. Meanwhile, the risk ofdebt distress remained high, with thetotal debt stock increasing from 39.3
percent of GDP in 2018 to 43.0 percent
of GDP at the end of 2019. The extreme

poverty rate (international poverty line
US$1.90 PPP) has remained broadly unchanged between 2018 and 2019, declining by only 0.2 percentage point over thetwo periods and stood at 24.4 percent in2019. The contraction in the agriculture
and services sectors has exacerbatedpoverty with stronger negative effects in
the North West and Southwest regions
where growing insecurity increases thevulnerability of the local population.
Since early 2020 and despite light containment measures, the COVID-19 pandemic and its spillover effects have negatively affected the country. Economic
growth has decelerated in the first quarter as the agriculture and services sectors
contracted. Despite inflationary pressures, inflation remained below the
CEMAC threshold at 2.5 percent during
the first semester of 2020. Meanwhile,
the regional central bank (BEAC) has
loosened its monetary policy stance toincrease liquidity in the region with apackage of measures including narrowing its interest rate corridor, increasing
its liquidity provision while widening
the range of private financial instruments used as collateral. Preliminary
data indicate that the trade deficit has
narrowed by 36.9 percent in the firstsemester of 2020, reflecting lower imports volume (-31.6 percent change yearon-year) than exports volume (-3.5 percent change year-on-year) due to lower
capital goods imports. On the fiscal side,
additional expenditures to mitigate the
COVID-19 impact contributed to a budget deficit representing 3.5 percent of
GDP in the first quarter of 2020.

FIGURE 1 Cameroon / GDP growth and contribution to GDP
growthFIGURE 2 Cameroon / Actual and projected poverty rates
and real GDP per capita

Percent, percentage points

Poverty rate (%)

15

100

10

80

Real GDP per capita (constant LCU)
700000650000560

060000040-5550000

20

-10
-15
20171

20174

Private cons
GFCF

20183

Govt. cons
Net exports

Sources: National Authorities, World Bank.

20192

20201

0

5000002007

Inventories
GDP

2009

2011

2013

2015

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

MPO 214 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

Outlook
The COVID-19 pandemic has sharply deteriorated the medium-term outlook. RealGDP growth should contract by 2.5 percent in 2020, representing a deviation of 6
percentage points from the Pre-COVID
estimates. From the supply side, channels
include a slowdown of oil and non-oil
sectors, and reduced activity by enterprises and the informal sector, notably in agriculture. From the demand side, disruptions in global value chains, and tighter
external financial conditions, transmit theshock through the economy. In the medium-term, real GDP growth would recoverand reach 3.4 percent in 2022, sustained bymore robust domestic demand and external demand recovery. Despite potential
inflationary pressures, inflation would
remain below 3 percent in 2020-2022.
The external position is expected to worsen in 2020 before gradually improvingfrom 2021 onward. The current accountdeficit is projected to widen to 5.5 percent of GDP in 2020, reflecting lower export volumes and terms of trade deterioration. In response to the COVID-19 pandemic, the fiscal deficit is projected todeteriorate, driven by the drop of revenue in combination with additional

health and social expenditures. Revenues
losses are estimated to 2.5 percentage points
of GDP reflecting the combination of lower
external demand as well as tax measures tomitigate the impact of the pandemic onbusinesses and households. Reduced burden from both lower fuel subsidies and staff
and other administrative expenditure will
only partly offset the combined adverse
effect of lower oil prices and the COVID-19
fiscal impact. As a result, the overall fiscal
deficit is projected to reach 4.4 percent of
GDP in 2020 but would converge to 2.2
percent over the medium-term. The stock ofpublic debt is expected to converge to 45
percent of GDP in the medium term.
The extreme poverty rate is projected toincrease to 25.3 percent in 2020 in line withexpected negative per capita GDP growth,and remain flat through 2022 (25.1 percent)reflecting the slow recovery over the medium term. However, the combination ofslow recovery and population growth may
increase poverty. The persistence of conflicts is likely to widen regional disparities
and then inequality in the country.

Risks and challenges
A second wave of contagion would lead theeconomy to contract further by 3.5 percent

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

in 2020, with a more gradual U-shaped
recovery than in the baseline. Hence, amajor threat to the outlook is a sharper
deterioration of the economic activity inthe Euro Area and China. Domestically,
with the informal sector and small businesses being the hardest hit by the outbreak, the livelihoods of the poor may behampered due to earning losses. Socioeconomic risks are intensifying across thecountry as the Covid-19 pandemic increases stress on overstretched national
health systems. This is exacerbating preexisting challenges, including the ongoing
conflict in the South-West and North-Westregions and weak safety nets. With thepotential adverse effects of the COVID-19
pandemic and the regional disparities,
poverty reduction will require an inclusive growth through structural reforms,
increased opportunities in the informal
sector,andincreased
agricultural
productivity. Lastly, tighter external financial conditions could also weigh on
debt sustainability. On fiscal management, risks associated with contingent
liabilities related to state‐owned enterprises and infrastructure projects are also
potential sources of vulnerabilities. Finally, delays in public financial management
reforms could pose risks for fiscal anddebt sustainability.

(annual percent change unless indicated otherwise)
2017
3.5
3.3
2.5
4.2
-1.6
-0.6
3.3
3.2
1.3
4.3
0.6
-2.7
-4.9
37.6
-4.0
24.9
46.1
69.7

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
-2.5
39.3
-1.6
24.6
45.8
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
-3.7
-2.2
43.0
-1.3
24.4
45.7
69.1

2020 e
-2.5
2.3
2.3
-3.6
-13.2
2.4
-2.5
-0.2
-3.6
-2.5
2.5
-5.5
-4.4
50.7
-3.4
25.3
46.4
70.3

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-, 2017-, and 2014-ECA M -IV. A ctual data: 2014. No wcast: 2015-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202021 f
3.0
4.2
2.0
7.0
-0.5
7.0
3.0
4.1
2.6
3.0
2.5
-4.0
-3.3
47.6
-2.1
25.2
46.4
70.2

2022 f
3.4
4.3
-1.8
5.6
2.6
5.0
3.4
4.2
3.1
3.3
2.5
-3.0
-2.2
45.1
-1.1
25.1
46.3
70.0

CENTRALAFRICAN REP.
Table 1

Key conditions andchallenges

2019

P o pulatio n, millio n

4.8

GDP , current US$ billio n

2.2

GDP per capita, current US$

451.8

a

56.2

Gini index

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

b

b

102.0
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) economic growth for 2019 is estimated at 3.1
percent but projected to contract by 1.2
percent in 2020 following the COVID-19
pandemic. The outlook remains subject todownside risks arising from more significant socioeconomic impacts of the COVID-19 coupled with uncertainty related toupcoming general elections. The implementation of key structural reforms
should remain a key priority focus to consolidate the peacebuilding process andmitigate the adverse impact of COVID-19
on social outcomes.

With an average growth rate of 4.1 percent
since 2015 – the highest five-year growth
average since independence – CAR entered 2020 with solid economic growthover the past five years. An improved
security situation coupled with enhanced
macroeconomic stability, foreign trade,investments, and implementation of structural reforms, supported this good economic performance. As the implementation of the peace agreement is materializing, the security and humanitarian situation is improving gradually. Conflictrelated incidents and civilian deaths declined from 1,842 and 721 in 2018 to 1,172
and 339 in 2019, respectively. Access to
education, health care facilities, and basicsocial services remain limited throughout
the country and under pressure due to alarge number of internally displaced persons. This undermines human capital accumulation and its contribution to economic growth – the Human Capital Index
is among the lowest in sub-Saharan African countries at 0.29. The formal private
sector is small, constrained by several
structural challenges including limitedaccess 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 is limited,making the country particularly vulnerable to commodity price shocks. The global

pandemic is exacerbating an already precarious humanitarian situation, with nearly half of the population requiring humanitarian assistance and food insecurity
affecting about 35 percent of the population. These pre-existing structural challenges left CAR especially vulnerable to
the COVID-19 outbreak and its socioeconomic impact. Economic activity in 2020is expected to contract further than anticipated due to the global economic recession and disruption in the supply chains.

Recent developments
Hindered by a lower-than-expected performance of the coffee and cotton sectors, thepace of economic recovery slowed to 3.1
percent in 2019, down from 3.7 percent in2018. On the supply side, economic activity
was supported by the dynamic agriculture
and services sectors. On the demand side,
private consumption continues to be themain driver of economic activity. Public
investments decreased from 7.4 percent of
GDP in 2018 to 5.6 percent of GDP in 2019,
while private investments increased slightly by 0.5 percentage points of GDP in 2019– leading to an overall decline in grossfixed capital investment.
Higher prices for food and manufactured
products, reflecting in part inflationarypressures from the blockade of the Bangui-Douala corridor in March 2019 led to anincrease in the consumer price index at 2.8
percent in 2019 from 1.6 percent in 2018.
Expenditure rationalization measures
combined with efforts to clear domestic

FIGURE 1 Central African Republic / Real GDP growthand contributions to real GDP growth.

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

Percent, percentage points

Poverty rate (%)

8

120

6

Real GDP per capita (constant LCU)
2500001002000004802150000060-2100000
40

-4
-6

50000

20

-8
2015

2016

2017

2018

Private Consumption
Gross Fixed Investment
Real GDP Growth
Sources: CAR Authorities and World Bank.

2019

2020

2021

2022

0

0
2008

Government Consumption
Exports

2010

2012

2014

2016

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

MPO 216 Oct 20

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

arrears maintained public debt on a declining path at 47.9 percent of GDP in
2019, although, CAR remains at high riskof debt distress. Delays in the executionof public investments and an increase in
official grants following the peace agreement compensated for the decline in tax
revenue in 2019. In this context, the overall fiscal balance posted a surplus of 1.7
percent of GDP in 2019.
The current account balance improved
significantly from -8 percent of GDP in2018 to -4.8 percent of GDP in 2019,
thanks to an increase in official grants.
Trade balance deteriorated further by 4.3
percent as the import bill increased while
exports of goods and services declined
slightly. Consequently, the balance of
payment is estimated to have generated alower deficit of 0.7 percent of GDP in
2019, contributing to the increase in foreign reserves in the CEMAC region.
The latest household survey was conducted in 2008, and the recent trends inhousehold consumption and poverty arebased on projections. In 2008, nearly 66.3
percent of the population lived with lessthan $1.9 per day, while the latest projections based on GDP per capita growth,
put poverty at around 71 percent of the
population in 2019, which equates toabout 3.4 million people living in extreme poverty.

Outlook
Economic activity is expected to contract
further than anticipated, with real GDP
growth projected at -1.2 percent in 2020
due to a deeper global economic recession. As the effects of the pandemic dissipate, economic activity is expected torebound gradually, contingent on apeaceful transition during the upcoming
general elections and the restoration of
security across the national territory. In
the medium term, CAR’s economic
growth is forecasted to remain about 2.5
percentage points below pre-COVID-19
projections.
With inflationary pressure resulting
from disruptions and delays in the supply chains, the consumer price index is
expected to increase by 3.5 percent in2020 but set to fall below the regional
convergence criterion of 3 percent in themedium-term.
The fiscal position is expected to deteriorate in 2020 as government revenues decline and pressure mounts from the expenditure side following the COVID-19
pandemic. The external position is projected to worsen in the medium term as aresult of a higher trade deficit and lower
investment inflows due to COVID-19.

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

2017
4.5
2.1
0.2
3.0
-7.7
-1.7
4.3
3.2
1.7
6.0
4.1
-7.7
-1.0
50.3
-0.7
71.6

(annual percent change unless indicated otherwise)
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

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: 2009-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

Expansion of social protection and essential services are expected to help tocontain the impacts of the pandemic, but
extreme poverty will remain high andabove its pre-COVID-19 level. With limited fiscal space, the economy is likely toenter a deeper recession if the COVID-19
outbreak lingers, such that the Government is prompted to strengthen andmaintain its restrictions measures. Thousands of people are likely to lose theirjobs while poverty and inequality willrise to unprecedented levels, especially if
combined with a deterioration of the
security environment. Further violence
and insecurity are likely to deteriorate
the humanitarian situation, increase thecountry risk premium, heighten investment uncertainty and delay the pace ofreform agenda, critical to leverage domestic resources, strengthen the social
contract and mitigate the adverse impact
of COVID-19 on social outcomes.

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

2020 e
-1.2
-4.5
11.4
4.9
-10.2
-9.1
-1.1
4.0
1.0
-5.2
3.5
-5.1
-4.0
47.4
-3.7
71.6

2021 f
2.2
2.8
-10.0
0.3
5.7
1.2
2.2
5.1
4.0
-0.5
2.5
-5.7
-2.7
45.5
-2.4
71.4

2022 f
4.1
2.9
4.4
5.8
5.6
2.3
4.1
6.2
4.5
2.3
2.5
-5.4
-1.2
43.6
-0.9
70.8

CHAD

countries increases. General elections
tentatively scheduled for the second
quarter of 2021 could increase uncertainty or trigger conflicts.

Key Conditions andChallenges

Table 1

2019

P o pulatio n, millio n

15.8

GDP , current US$ billio n

11.3

GDP per capita, current US$

715.5

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

b

86.8
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 6); Life expectancy (201 8).

Chad’s gradual macroeconomic recovery
started in 2018, but the impacts of the
COVID-19 pandemic are likely to resultin GDP contracting by 0.8 percent in2020. The poverty rate may well increaseby about 1 percentage point, and the fiscal
and current account deficits both widen
substantially in 2020. Meanwhile,
COVID-19 has highlighted sustainability
issues arising from Chad’s reliance on theoil sector. The recovery will remain fragileand subject to significant downside risks.

Chad's economic performance has been
subpar for most of the 2010s, keeping thecountry in the bottom part of many development rankings. Notwithstanding an
economic recovery during 2018-2019, annual GDP growth averaged negative 0.1
percent over the past five years or about
minus 3.1 percent in per capita terms. As aresult, living conditions and access to essential services have remained poor. Thissituation is due in part to exogenous constraints such as climatic shocks to agriculture, and endogenous constraints like thesub-optimal management of volatile oilrevenues, underinvestment in humancapital, cyclical insecurity and fragility,and poor-quality infrastructure.
The COVID-19 pandemic has highlighted
sustainability issues related to oil sector
dependency. The combination of the
global recession, disruptions in global
and domestic supply chains, measures toflatten the contagion curve, financial disruptions, and investment risk aversion
have taken a heavy toll on the economy.
This combination exacerbates the alreadyfragile situation of the country with weakregional integration, a slow economictransformation, poor quality health careand education, and the lack of access toelectricity and digital technology. Regional conflicts may also disrupt bilateral
trade and stretch government finances as
the flow of refugees from neighboring

Recent Developments
Due to higher oil production and agricultural output, growth recovered to 3.2
percent in 2019. Although the negative
output gap narrowed, inflation declined
from 4.0 percent in 2018 to -1.0 percent in
2019, reflecting subdued transportationand food prices. Agriculture and the oil
sector remained the main driving forces
contributing together about two-third of
the 2019 growth rate.
The current account deficit widened from
4.7 percent in 2018 to 4.9 percent in 2019,
due to an increase in imports needed foroil fields under development. In realterms, export growth reached 6 percent,with imports growing at 4 percent. The
deficit was financed by project grants and
FDI, which increased to 6.2 percent of
GDP in 2019.
Chad’s monetary and exchange rate policies are managed by the regional Bank ofCentral African States (BEAC). In 2019,
BEAC maintained a tighter monetary policy to rebuild its reserves and to ensure
financial sector stability. The policy interest rate remained at 3.5 percent while regional reserves reached 3.3 months in
2019, up from 2.7 months in 2018.
The overall fiscal balance (including
grants) deteriorated from a surplus of 1.5
percent of GDP in 2018 to a deficit of 0.6

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

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

Real GDP, potential gdp and the output gap

Poverty rate (%)

Real GDP per capita (constant LCU)

120

6
4

500000100

400000280

0300000-260200000

-4
40

-6
-8

100000

20

-10
2016

2017

Source: World Bank

2018
2019
2020
2021
Potential real GDP growth
Real GDP growth
Output Gap (% of potential GDP)

2022

0

0
2011

2013

2015

2017

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

MPO 218 Oct 20

2019

2021

Lower middle-income pov. rate
Real GDP pc

percent in 2019. Total revenues did notincrease significantly because of a decline
in budget support grants and oil revenues.
Meanwhile, total expenditure increased
by about 2 percent of GDP owing to a 12
percent growth in the wage bill and higher security spending. Chad remains at ahigh risk of debt distress, although a significant decline in the debt ratio to GDP.
Poverty remains pervasive in Chad with40.1 percent living below the international
poverty line of US$1.90 a day (at 2011 Purchasing Power Parity (PPP)). Although thepoverty rate remained stable between
2018 and 2019, the number of poor people
increased by about two hundred thousand
individuals. In 2019, the number of poor
people was estimated at 6.7 million, with ahigh level of income inequality (measured
by a Gini of 43.3).

Outlook
The COVID-19 global pandemic is putting
Chad back into a recession, with the economy expected to contract by 0.8 percent in2020. Border closures and disruptions in
the major economies have led to a reduction in private investments and weak exports on the demand side and a sharp
contraction in services (mainly transport,

hotels, and tourism) on the supply side, inthe first three quarters. Over the medium
term, growth is projected to average 2.9
percent, thanks to new oil fields production, higher oil prices, and the easing of
COVID-19 restrictions. Inflation would
remain below 3 percent in line with regional targets as GDP growth converges
towards potential.
The current account deficit is expected towiden to 11.2 percent of GDP in 2020 asexport growth slows down due to theimpact of COVID-19 on trade. The COVID-19 impact is expected to diminish in 2021,
with export growth reaching about 8 percent driven by crude oil exports. Also,
import growth would increase by 4 percent as private consumption and investment gradually recover. Relative substantial FDI and financial support from donors
will help finance this deficit. BEAC regional reserves are projected to remain below 5
months of imports by 2022.
In 2020, the fiscal deficit is expected toincrease to 1.7 percent of GDP. Fiscal revenue is expected to increase by about 2.8
percent of GDP-- despite a decline in oil
prices and a modest decline in oil production, oil tax is based on the prior year’s
performance. Public spending is expected
to increase by 28.8 percent to account for
COVID-19 related expenditures, and therestoration of wages benefits suspended

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

during the 2015-17 crisis. This deficit isprojected to widen to 3.5 percent in 2021
due to the lagged nature of oil revenues.
Public debt will increase to finance thefiscal deficit and is expected to remain at ahigh risk of debt distress.
The COVID-19 crisis is hurting economic
growth and has significant social impacts.
The poverty rate (using the international
poverty line) is projected to increase by 1.3
percentage points, reaching 41.4 percent in
2020, adding about 0.4 million people.
This negative impact of COVID-19 willremain for several years, with the poverty
rate expected to increase to 41.6 percent in
2022 and the number of poor will rise toreach 7.2 million people. Based on the
results of the high frequency survey implemented in June-July 2020, two third of
Chadian households reported a loss intheir total income. In addition, 57 percent
of transfer receivers reported a decline inthis source of income.

(annual percent change unless indicated otherwise)
2017
-3.0
0.2
9.5
-24.7
1.3
-1.3
-3.0
3.1
-1.7
-9.7
-0.9
-6.6
-0.8
49.8
0.8
39.9
67.7
87.3

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
40.1
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: 2012-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
67.9
87.4

2020 e
-0.8
0.5
10.5
-9.8
1.8
2.5
-0.8
2.4
-0.2
-4.9
2.8
-11.2
-1.7
49.1
0.0
41.4
69.0
88.1

2021 f
2.4
0.5
2.7
-2.0
8.0
4.0
2.4
7.2
0.8
-3.4
3.0
-10.5
-3.5
49.9
-1.7
41.8
69.3
88.2

2022 f
3.3
2.0
-1.7
-3.4
8.0
4.1
3.3
7.6
1.6
-2.4
3.0
-10.2
0.1
48.7
1.6
41.6
69.1
88.1

COMOROS

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

0.9

GDP , current US$ billio n

1.2

GDP per capita, current US$

1354.3

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

99.5

b

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).

Despite a contained spread of COVID-19
in Comoros, the country’s fragile landscape is being heavily impacted by thehealth shock, with severe consequences tofirms and households. Limited fiscal
space, incipient social safety networks
and a weak financial sector limit theGovernment’s capacity to respond to thecrisis. Growth is expected to recover overthe medium term, in the wake of stronger
demand, and the gradual pick-up of remittances and investment. Poverty
stands higher compared to its preCOVID-19 level.

Recent progress in political stability has
not yet taken Comoros out of a stagnant
long-term growth trajectory. Per capita
GDP growth of less than 1 percent overthe last ten years was predominantly consumption-driven, fueled by remittances
and tourism receipts flowing in from thediaspora. Poverty reduction has beenmodest, and inequality has been on therise, including between rural-urban regions and across islands. A dearth investment, discouraged by institutional fragility, weak financial sector and an onerous
business environment, has slowed theaccumulation of physical capital. Labor
force participation has been remarkably
low, especially from female workers, andlow quality of education has persistently
undermined the contribution of humancapital to productivity growth, with overall total factor productivity nearly absent.
The monetary agreement with France has
contributed to fairly conservative fiscal
policy, low inflation rates, and adequatelevels of foreign reserves, with no signs ofa sustained and/or significant overvaluation of the currency in recent years.
Comoros’ longstanding challenges are escalating due to the COVID-19 crisis. Growing financial sector vulnerabilities, including high levels of non-performing loans
and solvency issues, could intensify during
the pandemic, compromising the stabilityof the financial system. A worsening of the

FIGURE 1 Comoros / External Sector

financial situation of State-Owned Enterprises (SOEs), including of Comores Telecom, a publicly owned telecommunication
provider, could intensify risks associatedwith SOEs’ contingent liabilities. Limited
fiscal space, incipient social safety networks
and a shallow financial sector limit theGovernment’s capacity to respond to theeconomic and social ramifications of thecrisis. Sustained progress towards politicalstability could be compromised if the Government’s relief response to COVID-19 isperceived as insufficient and inequality
rises.

Recent developments
The dampening effect of COVID-19 inComoros’ economy strikes one year after
the Cyclone Kenneth (April 2019), whichcaused substantial damages to the agricultural sector. The positive growth effects
expected from the reconstruction efforts
and recovery after the cyclone will be
more than offset by the negative impact of
COVID-19, lowering growth projections to-1.4 percent in 2020 (from 4.4 percent in
pre-COVID forecasts). Social distancing
measures adopted early on contained the
spread of the virus, but decreased labor
supply and weakened economic activity.
Demand and supply effects related to external trade and the disruption of international travel are hitting Comoros’ main
earning sectors. The slowdown of remittances from the diaspora (which
dropped in the second quarter and expected to have decreased further during

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

Percent of GDP

Poverty rate (%)

357050000030

60

490000

25

50

20

40

Real GDP per capita (constant LCU)

48000047000046000015301045000020440000

5

10

0
2010

2012

2014

2016

2018

2020e

2022f

0

4200002004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Exports, Goods and Services (% of GDP)
Imports, Goods and Services (% of GDP)Net Personal Remittances (% of GDP)
Sources: World Development Indicators and World Bank staff forecasts.

430000International poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2.

MPO 220 Oct 20

Lower middle-income pov. rate
Real GDP pc

summer) are cutting down domestic demand (Figure 1). Government measures toreduce the price of imported goods at customs have been relatively successful incontaining price increases and the inflation rate will remain low in 2020.
Financial sector vulnerabilities have increased. The SNPSF, a public systemic
financial institution, is insolvent, although
it has recently taken key initial steps in its
restructuring process. In May, the BDC
and BFC (two commercial banks) wereplaced under temporal provisional administration of the Central Bank due to liquidity strains. The slowdown of economic
activity along with COVID-19-related
custom tax cuts are resulting in a large
drop in fiscal revenues, while expenditures are on the rise, yet with some restrain (due to limited borrowing capacity),
to finance higher spending in health careand other social and economic measures.
External budget support from donors andparticipation to the Debt Service Suspension Initiative will help to contain the deficit of the fiscal account, estimated at 3.9 of
GDP. A combination of lower remittances
inflows, the drop of tourist arrivals andthe slowdown of exports would generate
a current account deficit of 3.7 percent of
GDP. Disruptions in public services, including health and education, the decline
in remittances and consumption, and the

reduction of informal jobs, are affecting
the poor disproportionally, with extreme poverty (estimated based on$US1.9 PPP per person per day) increasing to 19.6 percent in 2020 (from 18.6
percent in 2019).

OutlookDespite the significant adverse short-term
impact of the pandemic, the medium-term
outlook for Comoros’ economy remains
favorable. Growth is expected to recoverin 2021-2022 under the key assumption of
the progressive end of the health crisis. A
global recovery would bring in higher
remittances and tourism receipts. Sustained economic recovery would also be
supported by the take-up of delayed investments, including public and private
investments related to the cyclone reconstruction, and by the recovery of the agricultural sector. Domestic revenues areprojected to progressively recover withthe uptake of economic activity and custom tariffs. Fiscal pressures associatedwith COVID-19 health costs are projectedto ease and capital expenditures related to
Cyclone Kenneth reconstruction efforts
would resume. Measured against the lower-middle-income poverty line of $3.2 a

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

day per capita (2011 PPP), absolute poverty is projected to slowly decrease to 39.3
percent by 2022 (Figure 2).
The projections for the impact of the pandemic are, however, subject to the highly
uncertain spread of the disease domestically as well as overseas, with a prolonged
COVID-19 outbreak slowing the recovery
in 2021. A deeper recession in France(where most Comorian migrants live)
would continue to push down remittances, while potential extended travel restrictions would lead to fewer visits fromthe diaspora, with consequent lower tourism receipts. Fiscal transfers to crisis-hit
SOEs would be needed as their vulnerabilities would rise with a prolonged crisis,
while intensified struggles in the financial
sector could trigger a financial crisis. On
the contrary, a faster than expected end of
the health crisis would produce a solid
global recovery, allowing for a stronger
economic recovery domestically.

(annual percent change unless indicated otherwise)
2017
3.8
4.2
5.9
6.9
11.8
10.8
3.4
3.8
-2.7
4.5
1.8
-2.1
0.4
18.4
0.4
18.7
39.2
64.4

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

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: 2014-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
18.6
39.0
64.0

2020 e
-1.4
-3.1
17.0
-2.8
-1.4
-0.7
-1.4
1.0
1.8
-3.0
1.8
-3.7
-3.9
30.3
-3.5
19.6
40.4
65.3

2021 f
2.6
2.5
-2.9
3.7
4.2
1.8
2.7
1.8
2.9
3.0
2.0
-3.8
-2.9
32.8
-2.4
19.2
39.8
64.9

2022 f
3.5
3.6
1.5
3.0
3.2
2.4
3.5
2.0
2.8
4.3
2.0
-4.0
-2.1
33.4
-1.5
18.8
39.3
64.4

DEMOCRATIC
REP. OF CONGO
Table 1

2019

P o pulatio n, millio n

86.7

GDP , current US$ billio n

48.9

GDP per capita, current US$

564.1

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

b

108.0
60.4

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 5); Life expectancy (201 8).

Economic activity is expected to contract by
1.7 percent in 2020 due to COVID-19 containment measures. Low revenue collection
coupled with exceptional expenditures related to COVID-19 has increased the budget deficit, with monetization by the central
bank increasing pressure on both exchange
and inflation rates. The medium-term outlook is a slow recovery over 2021–22, but
this is subject to downside risks, notably a
possibly more prolonged global downturn.
Achieving inclusive growth remains a challenge due to high poverty and inequality.

Recent developments
GDP is expected to contract by 1.7 percent
in 2020, driven mainly by contractionsin private consumption and investment(Figure 1). Measures to contain COVID19 measures have reduced activity inretail trade, travel, hotels, restaurants,
and catering. The non-extractive sector
is expected to contract by 2.5 percent by
the end of 2020. However, a limited
COVID-19 spread and the containmentof workers on the mining sites allowed
some major mining activities to grow.
Copper and cobalt production increasedin January–June 2020 by 13.4 and 5.6
percent respectively, compared to thefirst half of 2019, while diamond andgold production declined by 29.9 and36.3 percent over the same period. Total
mining output is expected to grow by
only 0.6 percent in 2020.
The current account deficit (CAD) is
expected to deteriorate to 4.8 percent of
GDP in 2020. Capital inflows will only
partially offset the decline in net exports. Thus, despite increased financing
from international institutions, a balance of payments deficit of 0.3 percent
of GDP is expected in 2020, leading to a
decline in international reserves toabout 3.6 weeks of imports, compared to
4.4 weeks at end-2019.
The fiscal deficit is estimated to deteriorate by 0.8 percentage points to 2.1 percent of GDP in 2020 from 1.3 in 2019,
given domestic revenue underperformance (delays in reform implementation,

temporary relief measures) and persistent
relatively
highexpenditures(estimated at 12.1 percent of GDP in2020), all associated with the government’s response to the pandemic.
The Banque Centrale du Congo (BCC)
has resorted to monetization of the fiscal
deficit. It lowered the policy rate by 150
basis points to 7.5 percent in late March
2020, eliminated the reserves requirement ratio (from 2 percent), and set up a
special funding facility for commercial
banks. Broad money (M2) is estimatedto grow by 19.7 percent in end-2020,
mainly driven by the increase in net
credit to the government. Such important injections of domestic liquidity
led to a depreciation in the exchange
rate, estimated to reach 18.2 percent by
the end of 2020.
Supply shocks have pushed up food andmedication prices, adding to inflationary pressure from monetization. Inflation accelerated to 15 percent (year-onyear) in August 2020 and is expected toreach 21 percent in end-2020.
However, the BCC increased its policy
rate to 18.5 percent in August, to reanchor inflation expectations and tomaintain positive real interest rates.
Also, Treasury bills issuance, launchedsince late 2019, is expected to reach 1
percent of GDP at the end of 2020,
which should attenuate the use of monetization by the BCC.
Based on the last (2012) household survey,
77.2 percent of the population lived withless than US$1.90 per day (in 2011 PPP).
The latest World Bank projections put
poverty at 74.1 percent in 2020, after an

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

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

Percent, percentage points
12

Poverty rate (%)

Real GDP per capita (constant LCU)

120

10
8

160000140000100

120000680

42100000

60

0
-2

80000
60000

40

40000

-4
20

-6
-8

2017
2018
2019
Private consumption
Government investment
Net exports

2020
2021
2022
Government consumption
Private gross fixed investment
GDP

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

20000

0

0

2004 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 222 Oct 20

Lower middle-income pov. rate
Real GDP pc

increase of 1.5 percentage points compared to 2019, due to the COVID-19
pandemic. This increase may be underestimated since, according to COVID-19
high-frequency phone surveys in Kinshasa, over 10 percent of households
have seen members lose their jobs while
20% have reduced their food consumption due to rising prices. Apart from
Nigeria, DRC remains the country withthe largest number of extreme poor in
sub-Saharan Africa. There are large disparities between provinces, with extreme poverty concentrated in the central and northwestern provinces. Thereis a strong correlation between poverty
and the collapse in mining employment,
especially in artisanal mining. Despitesome improvement, social and humanindicators are weak: in 2019, the infantmortality of 66.1 per 1000 live births ishigher than the Sub- Saharan average of
51.7, while the country is ranked 146thout of 157 countries in terms of the Human Capital Index.

OutlookGDP growth is expected to rebound to
2.1 percent in 2021 and accelerate with
3.0 percent growth in 2022, assuming a

gradual recovery in global demand. Favorable commodity prices, particularly
for copper and cobalt, would boost both
economic output and domestic revenue.
Expansion of transportation and otherservices, along with increased agricultural production, would also support
medium-term GDP growth.
The fiscal deficit should decline with therecovery, narrowing to about 0.6 percent
of GDP over 2021–22, mainly driven byefforts to improve tax revenue mobilization. Domestic revenues are projected torise to around 12.0 percent over 2021–22
from 8.7 percent of GDP in 2020.
The CAD is projected to slightly narrow
to 3.4 percent of GDP in 2021 and 3.0
percent in 2022. Positive trade inflows,
expected by 2022, stemming from increases in prices and volumes of exports
and lower prices of imports, would improve the current account balance. Mining FDI inflows and public capital inflows from IFIs will also support theincrease of international reserves from
3.6 weeks of imports in 2019 to around
5.9 weeks in 2022.
Given the lasting adverse effect of the
COVID-19 and the expected high population growth that is likely to partially offset
economic growth, extreme poverty rate is
projected to reduce slightly by 0.4 percentage point by 2022.

TABLE 2 Democratic Republic of the 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

2017
3.7
2.4
-16.4
-27.2
34.2
6.3
4.7
1.6
7.7
3.0
35.8
-2.9
1.4
12.2
1.6
73.6
89.6
97.3

Risks to this outlook stem from uncertainty
over commodity prices, the pace of the global COVID-19 pandemic, and GDP growthamong DRC’s trade partners, especiallyChina. DRC has little scope for fiscal policy
to absorb shocks, while an expenditure-led
adjustment could further jeopardize longterm growth prospects and pro-poor spending. Following steps taken by the BCC toreduce monetization, a prolonged global
downturn brings along the risk of abandoning this restrictive monetary policy which
could increase inflationary pressures.
Strengthening the healthcare system remains a key challenge. DRC continues toface both COVID-19 and the 10th and 11th
Ebola outbreaks. These could result in
behavioral changes by households andfirms that may dampen growth prospects,
widen inequality, and increase vulnerabilities. Finally, a consensus between political components is crucial to move structural reforms forward.
The medium-term challenge remains toachieve economic diversification in orderto reduce the commodity dependence, byimproving the business environment andnarrowing the infrastructure gap.

(annual percent change unless indicated otherwise)

2018
5.8
2.7
8.4
-29.5
25.7
5.9
5.9
1.5
12.1
1.3
29.3
-3.6
0.1
10.4
0.4
73.0
89.2
97.2

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 2012-E123. A ctual data: 2012. No wcast: 2013-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

Risks and challenges

2019
4.4
1.4
20.2
14.4
-2.5
-7.6
4.3
2.8
6.8
2.1
4.7
-3.8
-1.3
10.2
-1.0
72.6
89.1
97.1

2020 e
-1.7
-4.5
3.8
-10.8
2.8
-5.3
-1.6
3.0
-0.9
-4.4
15.0
-4.8
-2.1
10.8
-1.9
74.1
89.8
97.4

2021 f
2.1
1.8
6.8
0.6
4.6
6.0
2.0
3.2
1.8
1.7
10.5
-3.4
-0.8
10.7
-0.6
74.0
89.8
97.4

2022 f
3.0
2.3
5.9
9.1
5.0
7.3
3.0
3.6
3.3
2.3
7.0
-3.0
-0.4
9.9
-0.1
73.6
89.6
97.3

REPUBLIC
OF CONGO

Recent developments

Table 1

2019

P o pulatio n, millio n

5.1

GDP , current US$ billio n

12.3

GDP per capita, current US$

2396.7

Internatio nal po verty rate ($ 1.9)

a

38.2
a

62.6

a

82.9

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).

For the fifth consecutive year, the Republicof Congo’s economy contracted in 2019 (by3.5 percent) as public finances are being
consolidated. With the ongoing fiscal adjustment, Congo recorded fiscal and current account surpluses, but remained in
debt distress. The spread of COVID-19 andthe decline in oil prices weigh on the country’s economic outlook. Economic contraction is expected to continue and average
3.2 percent over 2020-2022, increasing thepoverty rate to 46.8 percent by 2022 (from43.1 percent in 2020).

The Congolese economy experienced its
fifth consecutive year of economic contraction with a negative growth of 3.5 percent
in 2019. On the demand side, fiscal consolidation negatively weighed on growth
while exports stagnated. On the supply
side, the hydrocarbon sector shrank by 8.8
percent because of technical difficulties insome oil fields and the non-hydrocarbon
sector grew at a sluggish rate.
During 2020H1, despite data limitations, it
is estimated that the country was significantly affected by the COVID-19 pandemic through lower oil prices and its subsequent losses in government revenues,
increased public social expenditures, andthe contraction of the non-hydrocarbon
sector due to national and international
containment measures. For instance, credit to the economy declined by 4.6 percent
in 2020H1 while non-performing loans
increased by 15.2 percent in 2020Q1 tostand at 29.1 percent of total loans. To
cope with this challenging situation, thegovernment prepared an overall response
plan totaling US$ 170 million (1.6 percent
of GDP in 2020) and adopted measures toease tax and duty payments for private
enterprises. Tax payments have been delayed while the turnover tax for small
firms and corporate income tax have been
reduced by two percentage points to 5
percent and 28 percent, respectively. To
reflect lower government revenue, a revised budget law was adopted in May
2020, implying a wider fiscal deficit in2020 as capital expenditures are set toincrease by 52 percent throughout theyear to 9.7 percent of GDP in 2020 (from3.4 percent in 2019). Despite the moderate
attractiveness of government securities,
the anticipated fiscal deficit could be partially financed by the domestic market as
BEAC, the regional central bank, decreased its policy rate by 25 basis points to3.25 percent in March 2020 and extended
the purchase of government securities
through 2020H2.
The economic crisis and the COVID-19
pandemic have affected the poor. In 2011,nearly 38.2 percent of the population lived
below the international poverty line of$1.90 PPP per day. According to the latest
World Bank projections, after a reduction
to 36.4 percent in 2015, this proportion is
projected to increase to 43.1 percent in2020 as a result of the economic crisis,with a worsening of the situation as
COVID-19 has spread. Compared to countries with similar income level, the country’s social and human indicators appear
weak. The Human Capital Index stood at
0.42 in 2020, ranking the country at 140
out of 174 countries. In 2019, infant mortality was 34.9 per 1000 live births compared to 26.8 for the Middle-Income
Countries as a whole.

OutlookAs the country is negatively affected by
the spread of COVID-19, containment
measures at the international and national
levels, the sharp decline in oil prices and

FIGURE 1 Republic of Congo / Major transmission channels
of COVID-19 pandemic in the Republic of Congo

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

Percentage points, annual change

Poverty rate (%)

US$ per barrel
120

40

100

20

Real GDP per capita (constant LCU)

100

40000035000080

30000080
0250000

60
60

-20
-40

-60

200000

40

40

20

20

15000010000050000

02014 2015 2016 2017 2018e 2019e 2020f 2021f 2022f

002005 2007 2009 2011 2013 2015 2017 2019 2021

Exports value (%)
Oil prices ($US/barrel) (RHS)

Government revenues (%)

Sources: Congolese authorities and World Bank estimates.

International poverty rate
Upper middle-income pov. rate

Lower middle-income pov. rate
Real GDP pc

Source: World Bank estimates based on data from national authorities. Notes:
see table 2.
MPO 224 Oct 20

the OPEC decision to cut oil production,
the GDP is expected to contract by 8.9
percent in 2020. In 2021-2022, growth isprojected to contract moderately at anyearly average of 0.4 percent as the increase in the demand for hydrocarbon
products could be modest in 2021, theexpansion of the non-hydrocarbon sector
be negatively affected by the anticipatedfiscal consolidation in 2021-2022 andcommercial banks continue to be risk
averse in light of the significant amountof non-performing loans. The expansionof the non-hydrocarbon sector is not expected to benefit from the partial clearance of domestic public arrears as government revenues are projected to decline significantly in 2020. The successful
implementation of reforms and the restoration of business confidence could result
into a moderate increase in private investment at end-2022.
The proportion of people living below
the international poverty line is expected
to increase from 43.1 percent to nearly
47.0 percent in 2022, because growth will
be driven by the hydrocarbon sector
while the non-hydrocarbon economy isexpected to contract.
Under the above-mentioned scenario, thefiscal deficit is projected to reach 13.3 percent of GDP in 2020. With the fall in oil
prices, government revenue is expected to

decline to 22.9 percent of GDP over 20202022, compared to 25.1 percent of GDP in
2017-2019. A strong fiscal consolidation
would be needed to ensure commercial
and social debt payments and such policy
could result in a fiscal deficit of 1.1 percent
in 2021-2022. Thus, public debt could fall to112.6 percent of GDP in 2022 after reaching
126.7 percent in 2020. The financing gap
could nevertheless average US$1.2 billion
over 2020-2022 (13 percent of GDP), requiring support from development partners.
Driven by a decrease in exports and a collapse in commodities prices, Congo isexpected to record a current account deficit averaging 6.6 percent of GDP over 2020-2022 from a surplus of 2.8 percent over
2017-2019. As weaker global demand
could have marked impacts on prices, theterms of trade will deteriorate by 20.6 percent in 2020 while a moderate rebound is
expected in 2021-2022.

Risks and challenges
The main risks to the country’s economic
stability stem from the continuous spreadof COVID-19 pandemic at the local andinternational levels that could affect thehydrocarbon and non-hydrocarbon sectors.
A decline in oil price below USD 27 per

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)
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

barrel, the price used for the 2020 revised
budget law, would particularly weaken
the country’s fiscal and external positions
while a procyclical fiscal stance would
exacerbate the negative effects of shocks
on growth and poverty outcomes. The
occurrence of this external shock emphasizes the need to implement bold reforms
that could support macroeconomic stabilization, accelerate the post-COVID19 economic recovery and stimulate economic
diversification.
Macroeconomic stabilization would require
restoring fiscal sustainability through public debt restructuring, and the implementation of public financial management reforms. In addition, increasing public expenditure efficiency could both support
economic recovery and macroeconomic
stabilization if the government adopts enhanced procurement practices and revises
its public investment management. Improving human capital and the businessenvironment remains critical to diversify
the economy as the Republic of Congoranks 138th out of 189 in the 2019 Human
Development Index and 180th out of 190 in
the Doing Business 2020. Finally, targeted
pro-poor service delivery should help containing the anticipated increase in poverty.

(annual percent change unless indicated otherwise)
2017
-4.6
-9.5
-16.8
-49.5
14.4
-34.5
-1.2
8.9
4.4
-9.7
0.5
-2.7
-6.1
97.6
-4.2
39.2
63.8
83.6

2018
-6.2
3.9
-4.7
-25.0
11.4
5.1
-7.7
-1.6
-10.4
-5.0
1.2
3.4
5.7
77.9
7.7
39.5
64.1
83.8

2019
-3.5
0.0
-9.2
-0.1
0.8
5.6
-3.8
2.2
-6.2
-1.7
2.2
7.8
6.4
84.8
8.9
40.9
65.1
84.5

2020 e
-8.9
-2.0
22.1
-12.3
-16.2
-10.0
-8.8
-3.1
-10.1
-8.5
2.4
-13.2
-13.3
126.7
-11.3
43.1
67.5
86.0

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices; based o n data fro m natio nal autho rities.
No tes: e = estimate, f = fo recast.
NA(a) Calculatio ns based o n 2011-ECOM . A ctual data: 2011. No wcast: 2012-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202021 f
-2.0
1.9
-22.5
-4.3
7.7
7.4
-1.9
0.4
0.4
-5.3
2.6
-4.8
-2.8
122.7
-0.9
44.1
68.6
87.0

2022 f
1.3
2.3
-4.1
-3.9
7.5
8.3
1.4
1.4
5.1
-3.5
2.8
-1.7
0.0
112.6
1.6
46.8
70.7
88.8

CÔTE D’IVOIRE
Table 1

2019

P o pulatio n, millio n

25.5

GDP , current US$ billio n

60.2

GDP per capita, current US$

2359.8Internatio 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

99.8

b

57.4

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).

Growth remained strong at 6.9 percent in
2019, supported by private investment
and services. Since early 2020, the
COVID-19 pandemic has negatively
affected economic performance throughdisruptions in trade and production capacity, as well as reduced foreign financing flows. As a result, fiscal and externalbalances will deteriorate. Poverty may
temporarily rise in 2020. Downside risks
predominate, including more severe
COVID-19 effects, political uncertainty
from the presidential elections, a decline
in agricultural commodity prices, andsecurity vulnerabilities.

Recent developments
Economic growth remained strong at 6.9
percent in 2019 (4.2 percent in per capita
terms). On the supply-side, growth was
driven by services, notably telecommunication, trade, and transport services. On
the demand side, investment and private
consumption contributed to the dynamism of the economy. Private investments in housing supported the construction sector while agro-processing
boosted manufacturing activities. In early
2020, activity decelerated due to COVID19, reflecting lower private consumption
and investment as uncertainty affectedconfidence and confinement measures
reduced demand.
The current account deficit narrowed from
3.5 percent of GDP in 2018 to 2.7 percent in
2019, reflecting higher export volumes andimproved terms of trade. Higher cocoa prices and strong petroleum product exports
contributed to the trade balance. The current account deficit was financed through a
combination of Foreign Direct Investment,
concessional borrowing, and regional bondissuances. In early 2020, the external sector
was affected by lower global demand,
which resulted in a 3.5 and 16 percent decline in exports for industrial agriculture
and manufacturing products, respectively.
Imports contracted by 5.3 percent due to thedeceleration of domestic consumption.
The fiscal deficit decreased from 2.9 percent in 2018 to 2.3 percent of GDP in
2019. This was mainly due to a reductionof expenditures which declined from 17.8

percent of GDP in 2018 to 17.3 percent of
GDP in 2019. The government policy tolimit recruitment in the public sector(except in education and health) helped
to lower the wage bill while the underexecution of foreign-financed projects
reduced capital expenditure. Tax revenues improved slightly from 12.1 percent
of GDP in 2018 to 12.2 percent of GDP in
2019. The improvement was supported
by enhanced digitalization of the tax
management system, which boosted VAT
collection. In Q1-2020, tax revenue declined by 0.2 percent due to COVID-19
mitigation measures. These included tax
relief for affected sectors and fast-trackcustoms procedures for essential andmedical goods. While the government
response plan led to a 1.5 percent of GDP
increase in expenditure. The risk of overall and external debt distress remains
moderate, with public debt standing at
37.8 percent in 2019.
Côte d’Ivoire’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 5.4 months of imports in 2019,
driven by fiscal consolidation in member states and higher net capital inflows.
To support the regional economy and
COVID-19 related extra spending, theBCEAO has implemented a set of monetary and macroprudential measuressince March 2020. These include lowering its policy rate to a fixed 2.5 percent
and extended refinancing operations of
the 3-month “Covid-19 T-Bills” at 2.5
percent for limited amounts.

FIGURE 1 Côte d’Ivoire / Real GDP growth and contributions to real GDP growth

FIGURE 2 Côte d’Ivoire / Actual and projected poverty
rates and real GDP per capita

Percent

Poverty rate (%)

15

8.0

Real GDP per capita (constant LCU)

100

1600000

7.0
10

6.0
5.0

5

4.0
0

3.0

1400000
80

1200000
1000000

60

80000040

600000

2.0

-5

1.0
-10

40000020200000

0.0
2017

2018

2019e

2020f

2021f

2022f

0

Source: World Bank.

0
2008

Current acccount balance (% of GDP)
Fiscal Balance (% of GDP)GDP growth (%)

2010

2012

2014

2016

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

MPO 226 Oct 20

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

The poverty rate slightly increased to an
estimated 26.3 percent (international poverty line US$1.90 PPP) in 2020, from anestimated 26.2 percent in 2019. The containment and prevention measures adopted by the government in the wake of the
COVID-19, have resulted in income loss
for households especially in urban areas.
Compared to 2019, 70 percent of informal
business owners have recorded a reduction in working hours and a decrease of
their turnover.

Outlook
Growth is projected to decline to 1.8 percent in 2020. On the external front, theglobal recession is projected to reducedemand for exports and negatively affectremittances and tourism. On the domestic
front, private consumption is expected to
decline as containment measures hit services and household’s income. However,by end-May 2020, cashew and cocoa prices were rising again, demand from external markets was recovering and activities
were also normalizing following deconfinement. In 2021, as the COVID-19 crisis
dissipates, a gradual recovery is expected,
driven by a rebound across all sectors.
Private consumption and investment

should pick up as uncertainty declines,
while the government’ support to SMEs
and the private sector continues, andsome FDI returns. Inflation is likely toincrease to 1.6 percent in the medium term
but remains well below WAEMU’s target.
The current account deficit is expected todeteriorate to 3.5 percent of GDP in 2020 but
will gradually improve from 2021 onward.
In the medium run, the trade balance would
benefit from higher exports of transformed
primary products and new mining products, and lower imports as growth remains
low. WAEMU reserves will drop to about
4.5 months of imports in 2020 as member
countries are hit by the COVID-19 crisis.
In 2020, the fiscal deficit is expected toreach 5.3 percent of GDP. As economic
activity decelerates, and fiscal relief
measures create further revenue shortfalls,
fiscal revenue will decrease. At the sametime, current expenditure should increase
from 12.9 percent of GDP in 2019 to 15.3
percent of GDP in 2020 owing to higher
COVID-19-related spending. In the medium terms, spending pressures are projected to ease thanks to economic recoveringand fiscal consolidation efforts.
The poverty rate is projected to fall from27.0 percent in 2018 to 25.8 percent in
2021, based on solid GDP per capita
growth (2.4 percent in 2021). Adverse
weather conditions observed in August,

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

could curb main crops production including cocoa and cashew. The compounded effect of the coronavirus pandemic and the below average rainfalls
recorded could be unfavorable to small
cocoa farmers revenue.

Risks and challenges
The outlook is subject to downside risks,
mostly arising from the COVID-19 pandemic, potential disruptions around the2020 presidential elections, and externaland security vulnerabilities. A potential
second wave of the COVID-19 could haveheavy toll on firms, workers and households. Greater political uncertainty as well
as security tensions may negatively impact investor confidence. The resulting
fiscal pressures will also challenge
Côte d’Ivoire’s ability to sustain inclusive
growth while pursuing a gradual fiscal
consolidation. Finally, vulnerability toexternal shocks including a decline in cocoa prices could also squeeze fiscal revenues and economic growth.

(annual percent change unless indicated otherwise)
2017
7.4
7.3
16.3
5.8
10.0
11.2
7.4
3.3
15.4
6.0
0.7
-2.0
1.4
-3.3
36.8
-2.1
27.9
57.3
80.7

2018
6.8
8.0
1.9
18.2
5.6
2.2
6.8
5.3
10.7
5.9
0.4
-3.5
1.2
-2.9
39.7
-1.6
27.0
56.5
79.6

2019
6.9
6.0
4.1
8.3
5.7
4.4
6.9
1.4
10.1
7.2
0.8
-2.7
1.0
-2.3
37.8
-0.8
26.2
55.7
78.4

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 2008-ENV and 2015-ENV.A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 227 Oct 202020 e
1.8
1.9
4.5
4.6
-4.6
-0.2
1.8
0.7
4.0
1.3
1.2
-3.4
0.2
-5.3
40.8
-3.2
26.3
55.8
78.6

2021 f
5.0
3.0
4.3
7.2
4.6
1.5
5.0
1.8
5.0
5.7
1.4
-2.6
1.4
-4.1
41.4
-2.6
25.8
55.4
78.0

2022 f
5.5
3.0
3.7
9.1
4.8
1.4
5.5
1.9
7.0
5.8
1.6
-2.5
1.6
-3.1
41.1
-1.7
25.3
54.8
77.2

EQUATORIALGUINEA
Table 1

Recent developments

2019

P o pulatio n, millio n

1.4

GDP , current US$ billio n

11.0

GDP per capita, current US$

8125.8Scho o l enro llment, primary (% gro ss)
Life expectancy at birth, years

a

b

79.0
58.4

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) UNESCO for School enrollment (201 5).
(b) WDI for Life expectancy (201 8).

Equatorial Guinea experienced its fifth
consecutive year of economic contraction
as lower hydrocarbon exports and fiscal
consolidation dampened growth. The
country is affected by the COVID-19, its
global consequences and the implementation of containment measures. The economy is expected to remain in recession in
the medium term. Downside risks include
COVID-19, and delays in the implementation of the structural reforms that areneeded to improve competitiveness, andthe effectiveness of fiscal policy. Such reforms would support the achievement ofshared prosperity.

The economy is estimated to have contracted by 5.6 percent in 2019, after contracting by 6.4 percent in 2018, as hydrocarbon output continued to decline on theback of aging oil wells. Lower hydrocarbon exports and public expenditures contributed to the contraction on the demandside. Unemployment is estimated to haveincreased to 6.4 percent in 2019 and youth
unemployment is estimated at 12.3 percent. Due to lower government revenues,
large government arrears (25.9 percent of
GDP at end-2019) to private construction
companies were recorded and resulted inhigh non-performing bank loans (about 40
percent of total loans in 2019) that weakened financial stability.
The overall fiscal surplus improved from
0.1 percent of GDP in 2018 to 1.6 percent
in 2019 as the government rationalized
capital expenditures and introduced newtaxes. Equatorial Guinea (GNQ) pursued
its expenditure-led fiscal consolidation in
2019, completed an IMF Staff Monitored
Program in September 2019, and has athree-year IMF Extended Fund Facility(EFF) program (US$ 282.8 million) that
was approved in December 2019.
However, in 2020H1, despite data limitations, it is estimated that the country wassignificantly affected by the COVID-19
pandemic through lower oil prices and its
subsequent consequences on government
revenues, increased public social expenditures, and the contraction of the nonhydrocarbon sector due to national and

FIGURE 1 Equatorial Guinea / Major transmission channelsof the COVID-19 pandemic in Equatorial Guinea
Percentage points, annual change

100

10
0

GNQ will continue to be affected by the
COVID-19 outbreak through lower oil prices, hydrocarbon exports and government

Mortality rate,
under-5 (per 1,000
live births)

120

20

Outlook

FIGURE 2 Equatorial Guinea / Non-income poverty
indicators

US$ per barrel

30

international containment measures. For
instance, credit to the economy declined
by 1.5 percent in 2020H1. To cope withthis challenging situation, the government
has adopted a broad emergency healthspending package (1 percent of the GDP),a social assistance scheme (0.3 percent ofGDP) and temporary support to the private sector (0.3 percent of GDP). To contain the fiscal deficit, the government cut
non-wage current expenditures and postponed non-priority capital expenditures.
The anticipated fiscal deficit could be partially financed by the domestic market as
BEAC, the regional central bank, decreased its policy rate by 25 basis points to3.25 percent in March 2020 and resumed
the purchase of government securities
during 2020H2.
The prolonged lockdown, collapse of oil
prices and disruption of economic activities is likely to have increased 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. Only formal employees, whichmake up a small share of the workforce,
have pensions or health benefits.

200%

80
100%

-10

60

-20

0%

-30

40

-40

Malnutrition
prevalence, height
for age (% ofchildren under 5)

20

-50
-60

Maternal mortality
ratio (modelled)
estimate, per100,000 live births)

02014 2015 2016 2017 2018e 2019e 2020f 2021f 2022f
Exports value (%)
Oil prices ($US/barrel) (RHS)

Sources: World Bank staff estimates and INEGE.

EqG relative to regional average
EqG relative to MIC averageunity benchmark

Government revenues (%)

Source: World Development Indicators (WDI).

MPO 228 Oct 20

revenues. Output is expected to contract by
9.1 percent in 2020 as hydrocarbon output
declines because the country will comply
with the OPEC decision to reduce oil production, external demand will decline, andsome investment could be delayed. The
economy will contract by an average of 2.1
percent in 2021-2022 despite the potential
increase in gas production in 2021-2022 thatwill result from the connection of the Alengas field to the main gas processing plant(Punta Europa). The current account deficit
is projected to widen to 9.1 percent of GDP
in 2020 from 5.9 percent of GDP in 2019 ashydrocarbon exports decline.
Consequently, despite the fiscal policy
measures announced in 2020Q2, GNQ is
expected to record a fiscal deficit of 5.2 percent of GDP in 2020 and public debt will
increase to about 55.2 percent of GDP in
2020. The securitization of domestic arrears, planned in 2020, will marginallystrengthen the banking system and affectprivate sector confidence in the nonhydrocarbon sector as the latter was affected by COVID-19 containment measures,and the outlook remains uncertain.
Measures to mobilize non-resource tax
revenues and cuts in public expenditures
could help contain the fiscal deficit at 1.6
percent of GDP in 2021-2022. The EFF
program-supported revenue measures
include a full implementation of excise

taxes, tax and custom administration reforms, the amendment of the 2017 tax
amnesty law and the continued rationalization of tax exemptions. An expenditure
review and additional cuts in inefficient
capital expenditures could free fiscal
space for new pro-poor social spending.
With investment expected to decline andreal growth projected to be sluggish in theservice sector in 2020, unemployment andpoverty are likely to have increased. A
Living Standard Measurement Survey(LSMS) is planned for 2021. This survey
will help understand challenges faced by
low income households and will provide
inputs to design the next National Economic and Social Development Plan.

Risks and challenges
A further decline in oil price represents amajor external downside risk as the effectsof the COVID-19 pandemic weighs on
growth prospects in major global economies. A decline in oil price would weaken
the country’s fiscal and external positions
while a procyclical fiscal stance would
exacerbate the negative effects of shocks
on growth and poverty outcomes.
With the current debt path that assumed
external borrowing to finance the expected

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)financing gaps, sustained political support
to economic governance reforms and astrong fiscal adjustment would be required
to restore fiscal and external sustainability.
This effort should not reduce the scope ofthe social assistance program that was
launched amidst this health crisis, andwhich is expected to be expanded to 15
percent of the population.
Delays in the implementation of tax andpublic financial management reforms remain a major challenge that could erode
the country’s capacity to rebuild fiscal andexternal buffers, and to improve humancapital in the medium-term.
Improving human capital and the businessenvironment remains critical to diversify
the economy. Implementing the recently
adopted business environment roadmap is
a major challenge as reforms are needed
across sectors. The design of adequate policy actions to improve human capital is critical and will depend on a timely completion of the 2021 household survey.
The timely organization of the LSMS typesurvey will be essential for the implementation of the interim national development
strategy adopted in April 2019 and designof the National Economic and Social Development Plan.

(annual percent change unless indicated otherwise)
2017
-5.7
3.4
0.4
-11.2
-3.8
8.3
-5.6
-2.7
-6.6
-3.5
1.1
-5.8
4.4
-7.0
43.2
-6.5

2018
-6.4
6.0
-0.1
16.3
-10.3
7.4
-6.3
-0.6
-11.6
4.9
1.3
-5.6
4.2
0.1
44.5
0.7

2019
-5.6
2.5
-1.9
-30.8
-1.5
1.9
-5.7
-5.6
-9.6
1.6
1.2
-5.9
3.9
1.6
49.6
2.3

2020 e
-9.1
1.4
-11.1
-39.1
-8.2
-5.3
-9.0
1.2
-8.7
-10.2
1.7
-9.1
3.8
-5.2
55.2
-3.8

So urce: Wo rld B ank, P o verty & Equity and M acro eco no mics, Trade & Investment Glo bal P ractices; based o n data fro m natio nal autho rities.
No tes: e = estimate, f = fo recast.
NA

MPO 229 Oct 202021 f
-2.9
2.0
-5.1
-20.6
-3.2
-1.8
-2.9
0.5
-5.8
1.6
1.8
-6.7
6.0
-2.5
57.3
-0.5

2022 f
-1.3
2.8
-3.0
-17.9
-2.8
-1.7
-1.3
1.4
-4.9
4.0
1.3
-4.2
5.5
-0.9
54.4
1.2

ERITREA

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

3.5

GDP , current US$ billio n

2.0

GDP per capita, current US$

566.7

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).

The pandemic shock is expected to reducereal growth to -0.6 percent in 2020, afteran estimated rebound to 3.7 percent theyear before. High expenditure rigidity
prevented a larger fiscal response to thecrisis, and the widening fiscal deficit isfinanced largely through monetization.
The speed of the recovery will depend on
delays caused by COVID-19 in finalizing
two large mines. Poverty data, like national accounts information, have notbeen produced over the last decade.

Eritrea has started emerging from a decade of international isolation, and two
decades of mobilization. While UN sanctions have been lifted, transitional politicalarrangements are still in place and focused on security. Meanwhile, progresshas stalled in establishing relations with
development and international partners.
Moreover, efforts to shift from a centrally
planned to a market-led economy havebeen slow and sporadic, and large SOEs
dominate economic activity. Monetary
policy is characterized by administrative
measures, fiscal dominance, and a fixedexchange rate regime pegged to the US
dollar, with foreign exchange reserves
hovering around 2 months of imports. The
banking system is mostly lending to thegovernment, lacking international correspondence banks, while payment andsettlement systems are absent. The country is among the most vulnerable and least
adapted to climate change, and frequent
weather shocks pose a heavy burden for
the economy and rural livelihoods. Agricultural output has barely exceeded
80 percent of annual food requirement
even in years of bumper harvest. The mining sector, which started operating in
2011, accounts for over 90 percent of totalexports, yet contributions to budget revenues are limited.
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, while inflation isestimated only for the capital, Asmara.
The last population census in Eritrea
took place more than 25 years ago. Little
is known about poverty; data from
1996/97, covering only urban areas, suggests that poverty was widespread witharound 70 percent of the population living in poverty.

Recent developments
Hit by the COVID-19 crisis, real GDP
growth is expected to plummet to-0.6 percent in 2020 from 3.7 percent a
year ago. A lockdown that lasted for several months and border closures haveadversely affected domestic demand andaggravated the effects of the external
shock. Deflationary pressures, aggravatedby the temporary opening of borders with
Ethiopia in 2019, have eased and inflation
is expected to reach 4.5 percent in 2020.
The external current account surplus is set
to narrow to 9.5 percent of GDP in 2020
from 12.1 percent last year as the compression in commodity exports exceeds themild slowdown in imports. Imports areconstrained and officially undertaken exclusively by the government, but informal
net imports are flourishing. A reduction in
inflows of remittances has also contributed to a narrowing of the external surplus.
External public borrowing is severely constrained given the build-up of arrears and

FIGURE 1 Eritrea / Evolution of total public debt (in percent
of GDP)

FIGURE 2 Eritrea / Wage bill (in percent of GDP)

Percent of GDP

Percent of GDP

350

20

300

18
16

250

14

200

12

150

10

100

8

50

6
4

0
2015

2016

Domestic debt
Source: Ministry of Finance.

2017

2018
External debt

2019

2020p

2021p

Total public debt

2
0
2014

2015

2016

Source: Ministry of Finance.

MPO 230 Oct 20

2017

2018

2019

2020p

2021p

cannot help building official foreign exchange reserves, which will continue tohover around two months of imports.
Meanwhile, the containment measures
reduced fiscal revenues, which is expected
to widen the fiscal deficit to 5 percent of
GDP in 2020 from 1.5 percent a year ago.
Current spending remained broadly unchanged from last year, with the wage billaccounting for half of the outlays. The newsalary structure introduced in 2014 forabout half of the government employees
resulted in the total wage bill more thantripling to 16 percent of GDP by 2020 since2016. Capital spending remains limited,
although some public investment in dams
and roads is taking place off-budget, which
may represent a contingent liability for thebudget. Aided by debt relief provided by
the Abu Dhabi Fund, total public debt,
including external arrears, is expected toshrink to an estimated 250 percent of GDP
in 2020 from 290 percent in 2017. Nevertheless, fiscal and domestic debt outcomesremain uncertain given frequent data revisions due to reporting lags driven by widespread manual processes.

Outlook
The international re-integration of thecountry could provide for a promising

growth outlook, coupled with two newlarge mines becoming operational overthe medium term. Real output growth isprojected to rebound to 3.5 percent in
2021 and increase further to 5.5 percent
in 2022, with both mines exhibiting sizable output capacity. The government isalso taking steps toward ensuring spillover effects from the new potash mine to
local fertilizer production. Increased utilization of fertilizer by farmers together
with reforms creating more space for theprivate sector in agriculture could raise
agriculture productivity and strengthen
output growth. That said, the challenging
macroeconomic situation together withthe hiatus in engaging with development
partners, compounded by climate change
and uncertainties regarding the impact ofthe pandemic on trade and commodity
prices, as well as limited opportunities
for private sector development under
existing policy environment, could
dampen growth prospects.
The steady decline in non-tax revenues
together with wage-related and other recurrent spending pressures, combinedwith few opportunities for external borrowing, imply limited options to scale up
capital spending in the near term. As accumulated revenues from the Eritrean
Petroleum Corporation are depleted, nontax revenues could decline significantly

TABLE 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)over the medium term exerting upward
pressure on the budget deficit. Efforts tonormalize the country’s relations with theinternational community could result in apathway to reduce significantly externalarrears and provide much-needed external financing. The latter would help boost
reserves in the shorter term and secure
foreign exchange for imports to build infrastructure. In parallel to addressing external arears, the government needs toresolve the massive domestic public debt
stock and resuscitate the financial sector.
Both are likely to impose a substantial
financial burden on the budget.

(annual percent change unless indicated otherwise)
2017
-10.0
-11.2
9.2
12.0
29.8
-4.6
-10.2
-18.2
-14.4
1.6
-13.3
24.0
2.9
-5.7
290.4
-3.6

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

MPO 231 Oct 20

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

2019
3.7
5.6
39.3
67.5
-5.2
6.8
3.7
27.0
13.0
-26.0
-16.4
12.1
3.9
-1.5
264.0
0.2

2020 e
-0.6
-1.6
16.1
151.6
-17.2
-11.1
-0.7
-0.5
-0.7
-1.0
4.5
9.5
3.8
-5.0
249.5
-3.4

2021 f
3.5
5.5
5.5
14.2
6.2
5.1
3.6
5.8
1.4
2.5
2.4
9.5
3.5
-4.7
236.4
-3.1

2022 f
5.5
8.8
7.0
-8.5
7.1
7.7
5.5
3.1
10.2
4.0
2.0
8.9
3.4
-1.5
217.6
0.1

ESWATINI

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

1.2

GDP , current US$ billio n

5.1

GDP per capita, current US$

4349.2

Internatio 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

b

115.2
59.4

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 pandemic has exposed
Eswatini structural weakness. Real GDP
is projected to contract by 3.5 percent in
2020, as COVID-containment measures
have disrupted supply chains and depressed demand since March. Lower revenue and rising expenditures (including
on COVID-containment measures) areexerting pressure on fiscal accounts. Inflation is rising, although it remains within the target band. Poverty is projected toincrease as the pandemic has caused company closures, increased unemployment
and restricted activity especially in theinformal sector.

Eswatini economic growth has been slowing, even before the COVID-19 pandemic.
Over the past five years Eswatini’s growth
has averaged 1.8 percent, consistently
below the Sub-Saharan Africa average.
Economic growth declined to 1.3 percent
in 2019 from 2.4 percent in 2018 on theback of a deteriorated fiscal situation andlow agricultural output. Expenditure has
been rising since 2016, while Southern
African Customs Union (SACU) revenues
have been declining, contributing to widening fiscal deficits, rising debt and accumulation of domestic expenditure arrears.
Delayed clearance of domestic arrears
strain banks’ balance sheets and undermines lending to the private sector andeconomic recovery. Declining private investments and weakening external competitiveness have kept growth subdued,hindering the long-term growth prospectsof the economy.
The economy is vulnerable to developments in South Africa, as Eswatini is dependent on South Africa for trade, government finances (through the SACU
transfers which constitute 40 percent of
the revenue), remittances and informal
trade. The slowdown in South Africa will
adversely affect future SACU revenues,
particularly in FY22/23, thus generating
additional budget and external financing
pressures, and put further pressure on
foreign currency reserves.

FIGURE 1 Eswatini / Fiscal deficit and Real GDP

Percent of GDP

10
7

3

Recent developments
The COVID-19 pandemic is driving Eswatini into its first recession since 1976.
COVID-19 containment measures havebrought the economy almost to a standstill. Since March 2020, the Government
imposed severe mobility restrictions andtemporary closure of businesses with person-to-person contact. As a result, almost
all economic sectors contracted during the
lockdown, except for health and communication. The mobility restrictions andbusiness closures have led to job losses.
COVID-19 related expenditures have reversed the fiscal consolidation efforts thatgovernment had started in 2019, amid declining revenues. Since the beginning of thepandemic, the Government has approved
two supplementary budgets, in March 2020
(0.1 percent of GDP) and in June 2020 (1.5
percent of GDP). Inflation year-on year (y/y) has started to pick up in 2020, rising

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

Percent of GDP

5

The pandemic is unfolding in a context ofhigh prevalence of HIV/AIDS and astretched health care system, which increase Eswatini’s vulnerability. Poverty
levels have historically been high, withclose to 30 percent of the population living
below the US$1.90/day international poverty line. This, together with high inequality levels – with a consumption per capita
Gini index of 54.6 in 2017 – increases vulnerability to the economic shocks. Unemployment has been high even before
COVID-19 at 23 percent in 2016 and mostly in the informal sector.

Poverty rate (%)

Real GDP per capita (constant LCU)

100

40000
35000

80

30000

4
1

1

60

-1

-2

40

25000
20000
15000

-5
-3

-8

-5

-11

5000
0

Source: Ministry of Finance.

0

2009

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Real GDP growth(% )[RHS]

10000

20

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Fiscal deficit( % of GDP) (LHS)

Source: World Bank staff calculations.

MPO 232 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

from 2.7 percent in January 2020 to 3.9 percent July 2020, partly due to COVID-19
induced supply chain disruptions.
As part of its response to minimize theeconomic fallout from the pandemic, theCentral Bank of Eswatini has continued
with accommodative monetary policy in2020 to support economic activity. The
Central Bank reduced the repo rate fourtimes (cumulative 275 basis points) since
March 2020 leaving the repo rate at 3.75
percent. However, accommodative monetary policy has not stimulated credit demand, as most companies were closed
during the lockdown.
The first month of the lockdown saw a
sharp adjustment in external trade. With
mobility restrictions, exports fell by 40
percent y/y in April 2020, while imports
contracted by 45 percent. The trend continued to July, with some recovery thereafter in exports and imports, as South Africa has relaxed the lockdown and Eswatini has allowed companies to restart operations. The trade balance and current account have remained in surplus.
COVID-19 is projected to increase poverty. The $1.90/person/day international
poverty rate is projected to increase from28.4 percent in 2019 to 29.9 percent in2020. This is largely because COVID-19
related mobility restrictions and market
closures have led to income losses, priceincreases and subsequently consumption
losses. Further, the adverse trade impacts of lockdown measures are likely toworsen the situation with disproportionate impacts on women and the rural
population.

Outlook
The economy is projected to contract by 3.5
percent in 2020, reflecting the economic
impact of the COVID-19 pandemic. The
manufacturing and service sectors are particularly hit hard by disruptions in global
value chains and travels restrictions respectively. Eswatini’s medium term economic
recovery hinges on the evolution of the
COVID-19 pandemic and the pace of recovery of the global and regional economies,
particularly that of South Africa. A weak
global recovery would lead to a delayed
pick-up in trade, investment, and tourism(due to averseness towards travel). The
authorities have approved a three-year Fiscal Adjustment Plan that will constrain demand. Inflation is expected to rise, but remain within the 3-6 percent target band,due to deferment of electricity tariff adjustments to 2021. This subdued economic
growth, together with high unemployment,
will continue to be associated with highTABLE 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

poverty levels, with the 1.90/person/day
international poverty rate projected at 29.8
percent in 2021 and 2022.
The fiscal deficit is projected to increasesignificantly to 8.7 percent of GDP in 2020
(from 7.3 percent in 2019). Domestic revenues are projected to fall due to weak economic activity. Expenditures are projected
to increase as the Government spends more
on health and support to individuals andbusinesses to mitigate the impact of thecrisis. The pandemic has increased borrowing needs particularly external borrowing
given the shallow domestic financial markets. External debt is projected to increasesignificantly in FY20/21 from 14.9 percent of
GDP in 2019 to 24 percent in 2020. The fiscal
deficit is projected to narrow over the medium term, as the Government implements its
three-year Fiscal Adjustment Plan approvedin June 2020.
The surplus on the current account is
expected to decline significantly (to 1.0
percent of GDP in 2020 from over 4 percent in 2019) due to low exports andtourism receipts, and reduced remittances in 2020. The surplus is, however, expected to pick up from 2021 onwards as
COVID-19-related trade and supply disruptions ease, and fiscal adjustments
contain the growth of imports.

(annual percent change unless indicated otherwise)
2017
2.0
5.6
2.9
-1.0
4.6
7.9
1.8
-4.3
1.8
2.9
6.2
6.2
2.7
-7.0
27.6
-5.9
28.8
52.1
71.9

2018
2.4
2.7
-4.7
34.3
10.9
-8.7
2.3
8.0
-0.2
3.1
4.8
1.3
-0.9
-9.9
24.6
-8.8
28.5
51.8
71.5

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-HIES. A ctual data: 2016. No wcast: 2017-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
1.3
2.6
-3.5
-2.1
8.0
6.0
1.3
-4.4
1.0
2.5
2.6
4.1
-2.1
-7.3
31.1
-5.6
28.4
51.8
71.4

2020 e
-3.5
-3.7
-5.4
-1.0
-5.6
-6.0
-3.5
4.8
-5.3
-3.6
4.1
1.0
-0.1
-8.7
41.1
-6.6
29.9
52.7
72.8

2021 f
1.5
2.6
-3.7
1.1
4.9
4.1
1.5
4.0
4.1
-0.6
4.2
5.6
-0.7
-6.4
44.1
-3.7
29.8
52.7
72.8

2022 f
0.9
2.2
-2.5
3.1
3.7
5.1
0.9
5.5
1.9
-0.6
4.6
4.3
-0.7
-6.2
49.6
-3.2
29.8
52.7
72.8

ETHIOPIA

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

110.1

GDP , current US$ billio n

95.7

GDP per capita, current US$

869.0

Internatio nal po verty rate ($ 1.9)

a

32.6
a

70.5

a

90.7

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

b

100.0
66.2

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).

The COVID-19 crisis has hit Ethiopia
through both external and internal channels. Merchandise exports growth
turned negative when the pandemic started to hit and FDI declined in FY20. In
recent surveys, households and firms declared to be facing substantial income
losses. Accommodative monetary andfiscal policies have been adopted to help
mitigate the impacts, but coverage is limited and the effects of the COVID-19 pandemic on household welfare are expected
to be severe. Growth is expected to sharply slowdown in FY20 and FY21.

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. The main driver ofgrowth has been capital accumulation,
mostly large-scale public investment ininfrastructure. While poverty declined byabout 10 percentage points during 20042016, gains are modest when compared toother countries, and there is evidence thatrural dwellers and the poorest have notbenefited 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 unevenplaying field. Maturity mismatches in thefinancing of the large capital investments
coupled with a loss in competitivenesscaused by an overvalued exchange rate have
put the economy at high risk of debt distress. Acknowledging these shortcomings,
authorities launched in September 2019 a
Homegrown Economic Reform Agenda,
aiming at fostering efficiency and introducing competition in key growth-enabling
sectors (energy, logistics, telecom), improving the business climate, and addressing
macroeconomic imbalances.
The COVID-19 crisis poses formidable
challenges for the people and the economy of Ethiopia. If the number of infections
in Ethiopia continues to rise exponentially

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

and a need for additional restrictive containment measures arises, it would further
hinder production and have an impact onhousehold consumption. The desert locust
invasion could affect crop production in
FY21, threatening food security. Progressin poverty reduction is likely to come to ahalt, and there is risk that poverty could
increase, given the high levels of vulnerability against shocks such as the one induced by COVID-19: between 2012 and2016, close to half of the population inrural areas and small towns experienced
at least one spell of poverty (meaning thatthey were below the poverty line at somepoint during this period).

Recent developments
Due to COVID-19 containment measures,
as well as the weakening of householdincome and demand, the growth estimate
for FY20 has been reduced to 2.3 percent.
While agriculture has held up well, thanks
to 6.2 percent growth in main harvest production, industry and services have reportedly been severely affected.
While the current account deficit narrowed due to declining imports, theexternal shock has affected exports,
remittances, and FDI. While merchandise export value grew by 12 percent(yoy) in FY20, this is the result of the
pre-COVID-19 performance, as exportsof goods have dipped in recent months.
Meanwhile, private transfers and FDI
declined by 10.2 percent and 19.8 percent during FY20.

FIGURE 2 Ethiopia / COVID-19 impact on jobs

Share of survey respondents that are employed
100
90
80

70
60
50
40
30
20

10
0
Pre-COVID

R1 (Apr-May)
National

Sources: Ethiopian authorities and WB staff forecasts.

Source: HFPS-HH.

MPO 234 Oct 20

R2 (May)Rural

R3 (Jun)Urban

Driven by food prices, annual inflation
continued trending up, reaching 24.6 percent in July 2020 compared to 21.6 percent
in June. During FY20 the Birr depreciatedby about 20 percent against the dollar(compared to 6 percent in previous years),
but the real exchange rate started to appreciate again in January 2020, against the
backdrop of high inflation.
Monetary and fiscal policies have relaxed to provide liquidity and financeneeded expenses. Reserve money grewby 22.8 percent in FY20, against a preCOVID-19 target of 12.5. Credit growth
eased to 20.3 percent in FY20, compared
to 26 percent in FY19.
Tax revenue is estimated to have declined
from 10 percent of GDP in FY19 to 8.6 percent of GDP in FY20, as collections of corporate income tax and VAT, among others,
falter. Meanwhile, recurrent expenditure
increased by more than a percentage pointof GDP, driven by the increase in COVID-19
related expenses (including healthcare andfood security, which is a challenge in Ethiopia and could be exacerbated by the crisis).
The COVID-19 pandemic has had severe
economic impacts, resulting from reduced
employment and income. According torecent surveys, more than half of thehouseholds reported in April that theirincomes were either reduced or had totallydisappeared. Employment rates plunged in

the early days of the pandemic—with 14
percent of respondents losing their job atthe beginning of the outbreak—particularly those who were selfemployed or working as casual labor, andin urban areas. The share of respondents
who lost their job was highest in the hospitality sector, construction, and wholesale and retail trade sectors.

Outlook
Growth would stall in FY21 as the numberof cases continues to accelerate during thefirst quarter of the year (July-September2020) and global recovery remains uncertain. Continued import compression andfavorable terms of trade are expected tocontain the current account deficit in
FY21, even as remittances fall further. Exports, remittances and foreign investment
are expected to recover over the medium
term. Inflation is expected to remain in
double figures in FY21 against a backdropof high food inflation, while trending
down in the medium term as a tighter
macroeconomic stance is implemented
once the pandemic abates. Following an
expansion in FY20 due to the COVID-19
response, the deficit is expected to be reduced in FY21.

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

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 demandwith reductions in income disproportionally concentrated among low-income
households. While COVID-19-induced
layoffs are relatively small in the public
sector, the private sector has shed jobs
with those working on temporary contracts or casual work particularly affected.
Results from the phone survey of firms
show that COVID-19 and related 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 self-employed (44percent of urban households) are hit particularly hard with an expected downturnof the economy. Moreover, reduced fiscal
space will put pressure on the provision ofsocial services during and after the economic downturn, potentially having detrimental long-term effects on the poor.

(annual percent change unless indicated otherwise)
2016/17
10.1
5.6
8.3
6.9
6.1
-7.5
10.2
6.7
18.7
8.6
7.3
-8.3
-3.3
58.9
-2.8
30.0
67.9
87.4

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
55.3
-2.4
29.0
66.9
86.1

2018/19 2019/20 e 2020/21 f 2021/22 f
9.0
2.3
0.0
8.7
5.1
2.5
2.5
4.0
7.2
17.9
-1.3
2.9
12.4
-4.1
-4.0
17.2
3.0
-0.7
7.0
12.0
0.6
-2.0
1.7
7.0
9.0
2.3
0.0
8.7
3.8
5.0
4.0
4.0
11.5
3.0
3.5
9.0
12.0
-0.5
-5.9
13.1
12.5
19.9
16.7
8.4
-5.1
-4.0
-4.2
-3.2
-2.5
-3.5
-3.1
-1.9
52.7
51.1
51.1
49.1
-2.0
-3.0
-2.3
-1.1
27.8
27.7
27.5
26.4
65.6
65.5
65.2
64.1
84.5
84.3
84.0
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) Calculatio ns based o n 2010-HICES and 2015-HICES and fiscal year gro wth rates. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

GABON

Recent developments

Table 1

2019

P o pulatio n, millio n

1.9

GDP , current US$ billio n

16.9

GDP per capita, current US$

8980.7

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

b

139.9
66.2

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 1); Life expectancy (201 8).

The COVID-19 outbreak is worsening
Gabon’s short-term outlook, with economic activity now projected to contract
by 2.4 percent in 2020. Lower fiscal revenues would lead to a fiscal deficit of 5.4
percent of GDP in 2020, while the current account deficit would widen to 7.6
percent of GDP. The medium-term outlook suggests a timid recovery with output levels expected to take about three
years to return to their 2019 levels, leading to a slight increase of poverty to
32.4 percent in 2022.

Growth accelerated to 3.9 percent in 2019supported by an increase in oil production and dynamic mining and agribusiness sectors, and the fiscal balance (on acommitment basis) shifted from a deficitof 1.3 percent of GDP in 2018 to a surplusof 1.4 percent of GDP in 2019. The gradual clearance of external arrears resulted
in a decline of public debt to 59.1 percent
of GDP in 2019 but persistent domestic
arrears are still weighing on the privateand financial sectors. Increased commodity exports, supported by rising commodity prices, narrowed the current account deficit to 0.3 percent of GDP in2019 while Gabon’s imputed reserves at
the BEAC increased to 2.5 months of imports in 2019 supported by the new foreign exchange regulation in CEMAC.
Economic activity decelerated sharply at
end-June 2020 due to containment
measures and weaker commodity prices
and global demand. Oil and oil products
exports fell by 1.5 percent and 27.7 percent
respectively at end-June 2020 (y/y) andwood exports value decreased by 6.6 percent (y/y). Domestic activity also suffered
as illustrated by the decline of services.
Total non-oil tax revenues declined cumulatively by 11.0 percent in April 2020 (y/y),reflecting weak non-oil economic activity
and constraints to tax collection. Additional COVID-19 spending sharply increased,
resulting in a financing gap of US$ 714.5
million (4.4 percent of GDP). The authorities were able to secure about US$ 317.3

million from the IMF and Euro 100 million
from the AfDB to cover the additional
financing needs. US$ 150 million budget
support from the World Bank is underpreparation, leaving a US$ 125.6 million(0.8 percent of GDP) financing gap to becovered. About US$ 25.4 million of additional domestic arrears have been accumulated by the end of May 2020.
Poverty and welfare disparities remained
high, with the poverty rate ($5.5/day, 2011
PPP) expected to increase to 32.6 percent
in 2020 because of job losses and decreaseof revenues for self-employed in urban
areas caused by the COVID-19 outbreak.
Inequality, measured by the Gini coefficient, is at a moderate level, but wide geographic disparities exist in living conditions and access to basic services, especially between urban and rural areas. Gabon’ssocial protection system is inefficient, underfinanced, and covers only a small fraction of the poor, explaining the persistenthigh level of poverty.

Outlook
Economic activity is now projected to contract by 2.4 percent in 2020, against an
expansion of 3.4 percent anticipated before the COVID-19 pandemic. The medium-term outlook suggests a timid recovery with output levels expected to takeabout three years to return to their 2019
levels. Growth is projected to reach 2.0
percent in 2021 and 3.9 percent in 2022,
supported mainly by sustained private
investments in agribusiness, wood and

FIGURE 1 Gabon / Real GDP Projections, pre and post
COVID (levels)

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

2019-Index 100

Poverty rate (%)

110

60

3500000

50

3000000

108

Real GDP per capita (constant LCU)

106

2500000

40

104

2000000

102

30
1500000

100
20

98

1000000

1096
94500000092

02005 2007 2009 2011 2013 2015 2017 2019 2021

2017

2018

2019

Pre-COVID-19
Source: World Bank calculations.

2020

2021

2022

International poverty rate
Upper middle-income pov. rate

Post-COVID-19

Source: World Bank. Notes: see table 2.

MPO 236 Oct 20

Lower middle-income pov. rate
Real GDP pc

infrastructure thanks to the gradualglobal recovery.
COVID-19 will, nevertheless, leave lasting economic scars to the economy since
output levels are expected to stay below
their pre-COVID anticipated levels overthe medium term. Inflation is projected
to remain below 3 percent in the medium term owing to the projected decline
in food prices.
Combined with unanticipated public
expenditures, lower fiscal revenues
would lead to a fiscal deficit of 5.4 percent of GDP in 2020, against a preCOVID-19 crisis anticipated surplus of
1.3 percent of GDP. The authorities are
expected to revert to the fiscal consolidation path once the fallout from the pandemic subsides, gradually narrowing the
fiscal deficit over the medium term. The
projected pick-up in tax revenue, combined with efforts to limit tax exemptions
and cuts in current spending is expected
to offset partly the projected decline incommodity revenues. Public debt is expected to increase sharply to 71.6 percent
of GDP in 2020 due to COVID-19 related
additional financing needs, before progressively declining to 63.3 percent of
GDP in 2022. The current account deficit
would widen to 7.6 percent of GDP in
2020, compared to a pre-COVID-19 crisis
projected deficit of 2.0 percent of GDP,

before gradually narrowing to 2.8 percent of GDP in 2022 supported by higher
oil prices and a resumption of investments in wood and agri-business thanks
to the expected progressive global economic recovery.
The negative impact of the COVID-19
pandemic on the most vulnerable would
be significant because of constrained access to quality healthcare in rural areas.
The short-term impact is more registeredby the formal sectors (hotels, restaurants,
education and retail trade) but long-term
impact would be more significant on
informal workers. The fact that social
protection is underfinanced, combinedwith tighter fiscal constraints would
worsen the situation. Because of thegradual economic recovery expected in
2021 and 2022, the share of households
living with less than $5.5/day is not expected to decrease, with poverty rate
expected to remain at 32.6 percent in
2021 and at around 32.4 percent in 2022.

Risks and challenges
Projections remain subject to significant
uncertainty and to serious downside risks
since the economic effects of the pandemic
are still unfolding. Because of Gabon’s

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

high dependency on oil, a new downward
trend in oil and manganese prices would
be harmful. This risk is more important
today as OPEC is putting pressure on Gabon to lower its oil production to comply
with the quotas set by the organization.
A significant upturn in the number of
COVID-19 positive cases in the upcoming months in Gabon and the rest of theworld is another major risk for Gabon's
outlook. This would translate into a longer-than-expected closure of borders between countries, preventing private investment to pick up as expected to support economic recovery. The negative
impact would be significant insofar as
the capacities of the health structures
located inside the country to cope with alarge number of patients are limited.
Despite the challenging context, the Government must preserve public investment
and maintain efforts to repay domestic
arrears while avoiding additional arrears
accumulation to lay the ground for a rapid economic recovery and mitigate thenegative social impact in the medium
term. In addition to the social protection
reform, current reforms to support domestic revenue mobilization, reduce thecivil service wage bill and improve thetransparency of the management of public spending, in particular capital expenditure, need to be completed.

(annual percent change unless indicated otherwise)
2017
0.5
0.4
-1.3
-11.5
3.4
-7.3
1.5
12.2
-6.6
5.4
1.1
-7.0
-2.6
62.9
-0.1
3.4
11.2
32.2

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
11.3
32.3

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
11.2
32.1

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 2011- and 2017-EGEP . A ctual data: 2017. No wcast: 2018-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using po int to po int elasticity at regio nal level with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 237 Oct 202020 e
-2.4
0.8
3.7
-4.1
-7.3
-4.0
-2.4
0.6
-4.1
-1.8
3.0
-7.6
-5.4
71.6
-2.3
3.5
11.3
32.6

2021 f
2.0
0.2
-6.0
2.5
6.8
2.8
2.0
0.0
3.0
1.7
3.0
-4.6
-3.6
67.4
-0.8
3.5
11.3
32.6

2022 f
3.9
1.3
3.9
4.1
5.3
3.0
3.9
22.7
8.0
-1.3
2.8
-2.8
-2.8
63.3
0.1
3.4
11.3
32.4

THE GAMBIA
Table 1

Recent developments
2019

P o pulatio n, millio n

2.4

GDP , current US$ billio n

1.8

GDP per capita, current US$

773.8

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

98.0

b

61.7

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).

Growth remained robust in 2019, supported by tourism, trade and construction. Fiscal and external deficits improved, while poverty fell. Due to COVID-19, the economy will contract by 1.8 percent in 2020, driven by a fall in tourism
and domestic consumption. Growth andpoverty reduction are expected to gradually recover over the medium term. The
outlook is subject to downside risks stemming from the speed of global recovery,
the magnitude of the domestic COVID-19
outbreak, and the pace of fiscal reforms.

GDP grew by 6.1 percent in 2019 (2.9 percent in per capita terms), supported by
tourism and wholesale and retail trade,while agriculture contracted by 1.3 percent
due to delayed rainfall. On the demandside, growth was driven by high public andprivate investment. In H1 2020, however,tourism came to a standstill, while private
consumption has been suppressed by
COVID-19 containment measures. Nevertheless, construction activities have increased, partially funded by a 48 percent
growth in official net remittances. Furthermore, favorable summer rains bode well
for agriculture this year.
The current account deficit (including
grants) declined substantially to 5.3 percent
in 2019, driven by strong increases in remittances, tourism and budget grants. FDI(mainly in real estate) financed the deficit,
while the exchange rate remained stableand foreign reserves rose. In H1 2020, however, the external sector was hit by the crisis, with the current account deficit alreadyreaching 4.6 percent of GDP, due to falling
services exports. However, record highofficial remittances in H1 2020 have bolstered international reserves.
In 2019 the government registered a primary surplus (including grants) of 0.6
percent of GDP, helping to reduce thefiscal deficit to 2.5 percent of GDP andpublic debt to 80 percent of GDP. The riskof external debt distress improved from‘in distress’ to ‘high’ following debt service deferrals from external creditors.

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

FIGURE 1 The Gambia / Actual and projected fiscal andprimary balance
Percent of GDP

Percent of GDP

While the fiscal position remained strong
in the first quarter of 2020, it deteriorated
in the second, with a 5 percent year-onyear drop in revenues driven entirely bydomestic taxes. Nevertheless, the collections for H1 2020 have exceeded revised
budget targets. The shortfall in domestic
taxes was compensated by higher nontax revenue due to one-off asset sales
authorized by the Janneh Commission.
Total expenditure for H1 2020 remained
similar to H1 2019. However, the composition of spending was changed to accommodate emergency spending on
health (0.5 percent of GDP) and food
distribution (0.7 percent of GDP), while
capital expenditure lagged.
Inflation increased to 7.1 percent in 2019.
Due to a decline in domestic demand following COVID-19, headline inflation decelerated to an annualized rate of 6.5 percent in June 2020, while food inflation wasslightly higher at 6.7 percent. Private credit has stagnated throughout H1 2020 since
end-2019. To ease liquidity conditions, thecentral bank cut its policy rate from 12 to
10 percent and the statutory reserve requirement ratio by 200 basis points to 13
percent in May. Broad money continued
to grow by 16 percent at end-June 2020,
compared to the same period last year.
The spread of COVID-19 prompted ahealth emergency, and social distancing
measures reduced economic activities,
triggered job losses and decreased labor
incomes. In urban areas, declining employment in services and manufacturingand high informality levels have reduced
household incomes, and in rural areas,
lower private transfers led to an increase

Poverty rate (%)

Real GDP per capita (constant LCU)

100

2

29000

90.0

28000

80

0

27000

85.0

-2

60

26000

40

25000

80.0
-4

24000

75.0

-6

20

-8

23000

70.0
2017

2018

2019 e2020 f

2021 f02022 f

22000
2010

Fiscal balance (% of GDP)
Debt (% of GDP, rhs)

Primary balance (% of GDP)

Sources: The Gambian authorities and World Bank estimates.

2012

2014

2016

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

MPO 238 Oct 20

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

of poverty. Despite emergency government support, and stable market prices,
households have experienced a rapid decline of their incomes and the poverty rateis expected to have increased from 8.4
percent in 2019 to 9.6 percent in 2020.

Outlook
The impact of COVID-19 has worsened
the economic outlook. Externally, theimpact will continue to come from tradedisruptions including tourism. Domestically, private consumption will remain
suppressed. GDP is projected to contract
by 1.8 percent in 2020, compared to thepre-COVID projection of 6.3 percent. As
the global economy starts to recover,growth could gradually rise to 5.3 percent by 2022. Inflation is forecast to
steadily drop, reaching 5.5 percent in
2022, close to the Central Bank’s targetof 5 percent.
The current account deficit is expected towiden, initially due to lower tourism receipts and trade disruptions, and overtime due to reduced budget support. The
deficit is expected to be financed by FDI.
Foreign exchange reserves would remainaround 4.7 months of imports, supported
by remittances.

For 2020, the fiscal deficit will increase to
3.8 percent of GDP, increasing public debt
to 83.1 percent of GDP. Tax revenues will
decline due to lower economic activity,
while health and social transfers will increase to respond to the crisis. However,participation in the debt service suspension
initiative (DSSI) is expected to yield debt
relief of US$ 4.14 million (0.23 percent ofGDP). As the economy recovers and taxable activity rejuvenates, tax revenues areprojected to increase supported by improved revenue administration and a tighttax expenditure monitoring framework.
Expenditures will shift towards externallyfinanced project execution. Subsidies to
SOEs and transfers to subvented agencies
are expected to fall as government
strengthens corporate governance and improves balance sheets of SOEs and rationalizes the agencies. Thus, starting 2021, thedeficit will decline, putting public debt-toGDP back on a downward path.
The COVID-19 crisis has pushed almost
40 thousand people into extreme poverty
and will undermine poverty reduction in
the near future. In the absence of social
safety nets, households will reduce consumption, while labor demand is likely
to decline in response to a slow tourist
season and insolvencies. The international poverty rate is expected to decline
marginally to 9.0 percent in 2022, withTABLE 2 The 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

significant downside risks associatedwith an uncertain recovery.

Risks and challenges
The Gambia has limited fiscal policy buffers to respond to a downturn, given thehigh risk of debt distress. A key risk factor
is the duration of the COVID-19 pandemic
both locally and globally, particularly inEurope. Erratic rainfall could also impact
agricultural output. Slow progress on fiscal reforms, along with shocks from SOEs,
could undermine the macroeconomic
framework. Limited upside risks originate
mainly from a faster recovery from thepandemic and a stronger-than-expected
tourism rebound.
COVID-19 threatens livelihoods and undermines drivers of poverty reduction,
including job creation and human capital
accumulation. Schools and universities
are closed, and online learning is notaccessible to all or effective, leading to alearning crisis that weakens the productivity of future generations, especiallyamong the poor in remote areas. Furthermore, capacity constraints in the healthsector could derail the fight against nonCOVID diseases.

(annual percent change unless indicated otherwise)
2017
4.8
9.5
-6.1
-1.2
9.6
19.1
4.8
-4.4
-3.5
11.7
8.0
-7.4
-4.8
87.0
0.1
10.1
37.7
72.4

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
-3.1
9.2
35.2
70.6

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 2015-IHS. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
80.0
0.6
8.4
33.3
69.2

2020 e
-1.8
0.8
14.8
14.8
-21.7
7.0
-1.8
1.2
2.1
-3.9
6.1
-8.6
-3.8
83.1
-0.7
9.6
36.5
71.5

2021 f
3.1
2.6
2.5
4.6
16.6
8.7
3.1
2.6
4.6
2.7
6.0
-12.3
-3.6
81.6
-0.7
9.6
36.4
71.4

2022 f
5.3
5.1
1.2
9.9
6.1
8.0
5.3
3.3
5.2
6.0
5.5
-11.7
-2.5
77.0
0.2
9.0
34.9
70.3

GHANA

Recent developments

Table 1

2019

P o pulatio n, millio n

30.1

GDP , current US$ billio n

67.2

GDP per capita, current US$

2233.0Internatio nal po verty rate ($ 1.9)

a

13.0
a

30.1

a

56.3

Lo wer middle-inco me po verty rate ($ 3.2)
Upper middle-inco me po verty rate ($ 5.5)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) WDI for School enrollment (201 9); Life expectancy (201 8).

The COVID-19 pandemic ended a strong
growth episode and a 2-year disinflation
process in Ghana. It also halted the fiscal
consolidation program, with an estimated fiscal deficit of 14.5 percent of GDP in
2020, as the Government provided support to protect lives and livelihoods. Poverty is expected to increase in 2020. Medium-term growth prospects have weakened with considerable downside risks,
including substantial debt rollover risks,
increased spending pressures in the runup to the 2020 elections, and possible
permanent job losses.

The COVID-19 pandemic has put an end
to Ghana’s strong growth episode (201719). The 2020 second quarter GDP contracted by 3.2 percent (Y/Y), the first in 38
years, compared to a 5.7 percent expansion in 2019. The slowdown in Q1 wasdriven by the oil sector, but services andagriculture showed more resilience. In thesecond quarter, the impact of the lockdown and health measures was felt in theservices and industry sectors, which contracted by 2.6 and 5.7 percent, respectively, while the agriculture sector grew by 2.5
percent. The Bank of Ghana’s composite
index of economic activity (CIEA) suggests some improvements in April andMay, including consumption (proxied by
VAT collections) and construction activities (proxied by cement sales).
Inflation rose sharply to 11.2 percent in
the second quarter of 2020, largely reflecting a 14.4 percent (Y/Y) increase infood prices spurred by panic-buying in
April. Inflation had remained in single
digits in 2019 and was below 8 percent
in the first quarter of 2020, thanks to atighter monetary policy stance, a moratorium on central bank financing of the
fiscal deficit and lower non-food inflation. Although inflation expectations
have trended upwards in recent months,
in April 2020, the Monetary Policy Committee of the Bank of Ghana (BOG) lowered the policy rate from 16 to 14.5 percent to help mitigate the impact of thecrisis on economic activity.

The fiscal deficit (excluding the energy
and financial sector costs) widened to 6.3
percent of GDP in June, double what had
been programed before the COVID-19
pandemic. This resulted from lower revenues and higher spending in response to
the crisis. To close the fiscal gap, total
domestic financing reached 5.7 percent of
GDP (89.5 percent of the total financing)as the Government turned to the domestic market including the BOG. The June
2020 primary deficit, at 3.3 percent ofGDP, was much higher than the 0.01 percent target, indicating adverse debt dynamics going forward.
The COVID crisis weighed on the demand for credit. This prompted the BOG
to reduce the Primary Reserve Requirements from 10 percent to 8 percent andthe Capital Adequacy Ratio from 13.0
percent to 11.5 percent. Yet, credit topublic and private institutions fell in thefirst five months of 2020 due to the uncertain outlook. As a result, growth inbanks’ after-tax profits slowed sharply
and the ratio of NPLs increased to 15.2
percent in May 2020 from 14.3 percent in
December 2019.
Ghana’s current account deficit narrowed
to 0.8 percent of GDP (US$556.3 million)
for the first half of 2020, slightly lower
than the 1 percent (US$661.1 million) recorded for the same period in 2019, mainly
due to lower investment income outflows,
particularly lower profits and dividends
in the extractive sectors. As exports decreased faster than imports, the Trade
Balance for January-June 2020 registereda lower surplus (US$963 million) than the
US$1,355 surplus recorded in the same

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

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

Percent, percentage points

Poverty rate (%)

18

100

Real GDP per capita (constant LCU)
6000

16

5000

80

14
12

4000
60

10

3000

8

40

6

2000

4

20

2
0
2016

2017
Agriculture

2018

2019

Industry

Sources: World Bank and Ghana Statistical Service.

2020
Services

2021

2022

1000

0

0
2005 2007 2009 2011 2013 2015 2017 2019 2021
International poverty rate
Upper middle-income pov. rate

Total

Source: World Bank

MPO 240 Oct 20

Lower middle-income pov. rate
Real GDP pc

period in 2019. The COVID-19 crisis adversely affected FDI inflows, especially tothe extractive sectors, as well as portfolio
investment inflows. Gross International
Reserves were equivalent to 4.3 months ofimports in June 2020.
Poverty (measured by the international
poverty line, US$1.9 PPP) declined from
13.0 percent to 11.1 percent between 2016
and 2019 as a result of strong GDP per
capita growth. The pandemic and lockdown resulted in significant job and income losses of 70 percent and 78 percent
respectively. Households dependent on
non-farm businesses were the most adversely affected, compared to those withincomes from the government, such aspensioners and safety net beneficiaries.

Outlook
The COVID-19 pandemic weighs heavily
on Ghana’s short-term outlook, with significant uncertainty around the pace ofrecovery over the medium-term. The crisis
is expected to lead to a sharp slowdown
from the pre-COVID-19 forecast of 5.8 percent to just 1.1 percent. The short-term negative impact will come through a decline inexternal demand, lower commodity prices,and lower FDI and tourism receipts.

The economic recovery is likely to bemodest as the global economic recession is
expected to continue into 2021. Trade,investment, and tourism activities may
take longer to recover to pre-crisis levels.
Non-oil activities, including agriculture
and agribusiness, are likely to be more
resilient. Growth is expected to average
1.7 percent over the medium term. To
mitigate the impact of the pandemic onhouseholds and businesses, the Government is implementing poverty and social
programs, including food and utilities
subsidies, as well as a business support
program for selected industries (e.g.,
pharmaceutical sector supplying COVID19 drugs and equipment).
The fiscal deficit (excluding the energy
sector and financial sector costs) is expected to widen to 11.4 percent of GDP
in 2020. If the energy sector and financial sector costs are included, the fiscal
deficit will be as high as 14.5 percent of
GDP. In anticipation of the fiscal shock,the Government suspended the fiscal
rule, which mandates a fiscal deficit below 5 percent of GDP. Over the medium term, the Government plans tomaintain fiscal support for the economy,
including infrastructure projects in thehealth sector, while revenues are only
expected to return to pre-COVID-19
levels by 2022. As a result, the fiscal

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

deficit is expected to remain above 5
percent over 2020-2022.
Ghana’s medium-term poverty projections
indicate a modest increase in poverty withthe slowing economy and a prolonged
recovery. The poverty rate (as measured
by the US$1.9, 2011 PPP) is projected toremain largely unchanged during 20202022 (Figure 2).

Risks and challenges
A prolonged COVID-19 pandemic, withlower oil prices and subdued economic
activity, poses a major risk to Ghana’s
macroeconomic outlook and could cause
poverty levels to stagnate for a prolonged period, especially if employment
does not rebound strongly. Prior to the
COVID-19 pandemic, Ghana’s public
debt faced a substantial rollover risk especially Eurobonds and short-term
domestic debt. This risk has been heightened given higher financing needs in2020 and the erosion of investors’ confidence toward emerging economies. In
addition, there is the risk of fiscal slippage due both to the upcoming 2020 elections and the considerable contingent
liabilities from the energy sector.

(annual percent change unless indicated otherwise)
2017
8.1
1.7
-10.8
1.0
16.5
7.9
8.4
6.1
15.7
3.3
12.4
-3.4
-4.7
57.3
0.5
12.3
28.5
54.1

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
27.4
52.7

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 2016-GLSS-VII. A ctual data: 2016. No wcast: 2017-2019. Fo recast are fro m 2020 to 2022.
(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 241 Oct 20

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
11.1
26.5
51.0

2020 e
1.1
-9.7
4.2
30.8
-2.3
-2.3
1.1
1.8
0.2
1.6
11.5
-4.0
-14.5
71.6
-7.9
11.2
26.7
51.4

2021 f
1.4
-0.3
-10.4
9.0
-3.2
-3.0
1.4
1.9
0.5
2.0
9.8
-3.8
-9.7
69.6
-2.4
11.3
26.8
51.7

2022 f
2.4
4.1
-9.4
1.5
1.0
0.4
2.4
3.0
2.4
2.2
9.6
-3.1
-8.3
68.9
-1.8
11.3
26.7
51.5

GUINEA

Recent developments

Table 1

2019

P o pulatio n, millio n

13.6

GDP , current US$ billio n

13.8

GDP per capita, current US$

1012.5Internatio 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

b

91.5
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 slowed to 5.6 percent in 2019 as
the mining boom eased, relatively to 2018,
while the fiscal deficit declined due to lower
public investment. Growth is projected to
decline to 4.2 percent and the fiscal deficit
will widen to 3.4 percent of GDP in 2020
due to the COVID-19 outbreak slowing
down poverty reduction. Downside risks
have risen and include the persistent effectsof the COVID-19 outbreak and social instability ahead of presidential elections.

Growth slowed down in 2019 to 5.6 percent(3.0 percent in per capita terms), following
reductions in both mining growth due to
unexpected bad weather. This is above theestimated potential growth rate of 4.3 percent. In the first half of 2020, economic activity in the services sector decelerated dueto the impact of social distancing measures,but mining production increased, particularly artisanal gold due to higher international prices. Inflation had declined to 9.5
percent in 2019, owing to tighter monetary
policy, but accelerated to 11.5 percent in thefirst half of 2020 with higher food prices
and an increase in central bank financing tomeet the growing fiscal deficit resulting
from COVID-19 mitigation measures.
After declining to 13.7 percent of GDP in
2019, the current account deficit is widening in 2020. Mining-related FDI continued
to be the main source of external financing
and remained unchanged at 12.9 percent
of GDP in 2019. International reserves
improved to reach 4.8 months of imports
in 2019. In the first half of 2020, import
volume growth has accelerated, reflecting
imports of medicines, sugar, and intermediate and capital goods.
The overall fiscal deficit (including grants)
was 0.5 percent of GDP in 2019. Tax revenues barely increased, to 12.5 percent ofGDP, in 2019 as mining revenues declined
due to tax exemptions. Meanwhile, subsidies to the public electricity utility morethan doubled to 1.7 percent of GDP in2019 reflecting payments for electricity

from the Kaleta project. To contain the fiscal deficit, capital expenditures were under
executed. The fiscal deficit widened in thefirst half of 2020 as revenues dropped, andgovernment spending increased due to thecrisis to strengthen health infrastructure,
expand social protection to vulnerable
households, and support for the private
sector (1.5 percent of GDP).
Public debt declined to 31.1 percent in
2019, largely owing to delayed implementation of externally financed projects. Although the share of nonconcessional borrowing increased, it
remained within the ceiling agreed under the IMF ECF program to support
debt sustainability. The risk of public
debt distress remains moderate.
Guinea has a flexible exchange rate regime. The Real Effective Exchange Rate
(REER) appreciated by 9.5 percent in 2019,as inflation did not decline as expected.
The IMF estimates that the REER was 1631 percent over-valued at end-2018.
Projections based on GDP per capita
growth suggest that the extreme poverty
rate (percentage of population living below the international poverty line of
US$1.90 per day, 2011 PPP) declined from
26.1 percent in 2018 to 24.7 percent in2019. Statistics from the COVID-19 household high-frequency survey indicate that
almost 9 out of 10 households experienced
earning losses due to the COVID-19 pandemic with households receiving transfers
and those owning nonfarm enterprises
being the most affected. Non-monetary
poverty – the Multidimensional Poverty
Index – estimated at nearly 66 percent in
2018, remains high.

FIGURE 1 Guinea / Tax Composition

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

Percentage of GDP
15

Poverty rate (%)
100

12

80

9

60

6

40

Real GDP per capita (constant LCU)
6000000
5000000
4000000
3000000
2000000

3

20

0
2016

2017

2018f

Taxes on Goods and Services
Direct Taxes

2019f

2020f

2021f

2022

0

0
2007

Taxes on International Trade
Mining Taxes

Sources: Guinean authorities and WB/IMF staff estimates and projections

1000000

2009

2011

2013

2015

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

MPO 242 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

Outlook
The COVID-19 pandemic dampened thegrowth outlook, which is projected to decline to 4.2 percent in 2020. The service
sector is expected to contract because of
declining hotel, restaurant and transport
activities. Strong bauxite and gold production will sustain growth in 2020. Over the
medium-term mining-related infrastructure investment would continue to drive
growth. Public and private investment for
infrastructure (energy and transport) will
support the construction sector. Better provisioning of agriculture inputs and infrastructure investments should improve agricultural productivity. The implementationof structural reforms to strengthen governance and business climate, as well as morereliable electricity provision thanks to thecompletion of the Souapiti hydropower
project in 2020, will support private sector
development over the medium-term. Inflation is expected to remain high but decline
gradually to 7.9 percent in 2022.
The external current account deficit isprojected to increase to 18.9 percent of
GDP in 2020, reflecting higher imports ofhealth products and, foods and capital
goods for infrastructure. The deficit isprojected to decline thereafter to 11.1

percent of GDP by 2022, with exports
projected to grow faster than imports
after completion of the dam. FDI inflows
will meet over 70 percent of financing
requirements between 2020 and 2022,with long-term loans meeting the rest.
The fiscal deficit (including grants) is expected to average to 3.1 percent of GDP in
2020-2021, to accommodate budgetary pressures due to COVID-19, before declining to
2.2 percent in 2022. Planned implementationof tax policy and administration measures,
including minimizing tax exemptions andtax code simplification, could help to sustain
tax revenues. Meanwhile, efforts to reduce
electricity subsidies should help keep expenditure under control. However, capital
expenditures are projected to increase to 4.9
percent of GDP in 2020 and accelerate further in 2021-2022 to fund an ambitious infrastructure program. External borrowing will
significantly increase in 2020 (by approximately 10.4 percentage points of GDP) tofinance exceptional budgetary needs to respond to the crisis and finance the Souapiti
project under a special purpose vehicle thatis not part of the central government.
The extreme poverty rate is projected todecrease to 24.2 percent in 2020 alignedwith modest expected growth and willfurther decrease to 21.4 percent by 2022
based on growth projections. However,lower agricultural GDP growth in 2019

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

and 2020, is likely to offset some of thegrowth effects on poverty reduction.
Food inflation continues to exert downward pressure on household purchasing
power, which is increasing during the
pandemic. The recovery of the service
sector may support earnings and employment in urban areas.

Risks and challenges
Downside risks dominate the economic
outlook. Social unrest and political instability in the run-up to the presidential
election in October 2020 could weaken
near-term growth, fiscal discipline, anddelay reform implementation. Increased
spending during the upcoming election
or in response to protests and union activity poses additional risks. The COVID-19 outbreak will result in health andeconomic shocks with significant effects
on household welfare and the fiscal outlook that are likely to persist into 2021.
The informal sector and small businesses
may continue to be badly hit by the impacts of COVID-19, seriously undermining the livelihoods of the poor who have
limited savings and access to financial
services that would offer alternative coping mechanisms.

(annual percent change unless indicated otherwise)
2017
10.3
2.9
28.4
-62.3
67.5
-20.4
12.5
2.5
26.6
7.5
8.9
-6.7
11.0
-2.0
39.5
-1.1
27.3
62.9
89.1

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
26.1
60.9
88.4

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 2012-ELEP . A ctual data: 2012. No wcast: 2013-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
13.0
-0.5
33.1
0.0
24.7
59.5
87.5

2020 e
4.2
3.5
27.1
34.3
8.9
26.9
4.2
3.1
11.3
-0.6
10.6
-18.9
9.0
-3.4
43.4
-2.8
24.2
58.8
87.2

2021 f
6.3
3.2
0.9
30.2
6.0
8.6
6.3
3.9
8.6
5.2
8.0
-15.1
8.8
-2.9
45.0
-2.0
22.9
56.9
86.4

2022 f
6.2
1.4
12.2
7.5
5.6
3.6
6.2
4.4
7.8
5.4
7.9
-11.1
6.7
-2.2
43.5
-1.3
21.4
55.4
85.8

GUINEA-BISSAU Recent developments
Table 1

2019

P o pulatio n, millio n

2.0

GDP , current US$ billio n

1.4

GDP per capita, current US$

738.2

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).

Growth recovered in 2019 supported byhigher cashew production. The current
account deficit increased owing to a deterioration in the terms-of-trade. The rise in thefiscal deficit was driven by higher recurrent
spending. Growth is projected to decline to-2.9 percent in 2020, due to economic disruptions caused by COVID-19 containment measures and global economic shock.
Poverty will remain high, but gradually
decrease in the medium-term. Risks to theoutlook remain significant, including political instability, pandemic effects, and fromthe volatility of cashew exports.

Growth increased from 3.8 percent in 2018
to an estimated 4.5 percent (2.4 percent inper capita terms) in 2019. The recovery
was underpinned by higher cashew output and higher electricity production due
to newly installed power generation capacity. Growth will be severely impacted
by COVID-19 in 2020. The lockdown imposed to contain the spread of the disease
has already lowered consumption anddomestic investment, and disrupted trade.
Inflation, which remained low at 0.2 percent in 2019, increased sharply in 2020,
reaching 3 percent in April. The rise ininflation was driven mainly by higher
food prices in the context of the crisis.
The current account deficit is estimated tohave increased from 4.3 percent of GDP in2018 to 5.0 percent in 2019, largely due toa decline in cashew prices. The COVID-19
lockdown delayed the cashew harvest andtrade, and the volume of cashew exported
is expected to almost halve in 2020. Cashew prices also decreased amid subdued
global demand, which combined withhigher prices for imported food, will leadto a deterioration in the terms-of-trade.
The overall fiscal deficit increased from 4.9
percent of GDP in 2018, to 5.2 percent in
2019, mainly owing to higher recurrent
spending in the wage bill, following salaryadjustments in 2018, transfers to the public utility company, and interest payments. Tax revenue increased marginallyfrom 9.4 percent of GDP in 2018 to 9.7
percent in 2019, but will decline in 2020

due to the delayed cashew trade and reduced domestic economic activity. Tax revenue during the cashew season, AprilSeptember, has fallen well short of the expected CFAF 26.5 billion (3 percent of GDP).
Public debt surged to 67.6 percent of GDP
in 2019, from 60.2 percent in 2018, driven byexternal loans financing public infrastructure projects. The profile of public debt has
become riskier in recent years as nonconcessional borrowing in domestic currency (notably from the West African Development Bank—BOAD) increased. Fiscal deficits have been the main driver of the increase in domestic debt levels. The government has been resorting to the regional
market to support people and firms affectedby the COVID crisis, which will further
increase overall debt levels. The risk of external debt distress remains moderate, but
the risk of overall debt distress is high.
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 5.4 months of imports in 2019,
driven by fiscal consolidation in member
states and higher net capital inflows. To
support the regional economy and COVID-19 related extra spending, the BCEAO
has implemented a set of monetary andmacroprudential measures since March
2020. These include lowering its policy
rate to a fixed 2.5 percent and extended
refinancing operations of the 3-month“Covid-19 T-Bills” at 2.5 percent for limited amounts.
Estimates of poverty (using the $1.90
international poverty line) indicate that

FIGURE 1 Guinea-Bissau / GDP growth, potential growthand Inflation

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

Percent

Poverty rate (%)

Percent of potential

6

0.2
0.1

4

0
-0.1

2

Real private consumption per capita (constant LCU)

100

30000025000080200000
60

-0.2
0

-0.3

15000040
100000

-0.4

-2

-0.5
-4

20

50000

-0.6

2017

2018

2019

2020

2021

Potential growth
Real GDP Growth
Inflation rate
Output Gap (% of Potential) RHS
Sources: Ministry of Finance and World Bank.

2022

0

0
2010

2012

2014

2016

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

MPO 244 Oct 20

2018

2020

2022

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

poverty declined from 63.3 percent to62.8 percent between 2018 and 2019.
However, during this period, the numberof poor people increased by around
14,000 people due to faster population
growth among the poor. Lower poverty
rate was supported by good cashew production, despite lower cashew prices.

Outlook
Growth is projected to decline to -2.9 percent in 2020, below the potential rate of 3.5
percent, reflecting disruptions in economic activity caused by strict measures tocontain the spread of the pandemic. The
Government has closed air borders andimposedseveralsocialdistancing
measures, including closing schools andbanning large public gatherings. These
measures will have a negative impact on
consumer spending and domestic investment. Growth would recover beginning
2021, supported by higher cashew production. Inflation would rise from 0.2 percent
in 2019 to 2 percent in 2020, reflecting
higher prices for imported food products.
The current account deficit is expected torise to 12.2 percent of GDP in 2020, reflecting a sharp decline in exports and higher
prices of imported food products. The

deficit could decline to 4.2 percent of GDP
in 2021 supported by an increase in cashew export volume and donor grants.
WAEMU reserves will drop to about 4.5
months of imports in 2020 as member
countries are hit by the COVID-19 crisis,increasing fiscal spending while also facing lower capital inflows.
The fiscal deficit is expected to increase to
8.2 percent of GDP in 2020, owing to lower tax revenues and higher COVID-19related government expenditures. Lower
domestic activity and imports are expected to reduce tax and customs revenues. Government spending will increase
driven by health-related measures andsupport for hard-hit sectors. Capitalspending is almost entirely financed bydonors and is expected to slow down
partly reflecting the prioritization of
spending toward COVID-19.
The pandemic is expected to increase
the poverty rate to 65 percent in 2020,reflecting lower farmer income and social vulnerabilities to the spread of thepandemic. This would push an additional 84,000 people into poverty. Poverty would gradually decline to about
64 percent in 2022, supported by increased cashew income and higher economic growth. However, the number ofpoor people is projected to remain
largely unchanged.

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

Risks and challenges
The outlook is subject to substantial
downside risks. Renewed political instability could cause fiscal slippages andexacerbate the already difficult businessenvironment. A slump in international
prices of cashew nuts or quantities exported would further restrict liquidity inthe economy and aggravate the impact of
the crisis on the private sector. The persistence of the COVID-19 crisis could
adversely affect household incomes andincreases their risk of falling into poverty. Guinea Bissau has very limited fiscal space to respond counter-cyclically toan economic downturn and needs toreprioritize expenditures toward critical
public health services and mobilize donor grants to address adverse economic
and social impacts.

(annual percent change unless indicated otherwise)
2017
4.8
16.7
4.9
-9.5
-17.8
18.6
3.8
-0.3
11.9
4.8
1.1
0.3
-1.1
58.1
-0.6
63.2
82.8
92.3

2018
3.8
2.5
-1.4
17.4
13.0
-3.1
2.9
0.7
5.0
4.0
0.4
-4.3
-4.9
60.2
-3.9
63.3
82.8
92.3

2019
4.5
3.4
4.3
13.6
8.1
5.5
4.5
3.5
4.6
5.3
0.2
-5.0
-5.2
67.6
-3.9
62.8
82.5
92.2

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 2010-ILA P -II. A ctual data: 2010. No wcast: 2011-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2010) with pass-thro ugh = 0,87 based o n private co nsumptio n per capita in co nstant LCU.

MPO 245 Oct 202020 e
-2.9
-4.0
9.1
-2.9
-32.5
-16.2
-2.9
-2.7
-2.4
-3.2
2.0
-12.2
-8.2
79.8
-7.9
65.4
83.6
92.9

2021 f
3.0
4.0
5.0
5.7
12.5
10.5
3.0
2.5
2.8
3.4
2.0
-4.2
-5.2
79.0
-4.5
64.9
83.3
92.7

2022 f
4.0
4.5
5.4
8.5
13.4
10.9
4.0
3.0
3.2
5.0
2.0
-4.5
-4.0
77.8
-2.5
64.0
83.0
92.6

KENYA

Recent developments

Table 1

2019

P o pulatio n, millio n

52.2

GDP , current US$ billio n

95.5

GDP per capita, current US$

1829.1

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).

The COVID-19 pandemic has imposed aheavy toll on lives and livelihoods, with acollapse in aggregate demand and rising
uncertainty. Nonetheless, ongoing policy
responses to the crisis and a gradual reopening of the economy are leading to arecovery in the second half of 2020. Kenya’s reduction in poverty has slowed but
is expected to return to pre-crisis levels
after 2020 and needs to be supported bymore inclusive policy responses. Moreprolonged pandemic, severe global recession, and adverse weather constitutedownside risks.

The COVID-19 pandemic has hit the Kenyan economy hard, sharply reducing economic activity and generating uncertainty
about future prospects. Real GDP growthmoderated to 4.9 percent in Q1 2020 (from5.5 percent in Q1 2019), before the main
impact of the pandemic, and Q2 experienced contractions in industrial output(reductions in electricity and vehicle assembly production) and, especially, services (accommodation and transport sectors). GDP growth for 2020 is projected to
dip to 1.5 percent—about 4.3 percentage
points less than pre-COVID projections. In
response, the government has deployedfiscal and monetary policy measures tosupport the healthcare system, protect
vulnerable households, and support businesses. These policy responses, together
with a gradual reopening of the economy
are leading to a modest recovery.
Headline inflation has remained within
the government target band around 5 percent due to relatively low food and energy
prices, providing space for accommodative monetary policy. Furthermore, core
inflation (excluding food and energy),
decreased to 2.0 percent in H1 2020 from
3.1 percent in H1 2019. This is consistent
with an economy where demand pressures are benign, and where there is alarge negative output gap. Accordingly,
the Central Bank of Kenya has eased thepolicy rate by 150 basis points, to 7.0 percent in June 2020. Private sector credit
growth has picked up modestly, rising 7.6

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

percent year-on-year (in June 2020), up
from very low levels (5.2 percent in June2019).
The current account deficit narrowed to
4.8 percent of GDP in June 2020, partially
due to a decline in imports, which morethan offset the decrease in exports. In theyear to June 2020, remittance inflows haveheld broadly steady at 2.9 percent of GDP,
while tourism receipts have contracted byabout 10 percent due to COVID-19. The
current account deficit was financed largely by official government borrowing. Foreign reserves rose to US$9.7 billion in June
2020 (5.9 months of import cover), which
continues to provide an adequate buffer
against short-term external shocks.
The government deployed fiscal stimulus(of 3 percent of GDP) to address the economic fallout of COVID-19, reversing thepreviously planned fiscal consolidation. It
increased spending to strengthen the capacity of healthcare system, provided cashtransfers to households, and supported
businesses through expediting VAT refunds and clearing arrears. The slowdown
in economic activity and tax cuts to cushion households and businesses led to a 1.3
percent of GDP shortfall in revenue collection. The fiscal deficit in FY2019/20 was 7.8
percent of GDP, compared with the original budget target of 6.0 percent. Government debt has continued to increase,reaching 65.6 percent of GDP at the end of
FY2019/20. As Kenya’s exports have declined due to shocks from the pandemic,
rising public debt increases fiscal pressure
associated with debt services obligations.
Expenditure on interest payments stood at
4.3 percent of GDP in 2019/20.

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

Percent of GDP

Poverty rate (%)

10

100

100000

8

80

80000

6

60

60000

4

40

40000

2

20

20000

0

Real private consumption per capita (constant LCU)

0

2019/20

2020/212021/222022/23

International poverty rate
Upper middle-income pov. rate

Projected fiscal deficit before COVID-19
Projected fiscal deficit after COVID-19
Sources: The National Treasury, Budget Policy Statement 2020; Budget Statement June 2020; and 2020 Budget Review and Outlook Paper.

02005 2007 2009 2011 2013 2015 2017 2019 2021

Source: World Bank. Notes: see Table 2.

MPO 246 Oct 20

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

Over one-quarter of wage employees
working in January 2020 were laid off in
March due to the pandemic, while remaining workers in industry and services
sectors face reduced working hours andpay. The national poverty rate decreased
to 36.1 percent in 2015/16 from 46.8 percent in 2005/06, mainly due to progress inrural areas. The international poverty
rate continued to drop to 34.0 percent in
2019, but only slightly decreased in 2020
to 33.8 percent due to the impact of
COVID-19 based on simulations using
the empirical relationship between real
GDP growth and poverty.

Outlook
Kenya’s economy is projected to rebound by 5.2 percent in 2021 and accelerate with GDP growth of 5.7 percent in
2022. This would be supported by improved investor confidence soon after
the COVID-19 pandemic is contained.
Agricultural output growth of 4.1 percent over the medium term assumes noadverse weather shocks and that recent
reforms to improve the use of fertilizers
and farm inputs are successful. Industrial growth of 4.0 percent in the base casewill be supported by the supply ofagricultural inputs, a recovery in domestic consumption, and steady public infrastructural spending. The services sector
is projected to grow by 6.5 percent in themedium term as the COVID-19 crisis
abates and domestic trade, transport,
accommodation, and education activities
rebound, supported by accommodative
monetary policy and private credit
growth. Inflation should remain moderate as supply disruptions associatedwith pandemic-related travel restrictions
ease, and assuming the absence of major
weather shocks that could affect foodprices. The current account deficit is expected to remain below 5 percent ofGDP, assuming the continued resilienceof remittance inflows, while exports of
Kenya’s main products (horticulture andtea) recover to pre-crisis levels.
With a stable population growth, percapita private consumption is projected
to increase by less than one percent toKsh.75,370 in 2020, before a return to pre-crisis growth rates in 2021. The international poverty rate is expected to return
to its pre-COVID-19 downward trend,
declining by just over half a percentage
point in 2021. Accelerating the pace ofpoverty reduction will require policy
interventions to raise agricultural
productivity, create jobs, and sustain
safety net programs.

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

Risks and challenges
The risks to the baseline growth outlook
are tilted to the downside. A renewed
acceleration in community transmission of
the virus could disrupt domestic economic
activity. Unanticipated droughts could
reduce agricultural output and rural incomes, as would a worsening and regional
spread of the locust infestation. A more
prolonged than anticipated pandemic andglobal economic recession would weighon Kenya’s export earnings, includingfrom the important tourism sector.
There is a continued role for policies tosupport firms and households to navigate
the ongoing COVID-19 pandemic and lay
a strong foundation for a resilient recovery. Following the pause in fiscal consolidation, which was appropriate in view of
the need to save lives and support livelihoods, there is now a need to put in placea revised medium-term fiscal consolidation plan, and commit credibly to this, inorder to preserve debt sustainability,
begin to rebuild Kenya’s fiscal buffer, andincrease space to increase private sector
credit and investment while ensuring thathousehold livelihoods retain space forrecovery from COVID-19.

(annual percent change unless indicated otherwise)
2017
4.8
7.4
3.9
8.3
-6.2
8.6
4.4
1.6
3.9
5.9
8.0
-7.2
1.3
-8.2
55.0
-4.6
35.4
65.7
86.2

2018
6.3
6.5
5.6
1.3
3.9
2.5
6.3
6.0
5.5
6.7
4.7
-5.8
1.7
-7.6
60.8
-2.9
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
-5.7
1.1
-7.9
62.7
-3.5
34.0
65.0
85.8

2020 e
1.5
3.3
5.7
0.3
0.1
1.2
1.5
3.7
1.1
0.8
5.7
-4.5
0.3
-7.8
68.0
-3.6
33.8
64.9
85.7

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-IHB S and 2015-IHB S. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202021 f
5.2
5.1
4.9
7.2
3.9
5.5
5.2
3.9
3.3
6.4
6.0
-4.8
0.9
-6.8
71.9
-2.7
33.2
64.6
85.5

2022 f
5.7
6.3
3.6
7.7
4.8
7.2
5.7
4.2
4.7
6.6
6.3
-5.2
1.6
-5.6
74.4
-1.4
32.4
64.1
85.3

LESOTHO

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

2.3

GDP , current US$ billio n

3.0

GDP per capita, current US$

1305.1

Internatio nal po verty rate ($ 1.9)

a

27.8
a

50.3

a

73.7

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

b

b

120.9
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 is expected to contract
by 5.3 percent driven by the effects of the
COVID-19 pandemic in 2020. This recession is largely caused by the slowdown inmining and manufacturing, on account of
weakened external demand facing exportoriented industries such as textiles andapparel, and mining. The slowdown inconstruction and wholesale/retail will also
weigh down growth and contribute to theincrease in poverty.

First, Lesotho’s public sector wage bill is
one of the highest in the world at 23 percent of GDP and the government sector isthe second largest employer after manufacturing. The high public sector wage billlimits fiscal space for social assistance andproductive investment, thus leaving elevated poverty and inequality unaddressed. Some efforts have been madeto control high public wages; however,political environment has complicatedcivil service reform.
Second, government spending is highly
correlated with SACU revenues. With
SACU revenue below historical averages
and government expenditure persistently
high, the government is facing fiscal challenges. Government domestic arrears estimated at M1.2 billion (approximately 3.3
percent of GDP) emerged as at January
2020. While the arrears have been cleared,
the potential for reoccurrence still exists
given higher COVID-19 related spending
and a lack of proper procurement andexpenditure control systems in place.
Third, the pandemic is unfolding in a context of high poverty and unemployment.
About 30 percent of the population still
lives below the international poverty lines(US$1.90/person/day in 2011 PPP terms).
Rural communities, which accounts forabout three-quarters of the population, aremostly affected partly due to poorer access to electricity, healthcare, and other

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

public goods. The economic vulnerability
and food insecurity amongst the poor will
be worsened by the pandemic. Job opportunities are scarce, as the private sector
faces a challenging business environment.
The unemployment rate at 23.9 percent in2018 (with youth unemployment at 43
percent), is already high and will be negatively impacted by the pandemic.

Recent developments
The economy was already in recession
even before the COVID-19 crisis hit. RealGDP contracted by 1.2 percent in 2019,and by 1.8 percent in the first quarter of2020 before any COVID-19 cases werereported. The nationwide lockdown implemented in late March brought theeconomy to a standstill as businesses wereclosed and the movement of people wasrestricted. All economic sectors, with the
exception of agriculture contracted in thefirst quarter of 2020. For example, mining
and manufacturing contracted by 18–21
percent mainly due to weak global demand. On the other hand, the significant
rainfalls observed in December 2019February 2020 contributed to agriculture
growth by 1.8 percent.
The year-on-year inflation rate increased
gradually from 4.1 percent in January to
4.9 percent in June 2020 due to higher
food prices, amidst supply-demand challenges imposed by closure of borders andcountry lockdown. The current accountdeficit narrowed from 3.9 percent of GDP
in the fourth quarter of 2019 to 0.8 percent

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

Percent, percentage points

Poverty rate (%)

15

100

Real GDP per capita (constant LCU)
11500

10

11000

80

5

10500

0

60
10000

-5
40

-10

9500

-15

20

9000

-20
2019

2020
2021
Services
Industry
Agriculture
Real GDP Growth, at factor cost

Sources: WDI and staff estimates.

2022

0

8500

2010

2012

2014

2016

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

MPO 248 Oct 20

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

in the first quarter of 2020 due to lower
imports of goods and services. The Central Bank of Lesotho (CBL) eased themonetary policy stance by reducing thepolicy rate from 6.25 percent in March to
3.50 percent in July 2020 to react to the
COVID-19 shock.
The poverty rates are estimated to haveincreased from 27.7 percent in 2019 to 30.5
percent in 2020 (the US$ 1.90, in 2011 PPP
terms).
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. Remittances have also fallen
due to the global economic slowdown,
especially in South Africa.

Outlook
Uncertainties surrounding the COVID-19
pandemic pose a huge risk to macroeconomic outlook. The recovery of exports
and overall economic growth depend on
external demand conditions as well as the
re-opening of the global economy – bothof which remain uncertain. The recession
in the neighboring and closely-linked
South African economy - which has already contracted by a record 51 percent in
the second quarter of 2020 – is expected todampen Lesotho’s growth outlook
through various channels, including declining incomes and remittances throughmigrant job losses.
Economic growth is expected to contract
by 5.3 percent in 2020 and recover to 3.1
and 3.8 percent in 2021 and 2020, respectively. Agriculture is expected to growmoderately in the medium term as agricultural subsidies are expected to contribute to crop production. Medicinal
cannabis farming is also expected to
grow. Mining is also expected to rebound as operations resume in one ofLesotho’s biggest mines (Liqhobong diamond mine) which contributes about 50
percent of the sector’s output, as well asa recovery in export demand. The construction activities associated with government projects (e.g. the LHWP-II project) are expected to start in the first halfof 2021, which will have a positive impact on growth. Manufacturing and services are also expected to recover overthe medium term. Despite the improvement in economic activity in the medium
term, the output level is expected to remain below the pre-pandemic level.
Inflation is expected to follow developments in the regional food prices due tosupply-demand challenges imposed by
restricted movements and closure ofborders and will accelerate steadily to

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

5.2 percent by 2022. The fiscal deficit isexpected to widen in 2020 and 2021 dueto the combination of tax revenues decline and the government’s tax deferralprogram. Health and social-related expenditure are expected to rise in linewith mitigation measures. The current
account deficit is expected to widen in2020 as imports of goods and services
resume at a faster pace than exports.
Economic recovery will be accompanied
by declining poverty rate but will remain
higher than in 2019. The poverty rate is at
29.8 percent (US$ 1.90 in 2011 PPP terms)
in 2021 and 28.1 percent in 2022. The
government is scaling up social assistance programs to limit the adverse impacts of COVID-19.

(annual percent change unless indicated otherwise)
2017
-0.4
1.1
0.1
-0.6
8.2
13.5
-2.5
3.1
-3.7
-2.7
5.3
-4.8
1.7
-0.9
36.6
-0.1
27.8
50.3
73.7

2018
1.5
0.8
-1.9
2.6
16.7
3.4
-0.2
-20.0
5.2
-0.2
4.0
-0.8
1.5
0.1
42.5
1.1
27.8
50.3
73.6

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 2017-CM SHB S. A ctual data: 2017. No wcast: 2018-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
1.4
5.2
7.8
34.7
-8.5
1.4
-1.0
-3.6
-5.5
1.2
5.2
-5.1
1.4
-1.2
46.0
-0.6
27.7
50.3
73.5

2020 e
-5.3
-4.0
19.7
-11.2
-15.0
-1.2
-5.3
2.0
-12.2
-3.0
4.2
-11.8
1.1
-7.3
60.1
-7.2
30.5
52.4
75.9

2021 f
3.1
3.5
4.8
9.6
10.0
9.0
3.1
2.2
7.5
1.5
4.7
-10.2
1.4
-8.9
60.8
-8.4
29.8
51.6
75.4

2022 f
3.8
4.2
1.3
9.1
8.9
8.5
3.8
2.3
8.2
2.2
5.2
-11.1
1.2
-7.8
63.1
-7.5
28.1
50.7
73.9

LIBERIA

Recent developments

Table 1

2019

P o pulatio n, millio n

5.0

GDP , current US$ billio n

3.1

GDP per capita, current US$

611.0

Internatio nal po verty rate ($ 1.9)

a

44.4
a

75.6

a

93.2

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

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).

Economic activity in Liberia decelerated
during the first half of 2020 amid unprecedented slowdown caused by the COVID19 pandemic. Real GDP is expected tocontract by 2.9 percent in 2020. Inflationary pressures moderated over the first halfof 2020 due to lower fuel prices and weaker economic activity, but inflation remained high reaching 20.8 percent (y/y).
Poverty rate as measured by internationallines are expected to increase in 2020. The
outlook is subject to high uncertainty anddown-side risks stemming from deteriorating global conditions.

Economic activity in Liberia has decelerated during the first half of 2020 amid unprecedented slowdown in global and domestic activity due to the COVID-19 pandemic and public policies designed tocontain it. During the first half of 2020,
output declined in multiple sectors of theeconomy. Rubber output fell by 18.8 percent (y/y) in H1 2020, as operations
slowed and employment in the agriculture sector declined; while iron ore output
dropped by 15.2 percent (y/y), despite amodest recovery in international prices.
Gold output also declined by 33.3 percent(y/y) in H1 2020 despite increase in gold
prices. Production of the two most important manufactured goods, cement andbeverages, was mixed. Cement output
remained at 2019 level between Januaryand June while beverages output dropped
by 41.5 percent (y/y) during the same period, reflecting the decline in service-sector
output and weakening consumption.
Pressures on inflation eased during thefirst half of 2020; but headline inflation
remained in double digits in H1 2020 at
20.8 percent, compared to 25.5 percent
during the same period last year.
Inflation dynamics were driven by lower
fuel prices and weaker economic activity.
Domestic food prices rose, however, by
37.3 percent in June 2020, compared to30.4 percent during the same period a year
ago as a result of disruption in domestic
food supply induced by stringent containment measures. High food prices haveadversely impacted households’ welfare
with 66.4 percent of households in direfood situation according to the HighFrequency Phone Monitoring Survey
Report launched in August 2020. In addition, 75.3 percent of households reported job loss and 67.5 percent reported
income loss.
The CBL maintained its monetary policy
rate at 30 percent during the first fivemonths of the year to help contain inflation but reduced it to 25 percent at endMay 2020 as pressures on inflation eased.
Charges on person-to-person fund transfer via internet and mobile banking wassuspended intermittently to enhance theuse of digital financial services while easing the liquidity pressures. The stock ofprivate sector credit plunged by 4.8 percent as at end-June 2020 while average
non-performing loan (NPL) ratio rose to
19.6 percent from 17.2 percent in December 2019, reflecting slowing economic activity and growing vulnerabilities in thebanking sector.
The FY2020 budget was revised downward to US$518 million in May 2020 toreflect the adverse impact of COVID-19 onrevenues from taxes on income andprofits, goods and services, and international trade, offset partially by a surge indonor financing. The fiscal deficit is expected to decline to 3.7 percent of GDP,
from 6.1 percent in FY2019.
The slowdown in global economic activity
has depressed external demand for Liberian exports, muted activity in the manufacturing and services sectors, and disrupted
investments in the export-oriented mining, agriculture, and forestry sectors. As a

FIGURE 1 Liberia / Real GDP growth, and sectoral contributions to real GDP growth

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

Percentage points

Poverty rate (%)

Real private consumption per capita (constant LCU)

120

5

250

100

3

200

80

1

150
60

-1

100
40

-3

50

20

-5

0

-7
2018
Agriculture

2019eIndustry

2020fServices

2021f

2022f

2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Real GDP growth

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

0
2007

Source: World Bank. Notes: see Table 2.

MPO 250 Oct 20

2017

2019

2021

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

result, exports declined by 8.6 percent (y/y) in H1 2020.
The performance of trade showed, however, a marginal improvement in the tradebalance, as decline in imports more thanoffset the decline in exports.

Outlook
Liberia’s real GDP is expected to contract
by 2.9 percent in 2020 due to decline in
output across multiple sectors, reflecting
the adverse impact of the COVID-19 pandemic and related containment measures.
The share of households living below theinternational poverty line of US$1.9/day(2011 PPP) is projected to rise to 52.2 percent in 2020, from 49.4 percent in 2019 due
to negative per capita income growth,high food prices, and job loss induced by
COVID-19. A recovery in consumption,
improvement in business confidence,higher spending on capital, and return to
growth in non-mining sector is expected
lift the economy to a rebound amid highuncertainty with real GDP projected torise to an average of 4.0 percent during2021-22. The inflation rate is expected tomoderate to 11 percent by 2022, as CBL
maintains a tight monetary policy stanceand fiscal consolidation continues.

The overall fiscal deficit is projected tonarrow to 3.2 percent of GDP by FY2022,
supported by implementation of public
sector reforms, including pay reform, revenue mobilization and expenditure management. Liberia’s external position is
expected to deteriorate in 2020 amid depressed external demand for its exports
and lower prices for all its major export
commodities except gold.
The current account deficit is projected towiden to 24.3 percent of GDP in 2020,
from 22.1 percent in 2019 and remain highover the medium term.
The current-account deficit will be financed by the net use of IMF credit andcapital inflows to the agriculture, mining,
and infrastructure sectors as the COVID19 pandemic subsides.

induce sharper contraction and slow thepace of recovery over the medium term.
Government’s inability to execute a clear
economic recovery plan supported by acredible budget and appropriate fiscal andmonetary policy measures could further
weaken Liberia’s fiscal and external balances, constrain growth, and inhibit poverty reduction. Limited progress on theneeded structural reforms to improve thecountry’s business climate, enhance domestic resource mobilization and public
investment efficiency could slow the paceof economic recovery and challenge medium-term prospects.

Risks and challenges
The current outlook is surrounded byhigh level of uncertainty, with risks heavily tilted to the downside. A protracted
pandemic, characterized by supply, demand, and terms-of-trade shocks could
undermine recovery in various sectors
and heighten poverty levels.
A second wave of COVID-19 spread locally could disrupt economic activity further,

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
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b(annual percent change unless indicated otherwise)
2017
2.5
-1.7
1.9
-4.1
6.4
-10.9
2.5
-1.1
16.4
1.1
13.2
-23.4
-4.8
34.9
-4.5
46.5
77.3
93.8

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
45.7
76.5
93.6

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
49.4
79.1
94.6

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 2016-HIES. A ctual data: 2016. No wcast: 2017-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202020 e
-2.9
-1.9
-16.8
2.6
-10.2
-7.4
-2.9
5.3
0.6
-12.1
17.6
-24.3
-3.7
57.7
-2.1
52.2
80.8
95.3

2021 f
3.4
1.1
-3.0
9.1
1.0
1.3
3.4
3.5
5.2
2.2
13.5
-24.8
-4.1
63.0
-3.1
52.7
81.3
95.4

2022 f
4.5
8.6
-7.3
2.9
1.6
3.1
4.5
3.0
5.7
5.5
11.0
-20.0
-3.2
64.9
-0.9
49.4
79.1
94.6

MADAGASCAR
Table 1

2019

P o pulatio n, millio n

26.4

GDP , current US$ billio n

14.5

GDP per capita, current US$

550.7

Internatio nal po verty rate ($ 1.9)

a

77.4
a

90.9

a

97.3

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

142.5

b

66.7

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 in Madagascar has been
severely impacted by the COVID-19 pandemic in 2020, resulting in the first recession since 2009. A rebound in global demand and the lifting of some travel restrictions are expected to lead to a modest
recovery in 2021, which would help reverse
a poverty rate uptick in 2020. However, theimpact of the crisis on activity, employment
and public finances will be long-lasting andis exacerbating prior challenges. Downside
risks continue to dominate, with the effectsof the pandemic potentially compounded bynatural disasters, especially during the cyclonic season.

Key conditions andchallenges
The COVID-19 crisis has stopped an
ongoing growth spurt in Madagascar.
Following a period of political instability and economic stagnation from 2009
to 2013, growth accelerated to an estimated 4.8 percent in 2019, its fastest
pace in over a decade (Figure 1). The
return to constitutional order in 2013
was instrumental to this revival, as it
contributed to restore investor confidence, access to key export markets,
flows of concessional financing, andreform momentum. Positive trends inincome per capita and poverty reduction halted at the start of 2020, as the
pandemic spread across the globe, triggering a sharp synchronized slowdown.
Structural challenges have been exacerbated by the pandemic. The recession
hitting Madagascar in 2020 will lead torising poverty and increased fragility
for vulnerable populations, while reducing available fiscal space to address
long-standing development challenges
associated with low levels of humancapital, poor infrastructure and exposure to natural disasters. Growth also
remains constrained by a lack of competition, poor public sector governanceand the prevalence of high informality
and self-subsistence agriculture. The
difficulty in creating formal employment and business opportunities will be
exacerbated in the post-crisis period,

FIGURE 1 Madagascar / GDP growth and fiscal balance

Percent annual variationand could be compounded if otherrisks materialize, including severe cyclones, floods, droughts, and episodesof social unrest amid persistent economic hardship.
Reforms will need to accelerate to rebuild better. Ensuring a sustained economic revival and alleviating extreme
poverty in the years ahead will requirea mobilization of domestic resources tosupport priority investments in humancapital and infrastructure, while accelerating key reforms to boost productivity in agriculture and enable a morecompetitive business environment forthe private sector. Helping to reinforce
bank solvency and address growing
non-performing loans after the crisis
will also contribute to improve access tofinance and the mobilization of private
capital for the recovery.

Recent developments
The impact of the COVID-19 crisis on
activity and household welfare has been
severe. Export-led industries, which anchored the economic recovery during
2013–19, suffered an outsized impact of
the crisis, with export revenues dropping
15 percent in the first half of the year.
Tourism, apparel, and mining, which are
key sources of growth and formal job
creation, were particularly affected. Income from informal employment in large
urban areas were also severely impacted
by lockdowns. A household survey conducted in June 2020 indicates that 10.1

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

Percent of GDP

Poverty rate (%)

6

6

120

4

4

100

2

80

0

60

Real GDP per capita (constant LCU)
900000880000860000

2
0

-2
-2

-4

-4

84000082000080000040

78000020

760000

-6

0

-6

-8
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
GDP (LHS)

Source: World Bank staff calculations

7400002005 2007 2009 2011 2013 2015 2017 2019 2021
International poverty rate
Upper middle-income pov. rate

Fiscal balance (RHS)
Source: World Bank. Notes: see Table 2.

MPO 252 Oct 20

Lower middle-income pov. rate
Real GDP pc

percent of households have been affectedby job losses since start of the year, corresponding to an estimated 7.7 percent
contraction in total employment. 64.4
percent of households reported that overall revenue had decreased. Reducing
food consumption was cited among the
top three response to lower revenues,
threatening long-term health of household members.
Inflow of external concessional financing
has contributed in preserving macroeconomic stability. A 16 percent drop in tax
revenues up to May 2020 has contributed to rising budget deficits and unexpected fiscal financing needs, whichhave been filled by emergency budget
support operations by donors totaling
3.1 percent of GDP in 2020. The tradebalance deteriorated amid weakening
export revenues, but currency pressures
have remained modest amid significant
inflows of concessional financing, causing only limited pressure on foreign exchange reserves and domestic prices.
Despite some depreciation of the Ariaryand supply chain disruptions due to theimpact of lockdowns in some large cities,
consumer price inflation remained stable, hovering around 4 percent up toJune 2020. This allowed the Central Bank
to maintain an accommodative monetary
policy stance throughout the crisis.

Outlook
The adverse economic impact of the
COVID-19 crisis will persist in 2021. Global trade and travel disruptions as well as
domestic containment measures are expected to result in the first recession in
Madagascar since the 2009 crisis, withgross domestic product (GDP) predicted
to contract by 1.2 percent in 2020, compared to an estimate of 5.2 percent justprior to the outbreak. Economic conditions are expected to stabilize in the second half of the year against the backdropof an ongoing rebound in global manufacturing activity and the end of strict travel
restrictions and confinement measures. In
this context, growth is predicted tostrengthen in 2021 but only to a modest
2.8 percent (Table 2). This remains about
twice lower than pre-crisis expectations,bringing the estimated cost of the crisis at
about 9 percentage points of GDP over a
two-year period.
Public debt remains on a sustainable
course despite widening fiscal deficits.
Lower tax revenues collection is expected
to widen the fiscal deficit to more than 5
percent of GDP in 2020-21, bringing public
debt to a projected 46.9 percent of GDP in
2021, from 38.4 percent 2019. However,

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

public debt remains well below the risk
threshold for a medium debt-carryingcapacity country and fiscal deficits continue to be financed predominantly by concessional financing.
The impacts of the crisis will push morehouseholds below the poverty line in2020. In the wake of sustained job andrevenue losses across both formal andinformal sectors, the poverty rate is expected to increase in 2020 to 76 percent(based on an international poverty line of$1.90/capita/day, in 2011 PPP). Moving
forward and assuming a gradual economic recovery from 2021 onwards, poverty is projected to return to a declining
trend, reaching 74 percent by 2022
(Figure 2). This scenario heavily depends
on the country’s ability to stage a sustained growth spurt in coming months.
Structural transformation into off-farm
employment, improved productivity inagriculture, as well as resilience to climatic and further economic shocks arealso key elements to facilitate rapid poverty reduction, particularly in more vulnerable rural areas.

(annual percent change unless indicated otherwise)
2017
3.9
1.2
13.9
-1.8
45.4
23.7
3.9
1.3
5.8
4.6
8.3
-0.4
2.7
-2.1
40.0
-1.4
76.1
90.2
96.6

2018
4.6
3.0
-6.2
-2.3
4.6
-4.1
3.7
3.7
8.1
2.4
7.3
0.7
2.6
-1.3
39.9
-0.6
75.3
89.7
96.0

2019
4.9
3.6
4.1
11.0
4.2
5.3
4.8
3.8
8.6
4.0
5.6
-2.1
2.6
-1.3
38.4
-0.6
74.3
89.2
95.5

2020 e
-1.2
1.8
6.2
-4.6
-9.6
-4.3
-1.2
2.2
-1.8
-2.6
4.8
-2.8
2.5
-5.4
43.9
-4.6
76.0
90.2
96.5

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 2005-EP M and 2012-ENSOM D. A ctual data: 2012. No wcast: 2013-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202021 f
2.8
2.2
2.7
6.3
2.8
3.8
2.8
3.0
3.1
2.6
6.1
-3.1
2.4
-5.2
46.6
-4.3
75.4
89.8
96.1

2022 f
5.4
3.0
5.2
12.8
6.4
6.6
5.4
3.4
6.5
6.0
6.3
-3.3
2.3
-4.1
46.9
-3.2
74.0
89.1
95.3

MALAWI

Recent developments

Table 1

2019

P o pulatio n, millio n

18.6

GDP , current US$ billio n

7.7

GDP per capita, current US$

411.6

Internatio nal po verty rate ($ 1.9)

a

70.8

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

a

89.6

a

44.7

Gini index

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

b

142.5

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).

The COVID-19 pandemic disrupted a thirdyear of faster economic growth for Malawi,
as global and domestic social distancing
behavior and policies disrupted economic
activity. Economic growth for 2020 is projected at 1.3 percent, with poor performancein services and industry sectors partially
offset by a second consecutive strong agricultural harvest. Economic growth in themedium term is expected to reach towards
4.9 percent, but this will depend on the paceof recovery from the pandemic both in Malawi and the global economy.

The economy is projected to grow by 1.3
percent in 2020, a downward revisionfrom 4.8 percent projected in September
2019, due to the impact of the COVID-19
pandemic. The disruption in global value
chains has slowed importation of production inputs, increased trade and logistics
costs, cut tourism earnings, and reduced
remittances. This has been compoundedby social distancing behavior and policies
to contain the spread of the virus. However, a second consecutive year of good agriculture harvest, apart from tobacco,helped alleviate some of the negative impact on growth. In addition, the new administration is expected to present a return to political stability for Malawi, following a year-long political impasse after
the contested May 2019 Presidential elections, which also negatively impacted
economic activity and investment.
Poverty reduction stagnated in Malawi
even before the COVID-19 crisis. The
share of the population below the international poverty line of $1.90 per day has
moderately decreased from 70 percent in2017 to 69 percent in 2019. Frequent natural disasters affect the rural poor’s ability
to escape from poverty, and the COVID19 pandemic poses a new challenge forhouseholds. Data from phone surveys
collected in July 2020 show that althoughmost respondents kept their job, 9 percent
stopped working, with similar effects
across rural and urban areas. In the sameway, 64 percent of small family-owned

FIGURE 1 Malawi / Fiscal deficit and public debt

FIGURE 2 Malawi / Actual and projected poverty rates andreal GDP per capita
Percent of GDP
70

Percent of GDP
10

and operated businesses reported earning
less revenue from sales after March 2020.
Headline inflation decelerated to 7.6 percent
in August 2020, supported by a decline infood prices and reduced global oil prices.
Food inflation decelerated to 11.3 percent
due to improved food availability following
the harvest. Non-food inflation also decelerated to 4.4 percent in August 2020 facilitated by a reduction in global oil prices.
Pressures on the Malawi kwacha (MK)increased in mid-2020, leading to a depreciation of 1.9 percent from July to midSeptember 2020 against the United States
dollar. Gross official foreign reserves haveremained above three months import cover for most of 2020, despite reports of delays in accessing foreign exchange bysome parts of the private sector.
The fiscal deficit widened to 9.4 percent
of GDP in FY2019/20, a significant increase from 6.5 percent in FY2018/19.
Revenues underperformed through thefiscal year and worsened with the onsetof the pandemic. This was compoundedby recurrent expenditure overruns, particularly in the third quarter, with expenditure pressures in advance of presidential elections in June 2020, as well as
rising spending related to the pandemic,
including increased allowances and recruitment of medical personnel. The deficit was largely financed by high-cost domestic borrowing, which contributed to
an increase in domestic debt to 36.5 percent of GDP and domestic interest costsof 4.3 percent of GDP in 2020.
The pandemic is contributing to a widening of the current account deficit, which is
expected to reach to 19.6 percent of GDP.

Poverty rate (%)
100

Real GDP per capita (constant LCU)
90000

9

80000

8

60

80

50

60

70000

7
6

60000

50000

5
4

40

40000

40

3

30000

2

30

20000

20

1

10000

0

20
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Fiscal Deficit (lhs)002004 2006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Real GDP pc

Public Debt (rhs)

Sources: Ministry of Finance, Economic Planning and Development, World Bank.

Source: World Bank. Notes: see Table 2.

MPO 254 Oct 20

Lower middle-income pov. rate

Delays in transportation of goods due tomobility restrictions, combined withweaker tobacco production affected theperformance of exports. Mobility restrictions in trading partners contributed
to declining imports. However, with therelaxation of mobility restrictions in South
Africa, Malawi’s imports partially rebounded from June.

OutlookReal GDP growth is projected to pick up
to 3.3 percent in 2021, assuming a gradual containment of the COVID-19 pandemic. Growth is expected to be driven
by agriculture, owing to the expanded
agricultural input subsidy, which should
support household incomes in the shortterm. In addition, activity is expected torebound in the services sector, which has
been heavily hit by the pandemic. As aresult of heightened economic andhealth risk associated with COVID-19,
the share of the population below thepoverty line in 2020 is projected to stagnate around 69 percent as in 2019. The
prospect of faster growth, after economic
uncertainties subside and agricultural
output improves, will likely decrease
poverty to 67 percent by 2022.

The government presented an expansionary FY2020/21 budget proposal in September 2020, with the deficit expected to reachover 12 percent of GDP. This is mainly
driven by an expansion of expenditure,largely due to the implementation of the
Affordable Input Program (AIP) which
has increased beneficiaries from 900,000
previously to more than 4.2 million smallholder farmers. The program is expected
to cost around 2.4 percent of GDP. The
accumulation of high cost domestic debt
combined with increasing interest rates
are contributing to increasing interest
payments, which are expected to reacharound 5.6 percent of GDP. Further, pensions and gratuities are proposed to increase by 18.4 percent (in nominal terms)
and wages and salaries by 13.5 percent.
Revenue is expected to rebound only
gradually as economic activity slowly
picks up. Public sector reforms could
translate to improved performance ofparastatals and reduce their vulnerability
to fiscal risks over the medium term. Further, development of the Domestic Resource Mobilization Strategy could increase the efficiency and equity of tax
collection and translate to increased resource envelope.
The current account deficit is projected toslightly improve to around 19.2 percent of
GDP in the medium term. Malawi should

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
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b

enjoy increased exports and remittanceinflows as the global economy recovers
from the COVID-19 pandemic. Imports arealso expected to increase, particularly in the
short term, as the government imports
more fertilizer and inputs under the AIP.

Risks and challenges
The impact of the COVID-19 pandemic on
the global and Malawian economy continues to increase uncertainty looking forward. A resurgence in COVID-19 cases
could depress economic activity, especially in the services sector, and reduce government revenues, while also increasing
health expenditure. This would expand
the fiscal deficit further and increase thealready high domestic debt burden. This
comes at a time the government needs torein in expenditure in order to reducehigh cost domestic borrowing, which isincreasingly crowding out fiscal space fordevelopment expenditure. In addition,
Malawi’s rain-fed agriculture sector ishighly vulnerable to weather shocks,
which could weaken growth in the agriculture sector, increase food security, andworsen poverty. This calls for investment
and policies to support agricultural diversification and commercialization.

(annual percent change unless indicated otherwise)
2017
4.0
11.4
-2.3
-6.0
3.7
-1.5
4.0
5.0
2.2
4.0
11.5
-22.4
1.5
-4.8
56.4
-0.5
70.2
89.4

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
69.7
89.2

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-IHS-IV. A ctual data: 2016. No wcast: 2017-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2016) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 255 Oct 20

2019
4.4
3.9
3.5
6.0
3.8
3.6
4.4
4.3
3.8
4.5
9.3
-17.8
1.4
-6.5
59.4
-2.6
68.9
88.9

2020 e
1.3
1.8
12.7
10.1
2.7
4.7
1.3
3.0
1.2
0.5
9.5
-19.6
1.1
-9.4
64.6
-5.0
69.3
89.0

2021 f
3.3
4.0
5.0
0.8
3.4
3.8
3.3
4.1
2.8
2.9
8.8
-19.2
1.3
-12.4
72.5
-6.7
68.9
88.8

2022 f
4.9
3.9
0.6
2.9
4.0
2.9
4.9
4.0
4.4
5.5
7.5
-18.9
1.8
-9.7
75.2
-3.2
67.7
88.3

MALI

Recent developments

Table 1

2019

P o pulatio n, millio n

19.7

GDP , current US$ billio n

17.2

GDP per capita, current US$

874.8

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

75.6

b

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).

Following robust growth in 2019, theeconomy is expected to contract in 2020
due to the COVID-19 crisis and the August 18, 2020 military coup. The fiscal
balance will worsen, and the debt pressures increase, although the external balance may be less impacted 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 uncertainty, rising insecurity, a sustained COVID-19 outbreakand climatic hazards.

Growth was stable at 5.1 percent in 2019supported by transportation, telecommunication, construction and agriculture.
Public investment and private consumption were the main drivers on the demandside. The COVID-19 crisis and the military
coup ended the good performance experienced since 2014 (growth averaged 5.7
percent). Retail sales, and non-financial
services were among the most affected
sectors by the pandemic and related containment measures. In contrast, industrial
production showed resilience during thefirst quarter (3.3 percent y-o-y) and gold
production rebounded in the second quarter (5.0 percent y-o-y). Inflation turned
negative in 2019 (-3.0 percent) and thetrend persisted till June 2020. Prices however picked up in July (0.9 percent y-o-y)
as food prices rose.
The current account deficit narrowed to
4.2 percent of GDP in 2019 due to improved terms of trade and increased official transfers. The current account deficit
was mainly financed by Foreign Direct
Investment (FDI) and project grants. The
financial and capital accounts improved in
2019-early 2020 due to a significant increase in budget support.
The fiscal deficit decreased to 1.7 percent
in 2019 as a result of greater revenue mobilization efforts and spending restraint.
As the pandemic took a toll on economic
activity, customs duties declined during
the first quarter of 2020 (-6.8 percent y-oy) because of lower oil imports and trade

FIGURE 1 Mali / GDP growth, fiscal and current accountbalance

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

Percent

Percent

flows. Following a drop over the first
four months (-17.2 percent y-o-y), domestic revenue collection rebounded
during May-July by 8.5 percent (monthly
average, y-o-y).
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. Foreign exchange
reserves reached 5.4 months of imports
in 2019 due to fiscal consolidation andhigher net capital inflows. To support
regional economy and COVID-19 related
extra spending, the BCEAO announced aset of measures since March 2020, including a policy rate cut and extended
refinancing operations of 3-month
COVID-19 bonds.
The financial sector remains sound. Domestic credits to the private sector increased by 2.2 percent in 2019. The banking sector remains well-capitalized(capital to risk-weighted assets rose from
12.5 percent in 2018 to 13.5 percent inJune 2019). Asset quality has improved
as the NPL ratio to total loans fell from
13.5 percent in end 2018 to 10.5 percent
in end 2019.
The extreme poverty rate (US$1.9/day
PPP) is estimated to have decreased to42.0 percent in 2019. For non-monetary
poverty indicators, the share of households with access to water and electricity
increased to 85.7 and 67.7 percent in 2019,respectively. However, the share of households living within 4 km of schools or
health centers decreased by 2 percentage
points in 2019, as a direct consequence ofschools and health clinics closure due to

Poverty rate (%)

Real GDP per capita (constant LCU)

120

62800000270000

100

5
4

-3

3

3.0

80

2600002.02500002-660240000

1

0

-9

-1

40

23000020-2220000

-12
2015

2016

2017

2018

2019e 2020p 2021p 2022p

0

GDP growth (%)
Fiscal balance (% of GDP, rhs)
Current account balance (% of GDP, 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 Oct 20

Lower middle-income pov. rate
Real GDP pc

security concerns. The Covid-19 pandemic
has reversed the progress in poverty reduction in 2020 with a 3 percentage points
increase due mainly to market disruptions
and price shocks as well as reduction inremittances.

Outlook
Growth in 2020 is expected to contract by
2 percent (-4.9 percent in per capita terms),
due to the COVID-19 impact on global
demand, domestic containment measures,and the effects of the coup and related
economic sanctions. Over the mediumterm growth is projected to gradually return to trend as the pandemic wanes andassuming a smooth political transition,
based on private consumption and public
investment. Inflation will turn positive
following resumed consumption and foodprice increases and reach 2 percent in themedium term.
The current account deficit will slightly
narrow in 2020 (2.3 percent of GDP) with
continued favorable terms of trade, subdued demand for imports and the impactof economic sanctions. The financial account surplus will shrink as the politicalsituation will depress grants, concessionalborrowing, and FDI. Over the medium

term, the current account deficit will gradually settle around 4.0 percent of GDP, as
oil prices are projected to pick up andgold prices decline from 2021.
The 2020 fiscal deficit will spike to 6.2
percent of GDP. Expenditures will increase while tax revenues underperform
due to lower economic activity, collectiondifficulties and fiscal support for COVID19 and security policies. The gap is expected to be financed by the debt relief,
concessional financing received before
the coup and additional bond issuance.
The deficit will remain high in 2021-22
due to slow economic recovery. The debt
-to-GDP ratio is projected to increase
from 40.5 percent in 2019 to above 45
percent (2020-2022), but the risk of debt
distress remains moderate.
Preliminary simulations assume negative
per capita GDP growth and suggest poverty
may further increase to 45.5 percent in 2021
before decreasing to 43.9 percent in 2022.

pandemic could reinstall containment
measures, and further slowdown the recovery. A prolonged political transitionand subsequent economic sanctions
would further damage the economy. The
already fragile security situation could
worsen, and extremist groups take advantage of any power vacuum. In addition, adverse weather shocks would hurt
agriculture and increase food insecurity,
as the economy remains dependent oncommodity exports which are vulnerable
to volatile commodity prices. Finally, contingent liabilities related to the energy
utility (EDM) constitute a significant fiscal
risk that weighs on public finances.

Risks and challenges
The economic outlook is highly uncertain
with substantial downside risks including
prolonged pandemic, heightened politicaluncertainty, increased insecurity and vulnerability to external shocks. A protracted

TABLE 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(annual percent change unless indicated otherwise)
2017
5.0
3.4
4.9
-3.7
13.6
-20.6
5.5
5.2
6.8
5.2
1.4
-7.3
3.6
-2.9
36.0
-2.0
44.3
76.1
93.7

2018
5.2
3.0
2.0
-0.9
-2.6
-12.3
5.3
5.9
5.5
4.8
1.9
-4.9
2.8
-4.8
37.7
-3.9
43.3
75.3
93.5

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 2009-ELIM . A ctual data: 2009. No wcast: 2010-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
5.1
5.8
9.5
-1.4
-6.3
7.8
5.1
5.1
4.4
5.3
-3.0
-4.2
1.8
-1.7
40.5
-0.7
42.0
74.5
93.2

2020 e
-2.0
-2.7
48.0
5.6
1.9
12.2
-2.1
0.0
0.2
-4.8
0.5
-2.3
0.9
-6.2
46.3
-5.0
45.0
76.7
93.9

2021 f
2.5
7.0
5.8
-4.0
11.4
8.4
2.8
-0.6
-0.7
7.5
1.5
-1.7
1.8
-4.5
48.1
-3.0
45.5
76.9
93.9

2022 f
5.2
8.3
3.4
-4.3
4.0
5.2
5.2
4.6
4.9
5.9
2.0
-3.1
1.8
-3.4
48.2
-1.8
44.0
75.8
93.7

MAURITANIA
Table 1Key Conditions andChallenges

2019

P o pulatio n, millio n

4.5

GDP , current US$ billio n

7.6

GDP per capita, current US$

1675.8Internatio 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

99.9

b

64.7

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).

Following a pick-up in 2019, the economy will contract by 3.2 percent in 2020
due to the COVID-19 crisis, which isaffecting the fishing and services. Consequently, the external and fiscal balances
will worsen, debt pressures will increase,and poverty will rise. Growth and poverty reduction are expected to gradually
recover over the medium term. Risks aretilted to the downside stemming from asustained COVID-19 outbreak, climatic
hazards, delayed structural reforms, andregional insecurity.

Prior to the COVID-19 crisis, Mauritania’s
long-term growth model suffered fromstructural constraints that hindered economic transformation and prevented progress on its development agenda. Despite
macroeconomic stability and key institutional reforms, particularly on the fiscal
front, growth over the past five years wasmodest at 3.2 percent, and only 0.4 percent
in per capita terms. This low growth reflects an unorganized urbanization andover-reliance on extractive resources,
which were not efficiently invested toboost competitiveness in non-extractive
sectors. This was coupled by financial
vulnerabilities and a business environment impaired by limited competition,
low human capital, and poor infrastructure. High import tariffs also shield domestic producers from international competition and impede access to cheap imported inputs. The lack of preferential
trade agreements further reduces tradeconnectivity.
The economic and human impact of the
COVID-19 pandemic on Mauritania issevere. The combination of the global recession, disruptions in global supply
chains, and measures to contain the
spread of the virus will cause the first economic contraction in Mauritania since2006 and reverse years of poverty reduction. The uncertain nature of the depth
and duration of the COVID-19 pandemic

exacerbates an economic context alreadyvulnerable to several downside risks.
These include sustained low oil prices andtechnical issues that could affect the development of the GTA gas project, and regional insecurity in the Sahel. Mauritania
is also exposed to recurring cycles ofdroughts that impact agricultural output.
Domestically, failures to properly implement structural reforms would undermine
non-extractive growth prospects while
fiscal risks could arise from contingent
liabilities associated with inefficient StateOwned Enterprises.

Recent Developments
Following a growth pick-up to 5.9 percent
in 2019, economic activity decelerated inearly 2020 due to COVID-19. Fishing production dropped in the first half of 2020
due to subdued global demand, and retailand transportation contracted as a resultof the lockdown measures. Inflation remained low at 2 percent in July 2020, consistent with a large negative output gap
and contained food prices.
After shrinking in 2019, the Current Account Deficit (CAD) widened to 3.8 percent in the first quarter of 2020, up from
3.1 percent in the first quarter of 2019. This
deterioration was driven decreased fishexports. As in 2019, the CAD was financed
largely by gas related FDI.
The fiscal balance remained in surplus in2019 thanks to the maintenance of prudent
fiscal policies. The robust fiscal positionand high growth reduced the debt-to-GDP

FIGURE 1 Mauritania / Evolution of main macroeconomic
indicators

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

Percent

Poverty rate (%)

Percent

80Real GDP per capita (constant LCU)

80

60000

70

6
-5
4

50000

60

40000

50

2

-10

40

30000

30

0
-15
-2

20000

20
10000

10
-4

-20

2015

2016

2017

2018

2019e 2020p 2021p 2022p

0

GDP growth (%)
Primary fiscal balance (% of GDP)
Current account balance (% of GDP, rhs)
Sources: Mauritanian authorities and World Bank staff calculations

0
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
International poverty rate
Upper middle-income pov. rate

Lower middle-income pov. rate
Real GDP pc

Sources: Mauritanian authorities and World Bank staff calculations

MPO 258 Oct 20

ratio from 75.7 percent of GDP in 2018 to
71.8 percent in 2019. The first half of 2020
yielded a primary fiscal surplus as thedrop in tax revenues due to the pandemic was offset by higher dividends fromstate-owned enterprises (reflecting lastyear’s strong profits) and cuts in nonessential spending.
Broad money accelerated by 14 percent(yoy) in May 2020 amidst high demand for
cash, while credit growth remained strongat 10 percent despite the crisis. However,the banking sector continues to suffer fromstructural weaknesses as evident by thehigh ratio of non-performing loans, whichstood at 21.5 percent in 2019.
As a result of the crisis, and the relatedhousehold income loss, the poverty rate
(US$ 1.9/day in 2011 PPP) is anticipatedto increase from 5.4 percent in 2019 to 6.3
percent in 2020. This increase will be
more pronounced in urban areas where
social distancing measures reduce economic activities in service sectors andinformality is widespread.

Outlook
COVID-19 has significantly worsened Mauritania´s economic outlook. Despite improved terms of trade, growth is projected

to contract by 3.2 percent in 2020 (-5.8 percent per capita terms). This first contraction since 2006 will be driven by a slowdown in almost all sectors of the economy.
Notwithstanding the high uncertainty,
and the long-lasting effects of the crisis,
growth would recover to 4.2 percent by
2022. The gradual recovery assumes arebound in China and Europe, the resumption of extractive projects, and theroll out of a vaccine during 2021.
The CAD is projected to widen to 17.3
percent in 2020, driven by lower export
demand for fish, which will offset the improved terms of trade. It is expected tonarrow in 2022 as fish and mining exports
recover due to a pick-up in international
demand. External financing would be met
by extractive related FDI and concessional
donor financing. As a result, international
reserves would remain steady at about 4
months of imports.
Budgetary pressures will increase particularly in the second half of 2020 due to theslowdown in economic activity affecting
indirect taxes, the fall in corporate income
tax, and the pick-up in social transfers. As
a result, the primary fiscal balance willturn into a deficit of 2.4 percent of GDP in
2020. As the economy recovers, the primary balance will return to a surplus, putting
the debt-to-GDP ratio back on a downward trend starting 2022.

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

The authorities are aiming to have a more
flexible exchange rate. In that context, thecentral bank plans to introduce a system
to foreign-currency auctions and establish
a technical platform to create an interbank
foreign exchange market in 2021. This
would help enhance the competitivenessof the non-extractive economy
The COVID-19 crisis will undermine poverty reduction as household income will
drop due to lower economic activity andsocial distancing-triggered job losses. As
the recovery in 2021-2022 will be driven
by the low-labor intensity extractive sector, the international poverty rate is expected to decline only marginally to 6.2
percent in 2022.

(annual percent change unless indicated otherwise)
2017
3.5
2.7
5.3
4.0
1.6
1.9
2.9
-2.9
3.3
5.5
2.3
-10.1
8.7
-0.2
69.6
0.9
5.8
23.5
57.9

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
75.7
3.7
5.9
23.8
58.3

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 2014-EP CV. A ctual data: 2014. No wcast: 2015-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
71.8
3.0
5.4
22.5
56.6

2020 e
-3.2
-5.6
9.5
-2.5
-3.2
-1.9
-3.2
0.9
-1.8
-5.4
3.4
-17.3
7.8
-3.8
78.8
-2.4
6.3
25.0
60.0

2021 f
2.0
1.6
2.3
4.7
2.5
4.1
2.0
1.5
3.9
1.2
4.0
-18.6
14.9
-0.7
79.4
0.5
6.4
25.4
60.4

2022 f
4.2
2.7
3.7
6.5
4.5
4.3
4.2
1.7
8.9
2.5
3.5
-14.5
13.6
-0.2
77.8
0.9
6.2
24.7
59.6

MAURITIUS
Table 1

Key conditions andchallenges
2019

P o pulatio n, millio n

1.3

GDP , current US$ billio n

14.0

GDP per capita, current US$

11061.8
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

101.1

b

74.4

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).

COVID-19 has led to a steep recession in2020 and is driving up government debt.
While a solid recovery is expected for2021/22, there are significant downside
risks to the forecast, including through a
prolonged pandemic and vulnerabilities
in the Balance of Payment. Progress interms of poverty reduction will slow
down due to the negative impacts of
COVID-19, and wage inequality remains substantial due to mounting skills
shortages and lack of inclusiveness in thelabor market.

Based on 2019 data, Mauritius was officially classified as a High Income Country.
However, recent growth has been largely
driven by consumption at the cost of increasing public debt and eroding external
competitiveness. Mauritius faces the challenge of managing its transition to aknowledge-based economy driven by
innovation and productivity growth, andthere is a need to unlock more productive
private sector investment. This will require a concerted effort to remove bottlenecks to new sources of growth, including
skills shortages and misaligned incentives.
Future inclusive growth is intrinsicallylinked to the challenge of overcoming
constraints in the labor market. This includes activating more youths and women, particularly those with low educational attainments. Over 50,000 youths aged
16 to 29 are neither in education nor in
employment, and about 1 out of 3 has
obtained at most a certificate of primaryeducation. Similarly, only 1 in 2 womenparticipate in the labor market, and only 1
in 3 among women with low education.
Significant short-term risk results from the
combination of pressure on the Balance ofPayment and a weakened Central Bank.
Pre COVID-19, large trade deficits were
financed by financial surpluses linked to
Mauritius’ offshore sector. Despite large
reserves – currently at 14 months of imports – previous IMF recommendations

called for further increases to mitigate therisk inherent to the offshore sector, including conduit investment of 40 times Mauritius’ GDP and foreign currency deposits
of nearly 90 percent of GDP. In 2020, the
BoP is exposed to a combination ofshocks: Covid-19 has depressed tourism
and manufacturing exports, and uncertainty in the global economy and Mauritius’ expected listing by the EU for heightened money laundering risk could impact
the financial account. At the same time,
the Bank of Mauritius’ balance sheet has
weakened as it has taken on an active rolein COVID-19-response, including a nonrefundable transfer to government equivalent to 12 percent of GDP.

Recent developments
Mauritius has had a total of 367 cases of
COVID-19, including 10 deaths, as of September 23. The last case of community
transmission was reported on April 26, andsince June 15 all COVID-related restrictions
have been lifted, but the border remains
closed. Tourist arrivals have dropped tozero since March and downstream industries like restaurants, tour operators, taxis,
and shops catering to tourists struggle withlow demand. Merchandise exports in thefirst half of 2020 were 24 percent below thesame period in 2019.
Public debt was on a rising trajectory prior
to COVID-19, and in the medium term
additional fiscal pressure is building due toexcessive spending on the universal noncontributory pension. The combination of

FIGURE 1 Mauritius / Balance of Payment dynamics

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

Percent of GDP

Poverty rate (%)

25

Real GDP per capita (constant LCU)

25

20
15

35000030000020

10250000

5
0
-5
-10

15

20000010150000100000

-15

5

-20
-25

2015

2016

2017

Change in reserves
Income and transfers (net)

2018

2019

2020f

2021f

2022f

0

0
2006 2008 2010 2012 2014 2016 2018 2020 2022

Financial account (net)Trade account (net)

Sources: Bank of Mauritius, World Bank staff estimates

50000

Lower middle-income pov. rate
Real GDP pc
Source: World Bank. Notes: see table 2.

MPO 260 Oct 20

Upper middle-income pov. rate

reduced revenue and increased expenditure
in response to COVID-19 put an additionalstrain on public finances and FY 19/20
closed in June with a 13 percent deficit andpublic debt spiking to 83 percent of GDP.
Since January 2020, the Mauritian Rupee
has depreciated by approximately 10
percent against the USD despite FX interventions of close to 3 percent of GDP.
Q2 BoP data is not yet available to ascertain movement in portfolio and FDI
flows, but registration of new offshore
firms fell by ~40 percent during Q2 while
foreign currency deposits remainedlargely stable.
Measured at USD 5.5 per day 2011 PPPline, 17 percent of the population waspoor in 2012 and the share declined to 12
percent in 2017. Results from a May 2020
phone survey show that the short-term
impact of COVID-19 was significant. 1 in 3
Mauritian households reported a reduction in their income in comparison withthe 12 months before the lockdown, and17 percent had to skip meals since thelockdown started.

Outlook
GDP is expected to contract by 13 percent
in 2020 under the baseline scenario,

which assumes a gradual re-opening of
the border in October 2020 with quarantine requirements that will limit tourist
arrivals for the remainder of the year.
While manufacturing exports, wholesaletrade and construction activity are expected to rebound in the second half ofthe year, the year-on-year change for2020 also remains negative.
In the medium term, a strong recovery
will be dependent on renewed dynamism
in the tourism sector, which is subject tosignificant downside risks. In addition to
the uncertainty of future developments
around COVID-19, Mauritius suffered anoil spill from stranded freighter MS Wakashio which affected part of the coastline and caused reputational damage forthe tourism industry. The financial sector
is expected to rebound in 2022 assuming
material progress on AML.
While another double-digit fiscal deficit
is expected in FY20/21, the effect on debt
is mitigated by a 12 percent of GDP grantfrom the Central Bank. While this significantly weakens the Bank’s balance sheet
and creates future fiscal risk, debt is expected to peak at around 90 percent of
GDP at the end of 2020 before slowly
declining. This strongly depends on government’s ability to reign in enhanced
spending for COVID-19 support and an
effective pension reform.

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

The current account deficit is expected toreach 13 percent of GDP in 2020 and remain wide in 2021 before gradually narrowing, assuming recovery in tourism
and additional efforts to strengthen export competitiveness. The main downside risk is in the financial account,where a reversal of flows related to theoffshore sector could quickly dominate
the real sector recovery.
Because of the sizeable contraction ofGDP, poverty is projected to increase to 13
percent in 2020 and decline more slowly
to 9 percent by 2022 when measured
against the USD 5.5 per day 2011 PPP line.

(annual percent change unless indicated otherwise)
2017
3.8
3.2
1.6
4.8
-1.0
2.2
3.6
-0.2
2.8
4.0
3.7
-4.6
189.3
-3.0
66.1
-0.5
2.2
12.7

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
11.2

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) Histo rical demand-side data is being revised due to a co nsistency pro blem.
(a) 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: 2018-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
10.1

2020 e
-12.8
-11.1
-1.1
-26.0
-27.7
-19.8
-12.9
3.5
-7.8
-15.1
2.8
-13.3
8.7
-17.1
90.2
-14.0
2.2
12.9

2021 f
6.4
7.5
7.2
33.6
30.4
30.5
6.1
4.5
8.6
5.5
3.5
-13.2
15.1
-8.8
90.9
-5.9
1.8
10.6

2022 f
7.1
4.1
4.8
12.3
13.5
7.1
8.2
4.1
1.7
10.4
3.5
-10.9
14.9
-6.2
88.0
-3.5
1.6
9.2

MOZAMBIQUE
Table 1

2019

P o pulatio n, millio n

29.5

GDP , current US$ billio n

15.3

GDP per capita, current US$

518.6

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

112.6

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 is projected to contract by
0.4 percent in 2020 due to disruptions
caused by COVID-19. The economic fallout from the pandemic has adversely
affected firms, employment and households. As a result, the poverty rate is expected to increase to 64 percent in 2020,
from 62.5 percent in 2019. While there isgreat uncertainty about the future courseof the pandemic, the economy is expected
to gradually recover starting 2021 as
LNG investments and extractive production gain momentum.

Key conditions andchallenges
COVID-19 reached the shores of Mozambique as it attempted to recover from theeconomic slowdown triggered by the hidden debt crisis and tropical cyclones in
2019. Growth declined from an average of
8 percent in 2001–2015 to 3 percent in 2016–2019. The aforementioned shocks exacerbated existing vulnerabilities stemmingfrom overreliance on the exports of primary commodities and capital-intensive
mega-investments with limited local linkages. Large infrastructure deficit and low
labor productivity, especially in rural areas where most of the population resides,
pose additional challenges for growth, job
creation, and poverty reduction.
Improved macroeconomic stability andliquified natural gas (LNG) investments
were expected to support economic recovery in the medium-term, but COVID-19
derailed expectations. The combination of
weak global demand, low commodity
prices, and strict containment measuresconstrained trade and domestic economic
activities. The crisis also caused a sudden
income loss for many households.
Real GDP is expected to contract by 0.4
percent in 2020. However, downside risks
remain given the uncertainty around thecourse of the pandemic. Projections suggest that debt levels and service remain
elevated over the next five years. Moreover, escalating insurgency attacks in regions where most of the poor live create

added fiscal pressures and could push
more people into poverty due to displacement and limited access to social services.
Mozambique’s immediate priority involves protecting lives and livelihoods,
while setting the path for recovery.
Measures to support households and viable firms affected by COVID-19 need to bestrengthened. This should be complemented by awareness campaigns to ensure a safe gradual lifting of the containment measures. In the medium-term, it iscritical to ensure that gains from the LNG
sector support inclusive growth. This
would require, among others, strengthening economic management to prevent
adverse effects from the upcoming large
foreign currency inflows, and linking the
local economy with the LNG industry.
Further, vulnerabilities to external shocks
and climatic conditions call for diversification, resilience and more inclusive growth.

Recent developments
COVID-19 has significantly worsened
economic conditions. Real GDP contracted
by 3.3 percent in the second quarter of2020 (year-on-year) owing to a decline inexports and private consumption. Favorable weather conditions led to higher agricultural output while electricity production increased. However, these positive
developments were offset by weaker performance in other sectors. Private services
contracted by 5 percent, with output inhotels and restaurants dropping by almost
40 percent as a result of travel restrictions.

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

Poverty rate (%)

108Real GDP per capita (constant LCU)

100

25000

80

20000

60

15000

40

10000

20

5000

6
4
2
0
-2

2013 2014 2015 2016 2017 2018 2019 2020f 2021f 2022f
Agriculture
Private services
GDP

Source: World Bank Staff Estimates.

Extractives
Public Services

0

0
2008

Manufacturing
Tax

2010

2012

2014

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

MPO 262 Oct 20

2016

2018

2020

2022

Lower middle-income pov. rateGlobal supply chain disruptions resulted
in a decrease in extractive and manufacturing production. The coal industry has
been particularly hit, with Vale-do-RioDoce production in the largest mine being
suspended in June. As of June 2020, firms
reported losses estimated at 7 percent of
GDP. About 120,000 jobs were also lost.
Overall inflation was below 3 percent,whereas annual food inflation rose, reaching 7 percent in August 2020. As a resultof these pressures, about 852 thousandpeople are expected to fall into poverty.
The current account deficit (CAD) increased by 17 percent in the first half of2020 (year-on-year) reflecting the combined effects of a fall in exports and commodity prices. At US$ 700 million, FDI,
mostly from LNG megaprojects, financed
about 34 percent of the CAD. This, together with private external borrowing, helped
to keep half-year gross international reserves at 7 months of imports.
The fiscal situation remains difficult.
COVID-19 response measures, estimatedto cost an equivalent of 2.2 percent ofGDP, would push the primary and overall
fiscal deficits to 3.6 and 6.9 percent in
2020, from pre-COVID estimates of 1.1
and 4.6 percent, respectively. Tax relief
measures and economic slowdown will
likely reduce revenues by a percentage
point of GDP. At the same time, escalating

insurgency has led to a sharp increase in
defense spending, which doubled to 1
percent of GDP in the first semester(year-on-year). As a result, domestic
debt rose to 18 percent of GDP in thefirst half of 2020, from 16 percent in2019. This would push total public debt
to a projected 121 percent in 2020, from108 percent in 2019.

OutlookGDP growth would be negative in 2020
for the first time in 28 years. The sharp
economic contraction reflects a decline inexports, reduced domestic consumption
and delayed implementation of LNG investments. The extractives sector is expected to contract as low prices and muted demand halved coal production. Services output is projected to decrease associal distancing measures curtail private
consumption. Household earnings would
decline, leading to an increase in the poverty rate from 62.5 percent in 2019 to 64
percent in 2020. Nonetheless, recovery is
expected from 2021, with growth reaching
4 percent in 2022, assuming a rebound inglobal demand, the roll-out of a COVID19 vaccine in 2021 and additional stimulus
to the business environment from LNG

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,dprojects. The poverty rate is expected togradually fall to 63 percent by 2022.
The CAD is projected to increase from 20
percent of GDP in 2019 to 61 percent in
2020, driven by higher imports of LNGrelated services. An external financing gapof 8 percent of GDP is expected in 2020
which would be financed by donor support, debt service suspension, revenue
savings from capital gains, and reserves.
The CAD will remain high through mid2020s and would be financed by FDI andexternal private debt.
The fiscal outlook remains challenging.
Besides COVID-19 spending pressures,
Mozambique would continue to grapple
with growing wage bill, defense spending,and debt service. Nonetheless, fiscal consolidation is expected to resume in 2021.
Efforts to enhance domestic revenue , including from early stages of LNG production, and improve expenditure efficiency
are expected to help the country achieve
its primary surplus target by 2024. Further, improved debt and fiscal risks management, and debt restructuring would
help reduce debt vulnerabilities and enhance debt sustainability.

(annual percent change unless indicated otherwise)
2017
3.7
0.6
3.2
-5.8
3.9
-12.9
3.8
4.0
9.6
1.6
15.1
-19.9
17.4
-3.6
106.6
-0.3
62.6
81.6

2018
3.4
3.7
-5.7
12.4
36.5
43.7
3.4
3.0
3.9
3.4
3.9
-31.0
18.1
-4.1
110.1
0.3
62.4
81.5

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) Figure includes o nce-o ff capital gains revenues in 2017, estimated at 2.7 percent o f GDP .
(b) Calculatio ns based o n 2014-IOF.A ctual data: 2014. No wcast: 2015-2019. Fo recast are fro m 2020 to 2022.
(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.

MPO 263 Oct 20

2019
2.2
4.0
6.1
-8.1
-5.5
-2.5
2.2
1.2
-0.2
3.8
2.8
-20.4
14.5
0.3
108.4
3.6
62.5
81.6

2020 e
-0.4
-1.1
24.3
117.7
-14.2
43.6
-0.4
0.6
0.0
-1.0
3.0
-61.0
17.9
-6.9
120.4
-3.5
63.7
82.3

2021 f
2.8
4.3
-9.3
2.2
19.1
2.8
2.8
2.9
2.0
3.0
3.3
-72.0
24.2
-5.4
122.0
-2.3
63.7
82.4

2022 f
4.4
8.1
1.6
32.4
2.5
18.9
4.4
4.8
2.9
4.9
3.6
-86.7
30.4
-3.5
116.7
-0.5
63.1
82.0

NAMIBIA

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

2.6

GDP , current US$ billio n

12.4

GDP per capita, current US$

4685.8Internatio 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).

COVID-19 has created challenges for an
already struggling economy, with depressed global demand, falling commodity
prices and movement restrictions adding toan economy characterized by low productivity and growing unemployment. Output will contract by 7.1 percent in 2020,
pushing an additional 125,000 people below the US$1.9 international poverty line.
The fiscal response has been strong but
growing debt levels require urgent attention. A recovery is expected in 2021, although this will be conditioned by the duration and intensity of COVID-19.

Namibia’s economy entered 2020 in an
already weakened position. After experiencing average annual growth of 4.4 percent between 1991 and 2015, the economy
fell into recession in 2016 and has since
struggled to recover. With growth being
largely dependent on investments in mineral extraction and government spending,falling commodity prices and the muchneeded fiscal consolidation to correct growing imbalances brought the economy to a
halt. Severe drought conditions have created an added challenge, especially to therural population, whilst a growing skills
mismatch and uncompetitive business environment have hindered the private sector’s ability to spur economic activity. Per
capita growth has thus remained negativeat a time where absence of productive jobs
has led to extremely high unemployment,
further exacerbating geographical disparities in economic opportunities and accessto services. Globally, Namibia remains oneof the most unequal countries.
The pandemic is confronting every level of
Namibia’s economy with an unprecedented
challenge. Locally, the uncertainty aroundthe intensity and duration of the outbreak is
a key concern, particularly as the recent
sharp rise in cases resulted in more restrictive nation-wide measures. Prolonged duration of these could require additional fiscal
stimulus, whilst further worsening growthand inequality. The authorities’ capacity toeffectively implement social protection programs will be key to mitigating COVID-19
impacts on poverty, as will efforts to mitigate the impacts of climate change on agriculture. Regional developments will remain
important given the key export market, important SACU transfers and links to supply
chains. Globally, persistently low international prices for uranium, which have already squeezed margins of local mines, andvolatility in prices of other export commodities present additional risks.

Recent developments
COVID-19 has added challenges for an already struggling economy. Namibia’s mineral industry, a key source of forex, has been
hit by falling commodity prices and dwindling global demand. Already grapplingwith insufficient supply of water for uranium production and depleting zinc deposits,
COVID-19 has forced a scale-back in mineralproduction. Declines in diamond, uranium
and zinc production put Namibia’s overallmining production index at a 12-month low
in May. Travel restrictions have severely
impacted the hospitality sector: indices foroccupancy rates dropped to below 5 inApril, while international arrivals fell to nearzero. Job losses in the sector have amassed
and are likely to continue if restrictions remain in place into 2021. Livestock farming,
which struggled with drought conditions inprevious years, now faces reduced local andforeign demand.
The pandemic has derailed on-going fiscal
consolidation efforts. The FY2020/21 budget

FIGURE 1 Namibia / Actual and projected overall fiscal
balance and public debt

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

Percent of GDP

Poverty rate (%)
80

Percent of GDP

900

Real GDP per capita (constant LCU)
70000

70

80

60000

-2

60

70
-4

60
50

-6

40

40

-8

30

-10

20

-12

10

30
20
10
0

-14

2017

2018

Fiscal balance (RHS)

20192020 e2021 f

40000
30000
20000

10000

0

0
2009

2022 f

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Public and publicly guaranteed debt (LHS)

Sources: Namibia Ministry of Finance and World Bank staff estimates.

50000

50

Source: World Bank. Notes: see table 2.

MPO 264 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

focusses on mitigating the impact of COVID-19 through additional health spending, aone-off Emergency Income Grant (EIG) for
low-income groups, a wage subsidy forseverely affected sectors, and guarantees
for loan schemes made available to SMEs.
This increased spending puts expendituresat 43 percent of GDP (from 38 percent lastyear) and, combined with lower revenue
collection due to fiscal relief measures andmuted economic activity, will widen thebudget deficit to 13 percent of GDP (from5.2 last year). Beyond increased domestic
borrowing and use of the Contingency
Fund savings, Namibia has auctioned fishing quotas to obtain much-needed forex toreduce the financing gap. The authorities
have also approached the IMF for support
through a Rapid Financing Instrument.
Additional financing will push public andpublicly guaranteed debt to 76 percent of
GDP (from 60 percent in 2019).
Reduced exports of key commodities havefurther weakened Namibia’s external position. Year-on-year exports fell 43 percent inApril, reflecting sharp declines in exports ofmetalliferous ores, mineral manufactures,transport equipment and fish. Whilst increased imports of food items linked to relief
packages have been offset by lower fuelprices, these have not been enough to curtailthe impact of reduced export earnings, thusincreasing financing pressures. Reserves fell

US$ 200m between end April and end June,
although remaining enough to cover 5.3
months of imports.

Outlook
Accentuated declines in output across key
sectors including hospitality, mining,transport, trade and construction will cause
the economy to contract by 7.1 percent thisyear, pushing extreme poverty up to 21.8
percent in 2020 (from 17.6 percent in 2019).
Consequently, an additional 125,000 people
will fall below the US$1.9/day international
poverty line –the “new poor” being male,young workers, those with low educational
attainment, and/or those in larger households. With urban households likely to be
more severely affected, unemployment is set
to rise. Almost 6,000 people have become
jobless between April and June. A moderate
growth recovery is expected in 2021 as mining production picks up and easing restrictions stimulate trade and transport activities. Recovery in other sectors, especially
hospitality, is conditioned on the health crisis being averted, financial recovery and abuild-up in confidence. Whilst the coming
on-line of the new Debmarine ship in 2022
could provide further impetus for growth,
efforts to diversify growth sources will

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,dremain critical for a more sustainable recovery. Namibia’s poverty rate will remain
at a high level over the medium-term.
The fiscal outlook will remain weak, particularly as SACU transfers are set to decline
sharply in FY21/22 due to the impact of
COVID-19 on regional growth and trade.
While the authorities have committed torecalibrating expenditures from the temporary COVID induced peak to stabilize
growth in public debt levels, further spending pressures are likely to materialize fromthe much-needed reforms to address key
structural challenges and COVID-19’s longterm economic implications. This, alongwith the international bonds due over the
next two years, will create additional challenges for the fiscal consolidation.
The expected global recovery in demand for
Namibia’s key exports (diamonds, minerals,
meat and fish) will help improve the tradebalance in 2021, as will the expected recovery in travel for tourism albeit from a lower
base given that several instances have had
to close. Despite this, the external position is
set to remain fragile given lower SACU
transfers and, in 2022, the imports related to
the Debmarine Vessel. International reserves are thus expected to remain underpressure over the medium term, although
efforts to diversify exports and attract foreign investment could lead to an improvement in the external position.

(annual percent change unless indicated otherwise)
2017
-0.3
-5.5
-2.1
-10.6
2.2
-8.6
0.1
7.0
-0.4
-0.5
6.1
-3.3
3.4
-3.7
50.4
-0.5
15.6
33.8
54.7

2018
0.7
-1.3
-0.1
3.0
16.4
3.9
0.7
-1.9
6.2
-1.4
4.3
-2.9
0.4
-5.9
55.3
-1.9
16.2
34.9
55.9

2019
-1.0
4.3
0.4
0.6
-2.2
3.2
-0.7
-2.6
-3.1
0.6
2.9
-2.0
-0.2
-5.2
60.3
-0.9
17.6
37.4
58.4

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) 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-NHIES and 2015-NHIES.A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202020 e
-7.1
-3.6
-0.9
-25.7
-24.0
-18.0
-7.1
-4.5
-13.9
-4.3
2.5
-5.2
-0.8
-13.2
76.2
-8.3
21.8
45.3
66.2

2021 f
1.8
1.0
-9.8
14.7
8.6
3.0
1.8
1.2
2.6
1.5
3.2
-6.0
0.5
-12.6
72.8
-7.3
22.0
45.6
66.4

2022 f
2.0
1.5
-5.9
9.2
8.9
5.0
2.0
1.3
2.8
1.8
3.5
-4.3
1.0
-9.7
68.1
-4.0
21.9
45.5
66.4

NIGER

Recent developments

Table 1

2019

P o pulatio n, millio n

23.2

GDP , current US$ billio n

12.9

GDP per capita, current US$

556.3

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

74.7
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 7); Life expectancy (201 8).

After economic growth of 5.9 percent in
2019, the impact of the COVID-19 pandemic is expected to result in growth falling sharply in 2020, to 0.5 percent, andremaining below its pre-crisis trend in themedium-term. Per capita income will fallin 2020 and the poverty rate increase by
1.6 percentage points. COVID-19 andinsecurity will continue to be serious
risks to economic growth and poverty
reduction, exacerbating the ongoing
downside risks from commodity pricefluctuations and weather shocks

Real growth hit 5.9 percent in 2019 (2.0
percent in per capita terms), in line withthe potential of the economy, driven bygood harvests and rising artisanal gold
production. Strong agriculture performance had positive spillovers on private
consumption. Investment was catalyzed
by the African Union summit and large
donor-financed projects. Inflation was
negative due to good harvests, compounded by low global food prices. The
authorities took prompt action to containthe COVID-19 outbreak: closing borders;
imposing a nightly curfew; and shortening working hours. Restrictions have been
gradually lifted since mid-May 2020. In
September only the closure of land borders remained in place. Headline inflation
during the first half of 2020 reached 5.2
percent y-o-y in July mainly due to theimpact of lockdown on food availability.
The current account deficit widened
slightly to 12.7 percent in 2019. Lower
commodity prices, the closure of the border with Nigeria and higher imports forlarge-scale infrastructure projects affected
the trade balance in 2019. The overall external balance turned positive for the firsttime in many years due to exceptionallyhigh donor support and FDI.
The fiscal deficit widened to 3.6 percent
of GDP in 2019, due to lower tax revenue
partially reflecting the closure of the border with Nigeria. Higher grants did notoffset the rise in health care and social
spending to mitigate the effects of thepandemic and the domestic revenue
shortfall. Preliminary tax revenue data in
the first half of 2020 points to a continued
weak fiscal performance exacerbated by
the COVID-19 pandemic.
Niger’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 reached
5.4 months of imports in 2019, driven by
fiscal consolidation in member states andhigher net capital inflows. To support theregional economy, the BCEAO has implemented a set of monetary and macroprudential measures since March 2020. These
include lowering its policy rate to a fixed
2.5 percent and extended refinancing operations of the 3-month “Covid-19 T-Bills”
at 2.5 percent for limited amounts.
According to household survey data, theshare of the population living on less than
US$1.90 a day in 2011 Purchasing Power
Parity (PPP) decreased from 75.3 percent
in 2005 to 45.4 percent in 2014. With continued economic growth, the share of the
population living below this international
poverty line is estimated to have declined
to 40.5 percent by 2019. However, the
COVID-19 pandemic and related economic and social distancing measures havereversed some of the recent gains in reducing poverty.
The impacts of the
COVID-19 pandemic in Niger are expected to be severe, impacting households: (i) in the short and medium term,
most households will experience income
losses due to job layoffs and lower remittances; and (ii) in the long-term a deterioration of human capital endowment;

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

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

Percent, percentage point

Poverty rate (%)

20

120

15

100

Real GDP per capita (constant LCU)
4000003500003000001080

525000060200000015000040-5100000
20

-10
2017

2018

Private consumption
Investment
Real GDP
Source: World Bank.

2019

2020

2021

2022

50000

0

Government consumption
Net Exports02005 2007 2009 2011 2013 2015 2017 2019 2021
International poverty rate
Upper middle-income pov. rate

Source: World Bank. Notes: see Table 2

MPO 266 Oct 20

Lower middle-income pov. rate
Real GDP pc

for example, school closure is expected toincrease drop-out rates, especially for girls
and the most vulnerable.

OutlookIn 2020, economic activity continues to beconstrained by lower exports due to theborder closures with Nigeria. Growth isfurther depressed by the effects of the
COVID-19 containment measures on supply and demand, including by delaying
the implementation of large foreign projects. Private investment will be affectedby the deterioration of domestic security
conditions. As a result, real growth is projected to drop to 0.5 percent. Domestic
demand will contribute modestly to
growth, due to stagnating real incomes.
The contribution from net exports will be
negative despite a lower demand for imported capital goods.
In 2021, if infrastructure construction restarts and the border with Nigeria reopens, growth it is expected to recover to
5.1 percent, but to remain below previous
forecast and below potential. Food shortages would raise consumer price inflation
to 4.4 percent in 2020. However, a returnto prudent fiscal and monetary policies
should keep inflation below the 3 percent

WAEMU target over the medium term.
GDP per capita is expected to reach 2019
levels only in 2022, as growth will beboosted significantly when crude oil exports to come on stream.
The current account deficit is expected towiden in 2021 with the resumption of theimport-intensive projects, before narrowing when several of these phase out andcrude oil exports come on stream. FDI
inflows and donor financed projects
would continue to finance a large share ofexternal financing needs. WAEMU reserves are expected to decline to 4.5
months of imports in 2020 as member
countries are hit by the COVID-19 crisis.
The fiscal deficit is projected to increase to
close to 5 percent of GDP in 2020 and 2021
partly as a result of increased health spending and stimulus measures to mitigate theimpact of COVID-19 crisis and higher security spending. Public debt is projected topeak at 47.2 percent of GDP in 2021 withconcessional financing and domestic borrowing from the regional market remaining the main sources of financing. The riskof external and overall debt distress is projected to remain moderate, although thespace to accommodate any further shocks
has narrowed considerably.
Results from macro-micro simulations
suggest that the poverty rate in Niger
would increase by about 1.6 percentage

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

point in 2020. However, poverty is expected to decline to 39.6 percent by 2021
as the country recovers from the pandemic and is expected to start exporting crude
oil. Beyond the monetary dimension, the
COVID-19 crisis is expected to have longlasting effects on the non-monetary dimensions of wellbeing, such as education,
health, and food security.

Risks and challenges
Risks to the outlook are on the downside.
The duration and depth of the COVID-19
outbreak present a downside risks togrowth and poverty due to a decline inincomes and remittances. The government
needs to reprioritize expenditures towards
additional health and social protection
spending and continue implementing
revenue mobilization measures, including
donor grants. Other risks stem from adverse weather conditions, as evidenced bywidespread flooding in September 2020,
further worsening of the security situation, and uncertainty ahead of the Presidential elections in 2021.

(annual percent change unless indicated otherwise)
2017
5.0
4.6
6.9
9.2
11.2
11.8
5.2
5.4
6.8
4.1
0.2
-11.4
2.8
-4.1
39.6
-3.4
43.4
74.6
92.7

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
39.0
-2.1
41.5
72.2
91.8

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
42.1
-2.6
40.4
70.8
91.3

2020 e
0.5
2.3
7.2
7.3
-22.0
7.1
0.5
4.5
0.0
-3.1
4.4
-16.8
4.8
-4.8
45.8
-3.7
42.0
72.9
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.
(a) Calculatio ns based o n 2011-ECVM A and 2014-ECVM A . A ctual data: 2014. No wcast: 2015-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using average elasticity (2011-2014) with pass-thro ugh = 1based o n GDP per capita in co nstant LCU.

MPO 267 Oct 202021 f
5.1
7.0
1.7
11.3
15.0
17.5
5.1
5.0
4.5
5.6
1.7
-19.2
7.5
-4.9
47.2
-3.7
39.6
69.8
91.0

2022 f
11.8
7.9
12.6
-7.5
54.0
-4.2
11.8
5.5
34.0
6.0
2.0
-11.6
3.0
-3.3
44.9
-2.1
34.6
63.2
88.5

NIGERIA

Key conditions andchallenges

Table 1

2019

P o pulatio n, millio n

202.0

GDP , current US$ billio n

448.1

GDP per capita, current US$

2218.0Internatio 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).

The COVID-19 pandemic and the oil pricecollapse are likely to lead Nigeria to its
deepest recession in four decades. Given
this crisis and natural population growth,
the number of people living below the international poverty line is set to rise by 16
million by 2022. While Nigeria faces severe
challenges to regaining growth momentum, reforms to enhance exchange rate
management, power supply, and the business climate would position the economy
on a stronger recovery path.

At the onset of COVID-19, the Nigerian
economy was still recovering from the2015-2016 oil price shock which swung
Nigeria into its first recession in 25 years.
The 2020 contraction would follow four
years of low growth and rising unemployment, due to various factors including
multiple foreign exchange rates, trade
restrictions, deficit monetization, combined with long-standing development
challenges to mobilize domestic revenues,
reduce infrastructure gaps, and strengthen
governance. Public revenues were alreadylow at 8 percent of GDP in 2019, with politically constrained tax reforms and inefficiencies in the oil sector. Despite sustained
fiscal deficits (around 4 percent of GDP),public spending, marred by energy subsidies, remained at half the level of countries at a comparable level of development. Before the pandemic, Nigeria’s poverty reduction efforts already faced major
challenges, as population growth (2.6 percent) persistently outpaced GDP growth
rates and job creation remained weak. In
2018/2019, 4 in 10 Nigerians were living
below the $1.90 per person per day (2011
PPP) poverty line and millions more werevulnerable to falling into poverty.
Nigeria has been hit hard by the COVID19 outbreak and the oil shock. Its economy
and public finances are highly dependent
on sales of crude oil. Nonoil industry andservices also depend on the inflows from

FIGURE 1 Nigeria / Oil price shock transmission channels

Recent developments
Nigeria’s economy contracted by 6 percent (year-on-year) in Q2 2020. The oil
sector was hit by tumbling prices and
OPEC quotas. Measures to contain the
COVID-19 outbreak had an immediate
impact on economic activity across thenon-oil industry and services sectors. Agriculture growth slowed amidst difficulties in moving inputs and outputs. In services, only telecoms (on the back of higher
data demand) and financial services(benefitting from pre-crisis credit growthand shielded by forbearance and stimulus
measures from the Central Bank) registered growth. Annual inflation accelerated
to 13.2 percent by August, with hikes infood and healthcare prices.
The crisis has severely impacted employment: between mid-March and May, theshare of working Nigerians almost halved
as Nigeria implemented strict lockdown
measures, with service-sector workers hit

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

Percent
20

the oil industry. The crisis is providing an
opportunity to address longstanding
structural challenges.
Since April, Nigeria harmonized key
exchange rates, increased electricity tariffs to more cost-reflective levels, established a market-based mechanism forgasoline prices, increased oil sector transparency, and adopted a crisis-response
budget. A relatively low public debt-toGDP ratio gives Nigeria borrowing space
to partially shield poor households fromthe effects of COVID-19.

110

Real GDP per capita (constant LCU)
400000

Poverty rate (%)
100

90

15

70

10

50

5

30
10

0

-10

-5

38000080

36000060
34000040

32000020300000-30
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

0Real GDP growth (lhs)
Exports (lhs, % of GDP)
Government Revenue (lhs, % of GDP)Oil price, Bonny Light (rhs, USD/barrel)
Sources: World Bank and Nigerian authorities.

280000
2009

2011

2013

2015

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

MPO 268 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

the hardest. Most Nigerians have subsequently returned to work (many entering
agriculture), but their incomes remainprecarious. Households adopted drastic
coping mechanisms with likely negative
long-term impacts: 51 percent reduced
food consumption and 29 percent drew
down savings. Fewer than 2 percent ofhouseholds are covered by social safety
net programs. Despite import contraction(reduced port activities and forex restrictions) mirroring oil-dominated export contraction, the current accountdeficit hovered around 3 percent of GDP
in Q2, aggravated by a sharp (40 percent)drop in remittances.
Capital inflows (concentrated in the financial sector) fell by 78 percent, putting
additional pressures on the reserves,
spurring the Central Bank to devalue,harmonize multiple nominal exchange
rates and commit to gradually moving toa more flexible exchange rate regime.
The Government enacted an amended
budget for 2020 which reflects the new
fiscal situation, reduces nonessential
spending, provides a COVID-19 stimulus (across health emergency, public
works, food security and support for
MSMEs), and revises borrowing limits toprotect critical expenditures in a transparent way by minimizing recourse toCentral Bank financing.

The Central Bank cut the policy rate andextended subsidized credit to the healthsector, MSMEs, and households.

OutlookDespite moderating oil prices (US$42 in2020), Nigeria’s economy is projected tocontract by about 4 percent in 2020, withsevere challenges to regaining growth
momentum in 2021-2022. Growth willremain constrained by low public andprivate investment, and lower consumption stemming from precautionary behavior in non-poor households anddwindling savings in poor households.
International capital flows are expected
to remain limited, with remittances(equivalent 5 percent of GDP) struggling
to recover given the slow recovery prospects in key diaspora abodes. International portfolio flows, which propped up
the fixed exchange rate before the shock,are unlikely to return before further exchange rate reforms.
Both the depth of the recession andspeed of recovery are subject to a highdegree of uncertainty and can deteriorate rapidly in the face of further oil
price movements, global and domestic
pandemic developments, and domestic

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

policy nuances. Deteriorating living
standards may lead to resurgence or
intensification of violence and conflict.
Depending on the frequency and size ofthese shocks, growth projections in 2020
range between -3 and -8 percent, withsimilar range of growth rates in the medium term.
In the absence of a robust response to
the crisis, the poverty rate is projected torise even faster than without the COVID19 shock, to 44 percent by 2022. Households deriving income from informal
activities (50 percent of GDP) that rely
on close physical proximity and those
close to conflict-prone areas are particularly vulnerable.
Fiscal and current account deficits willremain high, as oil revenues and exports
will be slow to recover, and the exigencies of COVID-19 require higher borrowing. While the availability of concessional debt may be limited given high demand across countries, Nigeria’s relatively low and sustainable debt stock
may allow it to return to international
capital markets. With little private sector
activity, and inflation limited by lack ofdemand, domestic issuances should also
prove a viable instrument.

(annual percent change unless indicated otherwise)
2017
0.8
-1.0
-8.0
-3.0
8.7
4.8
0.8
3.4
2.1
-0.9
16.5
2.8
0.6
-4.0
18.9
-2.3

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

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. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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

2020 e
-4.1
-3.1
-0.4
11.6
-25.0
-28.0
-4.1
1.2
-10.3
-4.1
12.9
-1.2
0.3
-5.8
27.1
-3.9
42.2
73.5
93.1

2021 f
0.3
0.4
-12.1
-23.3
22.5
3.1
0.3
1.8
-2.3
0.5
12.8
-0.6
0.2
-4.7
29.4
-2.5
43.2
74.3
93.4

2022 f
1.1
0.9
-0.1
9.6
1.2
11.6
1.1
2.1
1.3
0.6
12.1
-0.5
0.2
-4.6
31.1
-2.2
44.0
74.8
93.6

RWANDA

Recent developments

Table 1

2019

P o pulatio n, millio n

12.8

GDP , current US$ billio n

10.1

GDP per capita, current US$

789.7

Internatio nal po verty rate ($ 1.9)

a

56.5
a

80.3

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

133.0

b

68.7

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).

Growth is expected to slow substantially in
2020, as a result of the COVID-19 pandemic. The crisis is affecting not only
Rwanda’s priority sectors—tourism andhospitality—also mining activities. The
deterioration in both fiscal and externalbalances means that international assistance was necessary to cover financing
needs. The adverse effect of the crisis onservices and agricultural activities and theslow recovery of household consumptionmeans that poverty reduction is expected
to decelerate between 2020 and 2022.

Rwanda’s economy has been hit hard by
the global COVID-19 crisis. Measures tocontain the spread of COVID-19 have suppressed economic activity. After growing
by 9.4 percent in 2019, the output contracted
by 4.6 percent in the first half of 2020. Hit by
COVID-19, the economic contraction was
broad-based across sectors. On the production side, the most hit sectors are mining (40.2 percent), education (-35 percent), hotels
and restaurants (-30.4)and transport-related
services (-20.5 percent). Construction, which
has been the engine of growth in the last
two years, saw its output declining by 7.8
percent in H1-2020. On the demand side,
the GDP contraction was mainly driven by
a 15.8 percent decrease in investment and awidened negative net exports (-15 percent).
The recovery is expected to begin by year’s
end, and GDP growth for 2020 is projected
at about 2.0 percent. Given the country’s
strong reliance on agricultural employment,
the projected deceleration of agricultural
output growth rate (to 2.3 percent) might
result in poverty increases in rural areas.
The collapse of exports is driving a further
deterioration of the current account to a
projected deficit of 14.5 percent of GDP for2020. In H1-2020, exports declined by about
35 percent (yoy) due a lower global demand
as well as lower prices for Rwanda’s main
export items (coffee and minerals-tin, coltan
and wolfram). Imports declined only by 4.9
percent (yoy) driven by lower purchases ofcapital (-17.4 percent) and intermediary
goods (-2.8 percent) reflecting disrupted

FIGURE 1 Rwanda / Twin Fiscal and Current Account deficits

global-supply chains and reduced domestic
activities due to COVID-19. The government relies heavily on concessional borrowing and grants to cover external financing
needs. Nevertheless, official reserves are
expected to decline from 5.4 months of imports in 2019 to 3.3 months in 2020.
Declining economic activities in H1-2020
resulted in lower revenue collection, eroding Rwanda’s fiscal space. In FY2019/20,
revenue performance recorded a 6.1 percent shortfall in domestic revenues compared to the revised budget prior-COVID19 compared to only 0.5 percent underspending. The fiscal deficit reached 9.4
percent of GDP in FY2019/20, increasingfrom 5.6 percent in FY2018/19. In 2019,
public debt is estimated at 58.5 percent of
GDP (from 52.4 percent in 2018). The deterioration in the prospects for Rwanda’s
output and export growth, coupled withan increase in borrowing needs due to thepandemic, led to a change in the risk rating of debt distress from “low” to“moderate” in the DSA of June 2020.
The fiscal deficit is expected to widen to
about 11.5 percent of GDP in 2020. The
government announced in April a US$900
million economic recovery plan (ERP) tosupport households, the private sector,
and key infrastructure services to boost
employment. To protect the poor and vulnerable affected by the pandemic, the government is expanding the coverage of thesocial protection program, and as part of
the ERP is implementing a food distribution program, cash transfers to casual
workers, subsidized access to agricultural
inputs, and measures to ensure poor
households’ access to basic health and

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

Percent of GDP

Poverty rate (%)

-20

100

Real private consumption per capita (constant LCU)
60000050000080-1540000060
300000-1040200000-520

100000

0

0
2015

2016

2017

Fiscal deficit

2018

2019

2020f

2021f

2022f

International poverty rate
Upper middle-income pov. rate

Current Account Deficit

Sources: National Institute of Statistics of Rwanda; World Bank staff estimates.

02005 2007 2009 2011 2013 2015 2017 2019 2021

Source: World Bank. Notes: see Table 2.

MPO 270 Oct 20

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

education. In March, the central bank responded to the crisis with measures tosupport liquidity including notably an
extended lending facility (0.5 percent ofGDP), and a reduction in the reserve requirement ratio from 5 to 4. In April, thecentral bank cut the policy rate by 50 basis
points, to 4.5 percent. Inflation reached 9.2
percent in July 2020, from 7.3 percent inJanuary 2020, driven by rising food andtransport prices.
Based on the latest household survey in2016/17, 55.5 percent of the population
lived under the international poverty lineof US$1.90 (2011 PPP), down from 62.3
percent in 2010/11. Although growth wasbroadly shared and inequality fell in the
period, growth in household consumption was modest.

pandemic by the end of 2020. It also assumes a recovery in global demand,higher prices for Rwanda’s export commodities, a resumption in international
business travel and leisure tourism, andimplementation of the ERP.
Fiscal pressures will persist. The budget
deficit is projected to fall slightly to 9.2
percent of GDP in 2021 and remain elevated in the medium-term. Tax revenue islikely to remain below 15 percent of GDP.
Meanwhile, total spending will remain ataround 30 percent of GDP in 2021, in partdue to increased spending on publichealth and to mitigate the impact of thecrisis on vulnerable households. In addition to higher financing requirements, thegovernment will reallocate fiscal resources
to priorities as defined in the ERP.

Outlook

Risks and challenges

Rwanda’s medium-term outlook has
deteriorated due to COVID-19. GDP is
now projected to grow by 6.3 percent in
2021—well below the 8.0 percent growthforecast before the crisis—with a gradual
recovery to its pre-crisis trajectory by
2022. The current forecast assumes a
progressive lifting of the lockdown in
Rwanda and complete control of theRisks are firmly titled to the downside. A
major risk is that domestic and global
outbreaks are not brought under control
as quickly as currently expected. The
crisis could be worse than anticipated incase of a second wave with winter, and/or delay in vaccine development or distribution. Deteriorating global conditions
resulting from a prolonged pandemic

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 Foreigni999999
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 further weaken Rwanda’s fiscal
and external imbalances while inhibiting
growth and poverty reduction, depressing Rwanda’s trade, hospitality and investment activities. As COVID-19
spreads locally, stringent containment
measures would disrupt economic activity further and lead to a fall in GDP in
2020, followed by slower recovery in
2021. Weather shocks remain a perennial
risk and could adversely affect agricultural output.
With government debt rising sharply,
Rwanda has limited fiscal space to bothaddress the pandemic and pursue investment-driven growth in the absence ofdonor interventions. Public and publicly
guaranteed debt is expected to rise to76.3 percent of GDP by 2022. Failure toback up the implementation of the ERP
by a clear fiscal reallocation strategy
could further drive up Rwanda’s public
debt and impede the delivery of criticalservices for growth and poverty reduction in the long run.

(annual percent change unless indicated otherwise)
2017
4.0
11.4
7.5
-9.9
29.2
35.1
4.6
4.7
1.5
5.6
4.9
-7.6
2.7
-4.6
48.7
-3.6
50.5
75.8
90.1

2018
8.6
8.6
4.5
5.4
6.8
3.0
8.5
6.1
8.7
9.7
1.4
-7.9
2.9
-4.8
52.4
-3.6
46.7
72.9
88.8

2019
9.4
9.0
17.4
30.6
4.9
20.2
8.9
5.0
16.5
8.2
2.4
-9.2
3.3
-8.1
58.5
-6.8
43.0
69.9
87.5

2020 e
2.0
4.5
3.9
1.8
-18.0
-2.7
2.0
2.3
4.0
1.1
6.4
-14.5
1.2
-11.6
68.1
-10.1
41.9
68.9
87.1

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 2010-EICV-III and 2016-EICV-V. A ctual data: 2016. No wcast: 2017-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using average elasticity (2010-2016) with pass-thro ugh = 0.7 based o n private co nsumptio n per capita in co nstant LCU.

MPO 271 Oct 202021 f
6.3
4.5
4.6
5.7
45.5
18.7
6.3
5.2
9.4
5.7
3.7
-10.2
2.4
-9.2
75.4
-7.1
40.8
68.0
86.7

2022 f
7.6
5.4
-6.0
21.3
12.6
10.1
7.6
5.5
11.6
7.0
5.5
-9.0
3.0
-6.6
76.3
-4.5
39.4
66.7
86.1

SÃO TOMÉAND PRÍNCIPE
Table 1

2019

P o pulatio n, millio n

0.2

GDP , current US$ billio n

0.4

GDP per capita, current US$

1995.7

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).

The COVID-19 pandemic has deteriorated
São Tomé and Príncipe (STP)’s alreadyfragile economy. Tourism, one of the maineconomic activities, has come to a standstill,pushing the country into a deep economic
recession. A recovery in 2021 is conditionalon a recovery in international travel andexpansion of commercial agriculture. Extreme poverty is projected at 39.5 percent in2020. To promote a sustainable economic
recovery, STP needs to implement structuralreforms to address macro-fiscal vulnerabilities and develop a competitive private sector.

Growth in STP has long been driven byan unsustainable reliance on public expenditures, especially grant- and debtfinanced public investment. The country’s remoteness, lack of competitive
exports and low human capital holdback growth.
Its persistent fiscal and current accountdeficits have led to debt accumulationand present an ongoing threat to the
fixed exchange rate regime. Key reforms, including on energy and taxation
are critical to maintain stability and create conditions for a private sector-led
growth model.
The COVID-19 pandemic hit STP’s economy primarily through a near-halt in
tourism, which is a large and promisingindustry in STP (accounting for about 10
percent of GDP, although less than 5
percent of employment). A prolonged
COVID-19 outbreak in STP or tourism
origin countries could delay the recovery in international travel – and STP’s
economy. Additional risks stem fromthe fragile energy sector that needs urgent investment and governance reforms. The ongoing economic andhealth crisis along with presidential
elections expected in 2021, could causedelays to reforms. Risks to the reform
agenda are partially mitigated by the
IMF program and support from otherdevelopment partners.

FIGURE 1 São Tomé and Príncipe / Twin Current Accountand Primary Fiscal Deficits
Percent of GDP

Recent developments

Key conditions andchallenges

The COVID-19 pandemic has pushed
STP into its first recession since 1992.
Real GDP is estimated to contract by 6.5
percent in 2020, with the contraction concentrated in services. Industrial output isalso expected to contract due to lower
public investment and delays in externally financed projects. Supply-chain disruptions are also likely to depress agricultural activity. The pandemic-related
uncertainty has also constrained foreign
direct investment (FDI). Reduced external and domestic demand, along withscarcity of imported inputs are weighingon the agricultural sector.
The crisis has widened STP’s current
account deficit. In the first quarter of
2020, a new palm-oil producer started toexport, increasing the share of palm-oil
exports to almost 46 percent of total
goods exports. However, goods exports
fell by 5 percent YoY in April 2020 asglobal conditions deteriorated. Tourist
arrivals were initially strong in 2020 but
stopped abruptly in early-March and had
not yet resumed by early September. Net
international reserves increased to US$39
million in May 2020 (equivalent to 3.7
months of imports) from US$32 million
at end-2019, bolstered by emergency
lending, including from the IMF.
Pandemic restrictions have triggered
inflationary pressures, with prices rising10.1 percent YoY in June 2020 driven byhigher food prices. The tight monetary
policy stance that had reduced inflation

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

Percent of GDP

40

7

35

6

Poverty rate (%)

Real GDP per capita (constant LCU)

100

21000
20000

80

30

5

25

4

19000
60
18000

20
3

15

40
17000

2

10

20

5

1

0

0

0

15000

2010

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Current account deficit

16000

2012

2014

2016

International poverty rate
Upper middle-income pov. rate

Domestic primary deficit (rhs)

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

Source: World Bank. Notes: see Table 2.

MPO 272 Oct 20

2018

2020

2022

Lower middle-income pov. rate
Real GDP pc

to 7.7 percent in 2019 was relaxed to provide emergency liquidity support to thebanking sector.
Finally, the pandemic response has widened the budget deficit, reversing theeffects of strong fiscal consolidation
measures in 2019. Lower domestic revenues and additional health and social
protection expenditures to address the
pandemic have increased the primary
deficit, which is estimated to reach 6.3
percent of GDP in 2020 and push public
debt to 105.2 percent of GDP. STP remains in debt distress due to longstanding external arrears under negotiations but remaining debt is deemed sustainable under programmed policies.

Outlook
A partial economic recovery is expected in
2021, with real output reaching its precrisis level in 2022. However, this is conditional on the COVID-19 outbreak being
controlled and tourists’ being willing toreturn. Agricultural activity is expected to
expand due to the recovery of global commodity prices, while higher public investment and implementation of externallyfinanced projects are expected to boost
industrial activity.

With a recovery of the tourism sector, thecurrent account deficit (excluding grants)
should return to pre-crisis levels ofaround 17.0 percent of GDP in 2021–22.
The trade balance is projected to improve,
driven by higher palm oil exports and aslow recovery of imports. 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 decline to 8.0 percent by the end of 2020 as the lifting of thepandemic-related disruptions relieves
inflationary pressures. Additionally, fiscal
consolidation and tighter monetary policy
are expected to reduce inflation in themedium-term. But the planned introduction of VAT in 2021 may create additional
inflationary pressures.
Fiscal balances are expected to improvein the medium-term as the government
resumes fiscal consolidation, improves
tax collection, and adopts measures toreduce losses on the electricity sector.
These should contribute to a gradualdecline in public debt. Additionally, theauthorities are committed to borrow externally only on concessional terms under the IMF program.
Weaker employment opportunities arising from the pandemic and higher foodinflation are expected to increase food

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

2017
3.8
4.0
1.6
3.0
4.6
5.7
-13.2
-5.1
84.3
-4.6
35.6
65.4
86.4

(annual percent change unless indicated otherwise)
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

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: 2018-2019. Fo recast are fro m 2020 to 2022.
(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 273 Oct 20

insecurity and extreme poverty. The shareof São Toméans living in extreme poverty($1.90 per day in 2011 PPP) is expected toincrease to 39.5 percent in 2020, from anestimated 35.6 percent in 2019, and gradually decrease to 37.6 percent in 2022. The
COVID-19 has revealed the value of STP
early investment in a social safety net(SSN) system. The Government quickly
adapted its social protection programs toprovide timely support. Two support
packages were deployed. First, the Government quickly provided immediate support through the delivery of advanced
payments to existing SSN beneficiaries forthe equivalent of 4 months. Second, a nine-month temporary cash transfer programfor 20,000 families has been approved, isunder preparation and it is expected tostart in 2021.

2019
1.3
1.8
-0.9
-0.3
2.7
7.8
-12.4
-1.3
97.7
-0.6
35.6
65.4
86.4

2020 e
-6.5
-6.5
-2.1
-3.2
-7.8
7.9
-17.0
-4.6
105.2
-3.8
39.5
68.0
87.8

2021 f
3.0
3.0
2.8
3.2
3.0
8.0
-11.9
-3.7
105.1
-3.2
39.2
67.9
87.8

2022 f
5.5
5.5
3.0
2.8
6.5
5.9
-9.3
-1.5
100.3
-1.0
37.6
66.7
87.2

SENEGAL

Recent developments

Table 1

2019

P o pulatio n, millio n

16.7

GDP , current US$ billio n

23.6

GDP per capita, current US$

1407.3

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

81.0

b

67.7

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

The COVID-19 outbreak will halt years ofstrong economic performance, withgrowth slowing from 5.3 percent in 2019
to -0.7 percent in 2020. The fiscal deficitof 6.2 percent of GDP in 2020 reflects theattempt to accommodate the shock. The
current account deficit widens as exports
and remittances slow, financed by increased external support. Recovery will be
gradual while poverty increases following
disruption of labor income, remittances,
basic services and food inflation. The keyrisk is a protracted crisis

The COVID-19 outbreak halted years ofstrong economic performance. Growth
averaged 6.3 percent between 2016-19,
despite slowing to 5.3 percent in 2019 (2.5
percent in per capita terms) due to poor
agriculture performance. 2020Q1 saw
growth decelerate to 1.4 percent compared
to 5.7 percent in 2019Q1. Services were not
only the largest contributor to growth in2019, but also took the largest hit in
2020Q1, contracting by 0.9 percent due to
weak real estate, hospitality and ICT activity. On the demand side, private consumption and investment, the main drivers of growth, were severely cut in thewake of the pandemic. Inflation was subdued at 1 percent in 2019, consistent withan output gap close to zero, but picked up
to 2 percent in June 2020, due to higher
food and transport prices.
The external current account deficit (CAD)
declined from 9.1 percent of GDP in 2018
to 7.7 percent of GDP in 2019 reflecting an
improved trade balance. Strong export
performance coupled with lower oilimport prices, helped offset the increase inhydrocarbon-related
capitalimports.
However, international supply chain disruptions and weak global demand since
March 2020 have weakened exports, notably related to tourism and transport services. While the 2019 CAD was financed
by Foreign Direct Investment (FDI) andincreased external debt, urgent 2020 Balance of Payments needs are largely met byconcessional external financing.

Fiscal pressures increased in 2019 andhave been aggravated by the COVID-19
crisis. The fiscal deficit widened to 3.8
percent in 2019, including a one-off debtfinanced central government transfer tothe electricity utility SENELEC. By May
2020, crisis related expenditures and lower
revenues pushed the deficit to 5.9 percent
of GDP, compared to 3.9 percent by May
2019. Public debt increased to 63.8 percent
in 2019, driven by hydrocarbon investment, below the line operations, and SOE
debt. The debt composition has shifted
toward external borrowing while the riskof debt distress increased to moderate.
Public debt in 2020 will increase to 69.8
percent of GDP, however, Senegal’s participation in the global Debt Service Suspension Initiative (DSSI) provides shortterm liquidity of 0.6 percent of GDP.
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 Euro. Its reserves reached 5.4
months of imports in 2019 due to fiscal
consolidation and higher net capital inflows. The real effective exchange rate
(REER) depreciated by 3.8 percent in
2019, mainly due to inflation differentials
between WAEMU and trading partners.
To support regional economy and
COVID-19 related extra spending, theBCEAO announced a set of monetaryand macroprudential measures since
March 2020, including policy rate cut andextended refinancing operations of 3month COVID-19 bonds.
The financial sector remains sound. Deposits continued to increase at 7.9 percent

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

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

Percent, percentage points
10

Poverty rate (%)

Real GDP per capita (constant LCU)

100

100000080

80000060

60000040

40000020200000

8

6
4
2
0
-2
-4
-6
2017

2018

2019

Consumption
Net exports
Potential GDP growth
Source: World Bank staff estimates.

2020

2021

2022

0

0
2005 2007 2009 2011 2013 2015 2017 2019 2021

Investment
Change in inventories
Real GDP growthInternational poverty rate
Upper middle-income pov. rate
Source: World Bank. Notes: see Table 2

MPO 274 Oct 20

Lower middle-income pov. rate
Real GDP pc

in 2019 and credit growth increased from
4.7 percent in 2018 to 6.7 percent in 2019.
Gross non-Performing Loans (NPLs) as ashare of total loans increased from 13.1
percent at end-2018 to 13.9 percent in end2019. So far, COVID-19 has not significantly reduced bank lending while NPLs decreased to 13.5 percent by end April.
The incidence of extreme poverty, benchmarked against the international poverty
line (US$1.90 a day, 2011 PPP), declined
from 36.5 percent to 33.4 percent between
2015 and 2019, attributable to agriculture
growth, increasing employment in Dakar,
access to basic services and low inflation.

Outlook
Growth will be negative at -0.7 percent in2020 as lower exports and remittances
subdue private consumption. GDP per
capita will contract by 3.3 percent. As uncertainty affects capital allocation, investment will slow in 2020, but increasingly
drive growth in the medium term. Assuming the pandemic recedes by end-2020,
growth would gradually recover to 5.6
percent in 2022. The current shock opens anegative output gap. Hydrocarbon production would support economic performance from 2023. Productivity growth,

prudent monetary policy and exchange
rate stability should keep inflation
around 2 percent.
The external current account deficit will
widen to 11.4 percent by 2022. Favorable
Terms of Trade (for oil and gold) andstronger export performance would begin
to offset continued investment-related
import growth thereafter. Short-term financing needs may be difficult to satisfy
by tight regional markets and subdued
FDI, putting the burden on external concessional financing. WAEMU reserves
would reach about 4.2 months of imports
by 2021 as member countries digest the
COVID-19 crisis, increasing fiscal spending and facing lower capital inflows.
The fiscal deficit is expected to peak at 6.2
percent of GDP in 2020 but return to the
WAEMU target of 3 percent of GDP after
2022. After revenue shortfalls in 2020, tax
revenue mobilization – supported by amedium-term revenue strategy –coupledwith prudent current spending - would
create fiscal space to gradually increase
investment and social expenditures. Fiscal
vulnerabilities will be contained whilereform and investment implementation
would increasingly crowd in the private
sector. Total public debt would start togradually decrease from 2023.
COVID-19 impacts household welfare significantly. Instead of falling by an additional

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

2.7 ppts. between 2019 and 2022, extreme
poverty incidence is projected to increaseby almost 1 ppt. in 2020. Indeed, short-run
simulations using the latest survey(2018/19) suggest the shock may havepushed an additional 600,000 people nearor into poverty during 2020Q2. Impacts
are uneven across the welfare distribution
and last, depending on socio-economic
and demographic characteristics, while
gender gaps may be exacerbated.

Risks and challenges
Downside risks are high. A protracted orrecurring Coronavirus outbreak would
raise fiscal pressures and economic losses
into 2021, delaying recovery and increasing poverty. Weaker revenue mobilization, uncertainty around hydrocarbon
production, and slower progress on investment climate reforms could negatively
weigh on investment, exports, and fiscal
revenues. A protracted crisis coupled withweather shocks could curb agricultural
growth while lower social spending anddisruptions in basic services could affecthouseholds’ capacity to invest and protect
human capital.

(annual percent change unless indicated otherwise)
2017
7.4
4.9
4.0
15.4
8.2
16.7
7.0
11.5
7.1
5.8
1.3
-7.4
-3.0
61.0
-1.1
34.7
65.2
84.3

2018
6.4
4.3
3.8
8.4
9.6
7.6
6.3
7.9
7.5
5.3
0.5
-9.1
-3.9
62.1
-1.9
33.9
64.6
83.5

2019
5.3
4.8
8.1
10.0
9.9
1.8
5.0
2.9
5.8
5.2
1.0
-7.7
-3.8
63.8
-1.9
33.4
64.1
82.9

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 2005-ESP S-I and 2011-ESP S-II. A ctual data: 2011. No wcast: 2012-2019. Fo recast are fro m 2020 to 2022.
(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 275 Oct 202020 e
-0.7
-0.3
7.1
-1.2
4.1
5.4
-0.7
3.0
1.1
-2.6
2.0
-9.0
-6.2
69.8
-4.0
34.1
64.7
83.7

2021 f
3.5
3.6
4.3
4.2
6.4
6.2
3.5
4.3
3.8
3.2
2.0
-10.5
-4.6
72.5
-2.6
33.9
64.6
83.5

2022 f
5.6
4.6
3.7
8.9
7.2
6.6
5.6
6.9
4.7
5.7
1.9
-11.4
-3.1
72.8
-0.9
33.3
64.0
82.8

SEYCHELLES
Table 1

Key conditions andchallenges
2019

P o pulatio n, millio n

0.1

GDP , current US$ billio n

1.6

GDP per capita, current US$

16752.4
a

3.1

a

7.0

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

46.8

Gini index

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

b

100.4

b

72.8

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).

Real GDP in Seychelles is projected to
decline by double digits in 2020 due to
COVID-19 and the reliance of the country on tourism. In the medium-term, economic growth is expected 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 reach its debt target. Poverty is expected to increase in 2020 due tothe impact of COVID-19.

Seychelles continues to grapple with theimpact of COVID-19 on its economy as
the implementation of strict measures tocontain the spread of the virus causes
spillovers in the travel industry. The
Government of Seychelles responded tothe effect of COVID-19 on the economy
with measures to mitigate the economic
fallout on businesses and households. In
addition, the government requested
emergency financing from the IMF(US$31.5 million), African Development
Bank (US$ 10 million) and the WorldBank (US$15 million) which were approved on May 8, 2020, June 23, 2020and June 25, 2020, respectively.
Absolute poverty in Seychelles is low (at 7percent in 2013) when measured against thehigh-income poverty line of USD 5.5 a day
per capita. Inequality, however, is significant
with a Gini coefficient of 0.47. The country’s
very generous social protection system is notaddressing inequality in a cost-efficientmanner and has shortcomings in setting
incentives for formal labor market participation, while rapidly spreading drug use is
imposing an increasing human and economic cost. Rising labor demand has been met
by a surge in expatriate workers in recent
years as labor force participation of Seychellois at 65 percent in Q3 remains rather
low and is declining (70 percent in 2014).
Contingent liability poses significant risks.
State-owned enterprises in Seychelles

have substantial debt, amounting to approximately 13 percent of GDP (IMF PCI
2019), including non-guaranteed debt tostate-owned enterprises. The weak financial
position of Air Seychelles has been exacerbated by COVID-19. Air Seychelles has requested US $15 million from the government to pay its debt incurred from twobonds procured by Etihad Airline. The airline has already received assistance of R109
million to guarantee its employees’ salaries
until December 2020 and planned annual
budget transfers over the next five years
account for US$6 million (0.4% of GDP).

Recent developments
Economic growth in 2020 is expected to
decline to -15.9 percent as tourist arrivals
are projected to decline by more than 60
percent. The fall in tourism activities will
have a domino effect on other sectors. To
improve short run liquidity, the Central
Bank of Seychelles loosened the monetary
policy rate in Q3 2020 from 4.0 percent to
3.0 percent. The inflation rate for 2020 is
projected at 3.9 percent due primarily to thedepreciation of the domestic currency (30.7
percent since January 2020). The current
account deficit is expected to reach 28.3
percent of GDP in 2020 and gross international reserves (GIR) are estimated to decline from US$500 (6.0 months of imports)
to around US$339 million by end-2020,
equivalent to only 2.7 months of imports.
As at July 2020 (January to July), total revenue collection underperformed the budgeted revenue collection by 16 percent.

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

Poverty rate (%)

Percent of GDP

10

120

5

100

Real GDP per capita (constant LCU)

16

12000014

100000

12

0

80

-5

60

8

-10

40

6

-15

20

-20

0

80000

10

60000
40000

4
20000

2

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Primary Balance (LHS)
Public Sector Debt (RHS)
Sources: WDI and staff estimates002006 2008 2010 2012 2014 2016 2018 2020 2022

Overall Balance (LHS)

Lower middle-income pov. rate
Real GDP pc
Source: World Bank. Notes: see Table 2.

MPO 276 Oct 20

Upper middle-income pov. rate

Expenditures are expected to increase
drastically due to higher spending associated with the government’s COVID-19
response package. Consequently, the fiscal
deficit is expected to increase to -16.0 percent of GDP in 2020. Seychelles’ debt to
GDP ratio is expected to increase to 94.3
percent of GDP in 2020 due to the shocks(GDP and exchange rate) of the pandemic.
Negative growth in 2020 is expected to takea toll on poverty reduction in Seychelles.
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 the full
impact of COVID-19 on poverty in 2020 is
not yet known, poverty is projected to riseto 7 percent in 2020. The unemployment
rate in Seychelles jumped to 4.8 percent in
the first quarter of 2020, from 2.3 percent in
the last quarter of 2019. In the second quarter of 2020, the unemployment rate is expected to increase. However, job loss is
expected to be mitigated by the financial
assistance for job retention program implemented by the government of Seychelles.

Outlook
Economic growth is expected to remain
subdued in the medium-term as global

tourism remains on a standstill and consumption remains subdued. A recovery ofthe domestic economy to pre-COVID-19
levels is conditional on a rebound of the
global economy and a revival of the travelindustry. As such, the reduction in economic activity is expected to persist in the
short to medium term.
The fiscal deficit is expected to contractover the medium-term, as the increase in
spending associated with COVID-19 subsides and revenue collection rebounds. The
increase in revenue collection will be driven by a resumption of economic activities,
although generous loss-carry forward provisions and gradual recovery in tourism
will likely continue to suppress VAT andbusiness tax collection below pre-crisis
levels for several years to come. This recovery in revenue is below the pre-COVID
projections and revenue will not reach preCOVID 2019 levels until 2025, in line withthe recovery path of the tourism sector.
Meanwhile, expenditure is projected toremain higher than pre-crisis levels in 2021
due to increase capital spending (this might
not materialize due to execution constraints). The debt to GDP ratio would remain above the debt target <50 percent of
GDP in the medium-term (that was to bereached by 2021), by several years.
Poverty is projected to slowly continue todecline to 5 percent by 2022 ($5.5 a day

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)
Lower middle-income poverty rate ($3.2 in 2011 PPP) a,b
Upper middle-income poverty rate ($5.5 in 2011 PPP) a,b

per capita line), following an increase to 7
percent in 2020 due to COVID-19. Inequality is expected to increase due to COVID19 and continue to increase in the medium-term if underlying challenges are notaddressed. The 2018 household budget
survey is expected to deliver a muchneeded update on the most recent trends
in poverty and inequality.

(annual percent change unless indicated otherwise)
2017
4.3
14.8
6.3
-2.2
9.6
11.6
3.9
3.3
-2.2
4.8
3.5
-20.7
18.2
0.0
63.9
3.1
2.1
5.9

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
2.0
5.2

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 2013-HB S. A ctual data: 2013. No wcast: 2014-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2013) with pass-thro ugh = 1 based o n GDP per capita in co nstant LCU.

MPO 277 Oct 20

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
1.9
5.1

2020 e
-15.9
-13.6
3.9
-37.9
-40.8
-38.2
-15.9
0.7
1.8
-18.5
3.9
-28.4
4.2
-16.0
94.3
-12.2
3.1
7.0

2021 f
3.1
9.1
0.2
29.0
31.5
38.2
3.1
0.9
1.7
3.4
2.9
-28.1
14.7
-7.2
91.6
-3.2
2.5
6.6

2022 f
3.8
5.0
-3.2
9.7
7.2
6.5
3.8
1.3
2.5
4.0
2.9
-28.2
16.6
-5.3
87.8
-1.6
2.3
6.1

SIERRA LEONE
Table 1

2019

P o pulatio n, millio n

7.9

GDP , current US$ billio n

3.7

GDP per capita, current US$

471.1

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

112.8

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 is expected to contract by 3.1 percent in 2020 with the collapse in services sector output. On the
demand-side, the contraction will be driven
by the decline in investment and net exports. Growth is expected to rebound to 2.7
percent in 2021 and further to 4.2 percent
in 2022 driven by the recovery in agriculture, mining and services. Downside risks
to this outlook include a more severe
COVID-19 outbreak, higher-than-expected
inflation, financial sector weakness, growing unemployment and poverty.

Recent developments
After growing by 5.4 percent in 2019, Sierra Leone’s economy is projected to contract
by 3.1 percent in 2020 due to a sharp contraction in the services sector, reflecting
suspension of international flights, closureof land borders and lumas (weekly openair markets in rural areas) and businessclosures, especially in the hospitality sector.
Growth in agriculture is expected to slow
with disruptions in labor supply due to the
lockdown and delivery of key inputs suchas seeds and fertilizers. Nearly two-thirdsof rural households reported planting lessrice this season, forewarning increasing
food insecurity and lower agricultural production (COVID-19, Impact Monitoring
Survey in Sierra Leone (CIMS), July 2020).
On the demand side, the contraction of theeconomy is explained by lower investment
and net exports, reflecting COVID-19 related uncertainties and global trade disruptions. Nonetheless, public and private consumption will remain strong with increased spending on health, support tovulnerable households (through social safety nets programs) and businesses and demand for essential commodities, including
food. The proportion of households below
the international poverty line is projected toincrease to 44.2 in 2020 due to reduced income from self-employment activities andlower agricultural production.
Headline inflation is projected to reach 15.6
percent by end-2020 from 14.8 in 2019, reflecting food supply constraints as lockdowns and border closures disrupted

domestic and international food supply
chains. Food inflation (year-on-year),which had declined to 5.4 percent by end-December 2019, reached 17.3 percent at
end-July 2020. Four months into the pandemic, 8 out of 10 households reported
having difficulty getting enough foodcompared to a year ago, due mainly to a
decline in income and increased prices.
Nonfood inflation declined sharply from
21.1 percent to 10.2 percent at end-July
2020, reflecting lower prices for transportation, hotels and restaurant and goods andservices. The Bank of Sierra Leone (BSL)
lowered its policy rate by 150 basis points,
to 15 percent, and rolled out a Le500 billion
Special Credit Facility to ease supply chain
constraints. Consequently, money supply(M3) grew by 20.4 percent by end-June2020 from 14.5 percent in December 2019
due to increased credit. The Leone depreciated by 5.1 percent against the US dollar in
the first half of 2020, reflecting lower-thanexpected export receipts. The current account deficit (CAD) is expected to widen to
15.5 percent of GDP in 2020 from 14.0 percent in 2019, due largely to the widening of
the trade deficit as exports fall while imports increased. The BSL’s regular foreignexchange auctions provided liquidity tofacilitate imports of food and fuel. The current account deficit will be financed by anincrease in external reserves through budgetary and balance of payments supports
from development partners.
Depressed economic activity is expected
to reduce domestic revenues, from abudgeted 14.8 percent of GDP to an estimated 13.0 percent of GDP. The revenue
shortfall could be offset by increased

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

Poverty rate (%)

20

120

Real GDP per capita (constant LCU)
2000000100

101500000

80

0
60

-10

40

-20

20

1000000

500000

2016

2017

2018

Statistical discrepancy
Change in inventories
Public Consumption
Real GDP growth

2019

2020

2021

2022

Net Exports
Gross fixed capital formation
Private Consumption

Sources: Sierra Leonean authorities and World Bank staff estimates and projections.

0

0
2011

2013

2015

2017

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

MPO 278 Oct 20

2019

2021

Lower middle-income pov. rate
Real GDP pc

budget support grants from development
partners. Total expenditure is projected
increase to 26.1 percent of GDP from 20.6
percent of GDP in 2019 with increased
spending to implement public healthmeasures and mitigate the impact of thecrisis on households and businesses. To
address emerging fiscal crisis, the Government submitted a supplementary budget
to parliament on July 24, 2020, with proposed cuts to nonessential expendituresand funding for its COVID-19 response.
The overall fiscal deficit is projected toincrease to 5.8 percent of GDP compared
to an original projection of 3.3 percent of
GDP. The deficit will be financed fromboth foreign (0.5 percent of GDP) and domestic sources (5.3 percent of GDP). Total
public debt is projected at 79.4 percent of
GDP in 2020 (up from 71.7 percent of GDP
in 2019), largely reflecting the larger fiscal
deficit. Both external and overall risk ofdebt distress remained “high”.

Outlook
The poverty and economic outlook for 2021
–22 critically depends on the evolution of
the COVID-19 pandemic. Under the assumption of a mild global second wave
and the local spread ending by close of2020, economic growth is projected to rebound to 2.7 percent in 2021 and further to
4.2 percent in 2022 as activities in agriculture, mining, construction and services
recover and markets for Sierra Leone’s
exports reopen. However, in the absence ofa robust macro-fiscal response the recovery
is likely to be slower. Poverty is expected
to slowly decrease in 2021-22 but remain
above pre-COVID-19 levels of 40.6 in 2019,as the current economic shock makes it
even harder for small businesses and agricultural activities to climb out of a lowproductivity trap. Inflation is expected tomoderate to 10.2 percent by 2022, supported by increased domestic food production
as agriculture and fisheries recover. PostCOVID-19 fiscal consolidation efforts are
expected to reduce the budget deficit to 4.2
percent of GDP by 2022, reflecting vigorous
revenue mobilization and prudent expenditure management and control especially for payroll and public investment.
The CAD is projected to narrow to 12.0
percent of GDP in 2022, driven mainly byincreased exports and remittance inflows.

Risks and challenges

anticipated FDI inflows, higher than anticipated inflation and financial sector
weaknesses represent the main risks to
the outlook. First, the large stock of domestic arrears, estimated at Le 2.8 trillion
or 7.7 percent of GDP in June 2020, continue to weigh heavily on public financesand could impede post-COVID-19 fiscal
consolidation efforts as well as continued
expansion of anti-poverty programs. Second, weaker demand for the country’s
exports due to COVID-19 could worsen
the terms of trade, resulting in lower
than expected exports. Third, lower than
anticipated FDI inflows especially in themining sector could cause a drag on economic growth and reduce reserves tofinance the current account deficit,
putting further pressure on the exchange
rate. Fourth, the rapid money supply
growth supported by various monetaryand fiscal stimuli could make it difficult
to reduce inflation over the medium
term. Fifth, given the preexisting weaknesses in the banking system, COVID-19
is likely to increase uncertainty in thebanking sector and increase the risks ofloan defaults. Finally, with the closure ofabout 15 percent of businesses, job losses
could become permanent.

Large domestic arrears, weaker demandfor Sierra Leone’s exports, lower than

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,b(annual percent change unless indicated otherwise)
2017
3.8
-0.4
-4.8
16.2
23.3
6.3
3.7
4.5
-5.3
5.3
18.2
-21.1
-8.8
57.8
-6.6

2018
3.5
-7.0
-1.3
63.4
-34.9
-11.5
3.4
3.9
-2.5
4.3
16.0
-18.8
-5.9
60.5
-4.7
43.0
76.0
92.7

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-SLIHS. A ctual data: 2018. No wcast: 2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
5.4
2.7
2.7
9.0
19.2
8.1
5.2
5.6
10.2
3.2
14.8
-14.0
-2.8
71.7
-1.4
40.6
74.8
92.1

2020 e
-3.1
4.0
58.3
-28.4
-4.2
5.4
-3.1
3.1
1.1
-13.1
15.6
-15.5
-5.8
79.4
0.4
44.2
76.6
93.1

2021 f
2.7
9.0
-11.8
18.8
3.0
15.8
2.7
3.6
7.1
-0.3
12.8
-14.3
-6.3
82.1
1.0
43.7
76.5
93.0

2022 f
4.2
10.5
9.5
3.1
19.7
18.6
4.2
3.9
4.6
4.6
10.2
-12.0
-4.2
78.7
3.0
42.0
75.7
92.5

SOMALIA

Recent developments

Table 1

2019

P o pulatio n, millio na

15.0

GDP , current US$ billio n

4.9

GDP per capita, current US$

327.0

Internatio nal po verty rate ($ 1.9)
Gini co efficient

b

69.0

b

34.0

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

b

b

33.0
57.1

Sources: World Development Indicators (WDI), IM F & World
Notes:(a) Estimates based on 201 3 population estimates by
UNFPA and assumes an average annual population growth of(b) Somali Poverty and Vulnerability Assessment Report(World Bank, 201 9); Life expectancy for 201 8 from WDI.

As Somalia faces headwinds from the triple crisis of the COVID-19 pandemic,
desert locusts and drought, the economy
has contracted by an estimated 1.5 percent in 2020. Poor households and small
businesses have received lower remittances and sales revenues, while livelihoods
generated from the service sector and agricultural production are under threat.
While the economy is showing signs ofresilience, both the urban and rural poor
are expected to increase, with a heightened sense of vulnerability.

Somalia is facing a “triple crisis” of the
COVID-19 pandemic, the locust infestation and floods that has ended several
years of modest economic growth. The
economy is expected to contract by
1.5 percent in 2020, compared with the pre-crisis forecast of 3.2 percent. COVID-19
containment measures have lowered consumption, particularly in urban areas, andreduced demand for services. As the services sector is the largest employer, accounting for close to 75 percent of employment for youth and women, this has
resulted in job losses in both formal andinformal segments of the economy. The
global downturn curtailed remittancesfrom Somalia’s large diaspora in the firsthalf of 2020 compared with the previous
year. Small and medium enterprises wereparticularly affected, as remittances fell byover 17 percent in the second quarter.
Meanwhile the floods and desert locusts
continue to threaten agricultural production and exacerbate displacement especially among the rural poor. Approximately
3.5 million people are estimated to be foodinsecure and in need of urgent humanitarian assistance, while close to 0.5 million
were displaced by floods by the third
quarter of 2020.
Despite the challenging context, the economy is showing signs of strengthening
resilience. Prices in Somalia have remained relatively stable, as volatility has
been contained by a largely dollarized
economy, with notable reductions in fuelprices in line with falling global oil prices. As Somalia has limited manufacturing
and productive capacity, the country
remains reliant on imports for necessities, including food items. Total imports
increased by 3 percent in the first half in2020 (year on year) as firms adjusted
their trading routes amidst disruptions to
global supply chains. However, foodimports declined by 15 percent, raisingconcerns over food insecurity. Exports
fell by 25 percent in the first half of 2020,
largely due to dwindling demand forSomali agricultural products, with adverse consequences for households engaged in livestock.
The triple crisis has put new pressure on
public finances. It interrupted the trend ofsteadily improving tax collection. Revenue
collected by the federal government during January–July 2020 was 5 percent lower
than in the same period of 2019 and 12
percent below the 2020 target set in January, due mainly to effects of COVID containment but also in part to tax relief
measures. The federal government’s 2020
supplemental budget, passed in August,appropriated a substantial expansion of
cash transfers to households hurt bydrought and locusts, along with other newsocial spending, and increased grants to
subnational governments to help themadjust to the crisis.
The triple shocks have exacerbated already dire poverty and social conditions.
The combined effect of these shocks has
had negative impacts on household welfare and food security, particularly affecting the 69 percent of Somali households
that live below the poverty line and the 10

FIGURE 1 Somalia / Domestic revenue sources

FIGURE 2 Somalia / Actual poverty rates by population
group

Percent of GDP

Percentage of population
100

5

80

4

60
3

40
2
20

1

0
Mogadishu

0
2018

2019

2020b

Tax revenue

2021f

2022f

2023f

Non-tax revenue

Sources: Federal Government of Somalia (FGS), World Bank & IMF.

Source: World Bank.

MPO 280 Oct 20

Other urban

Rural

IDPs insettlements
95 percent confidence interval
Overall average (survey estimates)

Nomadspercent of households that hover slightly
above. Transmission channels include
reduced incomes, poor agricultural harvest, and lower access to remittances andfamily assistance that would normallybuffer the shocks. Without the needed
health capacity to manage a public healthemergency, social protection systems tocope with crises, and family assistance toease the financial stresses, many Somali
households face a desperate situation.

Outlook
The economy is expected to rebound during the last quarter of 2020, grow by 2.9
percent in 2021 with the easing of the
global pandemic, and enjoy a modest
growth acceleration as policy reforms takeroot. Economic activities have alreadyshown signs of resurging, following thelifting of containment measures. Remittances inflows are projected to remain
at over 30 percent of GDP. Meanwhile,
lower prices of fuel are projected to continue providing a boost to households andbusinesses, who face one of the highest
prices of electricity in the world.
Fiscal reforms are likely to strengthen
Somalia’s public finances. Tax and customs administration reforms should

enable domestic revenue to regain an
upward trajectory in 2021. Stronger financial management controls should
enable the government to create fiscal
space for investments. The increase in
fiscal transfers in the 2020 supplemental
budget could improve intergovernmental cooperation and potentially increase
political stability.
Already existing widespread poverty andvulnerability are likely to deteriorate dueto the multiple shocks. The COVID-19
crisis is likely to affect the urban poor andthose working in the informal sector andlivestock value chain, while the floods anddesert locusts will affect the rural poorand nomadic households. While the number of people living below the poverty line
is likely to increase, rapid action has beentaken to expand social safety nets.

electoral processes complemented bydialogue with the Federal Member States
could enhance stability, particularly if
discussions surrounding the Provisional
Constitution progress.
Further waves of Covid-19 and accompanying mitigation measures could result in amore prolonged than expected economic
slump, which could reduce remittance inflows, depressing household consumption
and activities of smaller enterprises. Somalia’s exposure to climatic shocks remains asource of vulnerability, particularly in rural
areas, as ongoing efforts to strengthen water management are only likely to bear fruitin the medium-to-long-term.
Desert locusts continue to pose a risk to
the Gu season cereal and livestock production and may also pose a threat to the
October–December Deyr season production, increasing the risks for livelihood
insecurity and agricultural production
deficits in many parts of the country. In
urban areas, there is a greater risk of rising informality and job losses as demand
for services falls. Any slowdown in implementation modalities for the safety
net expansion could risk exacerbating thesituation. Responding to these challenges, the government is creating a unifiedsocial registry to build a national database of the poor and vulnerable alongside the expansion of cash transfers.

Risks and challenges
As Somalia prepares for elections, currently slated for early 2021, there is a riskthat heightened political tensions overthe electoral model (which does not provide for direct elections in its presentform) could provide an opportunity forinsurgents to increase their foothold. On
the upside, a continued commitment to

TABLE 2 Somalia / Macro poverty outlook indicators(annual percent change unless indicated otherwise)
2017

2018

2019

2020e

2021f

Real GDP growth, at constant market prices

1.4

2.8

2.9

-1.5

2.9

3.2

3.4

CPI Inflation, annual percentage change

6.1

3.2

3.1

3.0

2.5

2.2

2.2

Current account balance, % of GDP

2022f 2023f

-9.8

-7.5

-10.5

-12.8

-12.9

-12.9

-13.2

Trade balance, % of GDP

-86.7

-84.8

-83.0

-91.4

-86.8

-88.2

-85.0

Private remittances, % of GDP

31.6

31.4

31.9

31.4

31.0

31.4

30.8

Official grants, % of GDP

46.1

46.6

41.3

47.9

43.7

44.6

41.6

Fiscal balance, % of GDPa

0.1

0.1

0.5

0.0

0.7

1.1

0.6

Domestic revenue, % of GDP

3.2

3.9

4.6

4.1

4.6

5.0

5.6

External grants, % of GDP

2.8

1.8

2.2

8.3

6.1

7.4

8.0

Total expenditure, % of GDP

5.9

5.7

6.3

12.4

10.1

11.3

12.9

Compensation of employees, % of GDP

2.8

3.0

3.3

4.7

4.8

5.1

5.5

So urce: Wo rld B ank (2020) and IM F (2020).
No tes: e = estimate, f = fo recast, (a) Federal Go vernment o f So malia (FGS).

MPO 281 Oct 20

SOUTH AFRICA
Table 1

2019

P o pulatio n, millio n

58.6

GDP , current US$ billio n

351.4

GDP per capita, current US$

5997.6

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

100.9

b

63.9

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 7); Life expectancy (201 8).

With the most cases in Africa and a very
strict lockdown that brought the economy
to a standstill, South Africa has been hard
hit by COVID-19. Growth is projected tocontract by 7.2 percent this year and torebound moderately in 2021 as preexisting structural constraints – such as
electricity shortages - become binding
again. Public debt is expected to reach82.3 percent in 2020, raising concerns
over debt sustainability. Poverty is expected to rise in 2020.

Key conditions andchallenges
The COVID-19 crisis hit South Africa
when its economy was already weak.
GDP growth averaged 1.7 percent annually over 2010-19, 2 percentage points below
the previous decade’s average. Per capita
real GDP growth has been contracting
since 2014. Business confidence is low andmanufacturing and mining activities havebeen hard-hit by electricity shortages as
Eskom faces protracted supply challenges.
Fiscal balances have deteriorated as a result of rising expenditures, especiallytransfers to public corporations, public
sector wage bill, and debt service payments. At the same time, high and stablerevenue collection has suffered from weakeconomic growth. On the background ofdeteriorating macroeconomic indicators,
South Africa lost its last investment grade
rating last March. Nonetheless, the country benefits from large and deep domestic
financial markets. Most of the publicsector debt is Rand-denominated.
There is high uncertainty around the outlook. A longer global health crisis andeconomic downturn, long-lasting disruptions in global supply chains, or longer
and deeper COVID-19 pandemic in South
Africa could prolong the recession anddelay and weaken the recovery.
Delivering on structural reforms to restart
the economy and put growth on a higher
trajectory than pre-COVID-19 and reducing unproductive expenditures is criticalto restore debt sustainability and improve
confidence. A worsening of investors’
sentiment could raise South Africa’s borrowing costs, putting additional pressure
on the budget and the domestic banking
sector to fund a growing share of the large
borrowing requirements.
Persistently depressed economic growth
combined with low job creation could
revert past progress towards poverty reduction and widen inequalities, alreadyamong the highest in the world.

Recent developments
GDP growth entered a technical recessionin Q4 2019. As domestic COVID-19 cases
rose, a strict lockdown in place from endMarch to end-April brought activity to a
standstill. GDP contracted by 8.7 percent y-o-y over January-June driven by mining(-19.8 percent y-o-y), manufacturing (-18.3
percent y-o-y) and retail and wholesaletrade, hotels and restaurants (-12.7 percent
y-o-y). On the demand side, households’
consumption fell by 7.5 percent y-o-y,gross capital formation plunged by 28.7
percent y-o-y. The external sector contributed positively to GDP growth (by 0.8
percent) as imports contracted more thanexports. Inflation decelerated, hovering
around the lower bound of the Reserve
Bank’s target band (3-6 percent) at 3.4
percent on average up to July. The current
account deficit decreased from 3 percent
of GDP in 2019 to 0.9 percent of GDP over
H1. Amid global and domestic uncertainty, South Africa experienced significant

FIGURE 1 South Africa / Public debt and financing
requirements

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

Percent of GDP

Poverty rate (%)

Percent of GDP

Real GDP per capita (constant LCU)

90

18

80

58000

85

16

70

56000

80

14

60

75

12

70

10

65

8

60

6

55

4

20

50

2

10

0

0

45
2016

2017

2018

2019

2020

2021

52000

40
50000

30

2022

48000

46000
44000
2005 2007 2009 2011 2013 2015 2017 2019 2021

General Government Debt (left axis)
Financing Requirements (right axis)
Sources: National Treasury and World Bank staff.

54000

50

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

MPO 282 Oct 20

Lower middle-income pov. rate
Real GDP pc

portfolio outflows that resulted in therand depreciating by close to 20 percent
since the beginning of 2020. Government
10-year bond yields increased to 13.1% in
end-March before stabilizing around preCOVID-19 levels since June. The banking
sector remains stable but bank-sovereignnexus risks are rising, especially for banks
exposed to financially-weak SOEs.
The South African authorities reacted decisively to the COVID-19 shock. The Central Bank eased the monetary policy
stance, reducing the repo rate by a cumulative 300 basis points since January. It
also took measures to provide market
liquidity, including government bondspurchases on the secondary market. Itpurchased Rand 21.6 billion over AprilMay (US$ 1.3 billion) and subsequently
lowered its purchases to Rand 7.6 billion
over June-July (US$ 460 million) as market
stress subsided. The government launcheda stimulus package of 10 percent of GDP
to support the health sector, vulnerable
households and small businesses.
The economic and social impact of thepandemic is high. The unemployment
rate, which stood at 29 percent before
COVID-19 is expected to have increased
significantly in 2020. Households’ survey
results suggest that up to a third of income earners may have lost their income
source between February and April, witha disproportionate impact on the poorest,
translating into heightened vulnerabilities,
notably to hunger.

Outlook
The impact of the COVID-19 pandemic
will translate into a significant economic
downturn in 2020. As some activities remain constrained into H2 (such as tourism), the economic impact of COVID-19
will be long, and the recovery moderate
during the second half of 2020. As economic activity restarts, pre-existing structural constraints are becoming binding
again, such as electricity shortages . GDP
growth is expected to contract by 7.2% in2020 and to rebound to 2.6% in 2021.
The fiscal situation has weakened further.
The deficit is expected to more than double – to 16.2 percent of GDP in 2020/21 –and public debt is projected to reach 82.3
percent of GDP. Debt service is estimatedto rise to 5.1 percent of GDP in 2020/21,
the fastest growing budget expenditure,
crowding-out
poverty-reducing
andgrowth-enhancing public spending. The
government is committed to restoring
fiscal sustainability and to reach a primary
surplus by 2023/24. Specific reforms toachieve this outcome are expected to be

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

announced in the Medium-Term Budget
Policy Statement in October. In the face ofrising gross borrowing requirements, theauthorities have contracted about US$ 5.6
billion in external financing from IFIs.
Further support may be needed to fill thefinancing needs over the coming years.
The COVID-19 crisis is likely to increase
poverty. Unemployment is expected toincrease significantly. Vulnerable people
such as workers in the informal sector andthose with low levels of education are
more likely to be unemployed as theydisproportionately work in sectors thatwill remain affected by containment
measures (e.g. hospitality, retail trade).
About 2 million South Africans could fall
into poverty, bringing the poverty rate measured at the upper-middle-income
country poverty line ($5.5/person/day in
2011PPP) - to 60.2 percent in 2020.

(annual percent change unless indicated otherwise)
2017
1.4
2.1
0.2
1.0
-0.7
1.0
1.5
21.1
1.1
1.0
5.2
-2.5
-1.5
-4.1
53.0
-0.4
19.1
37.9
57.3

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

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: 2015-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
-2.3
19.7
38.5
57.8

2020 e
-7.2
-13.4
3.5
-8.5
-10.5
-16.4
-7.2
-1.0
-7.1
-7.4
3.0
-1.8
0.0
-16.2
82.3
-11.1
21.9
41.3
60.2

2021 f
2.6
3.8
-1.5
6.1
11.6
13.4
2.6
3.3
2.5
2.6
3.9
-2.1
0.1
-9.5
84.6
-4.1
21.6
41.0
60.0

2022 f
1.5
2.3
1.0
1.5
0.9
2.2
1.5
3.0
2.0
1.2
4.3
-2.5
0.2
-7.7
86.7
-2.0
21.6
41.0
60.0

SOUTH SUDAN
Table 1

2019

P o pulatio n, millio n

13.0

GDP , current US$ billio n

4.9

GDP per capita, current US$

375.2

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

a

73.0

a

57.6

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

South Sudan has suffered multiple shocks
with the COVID-19 pandemic, low oil
prices, floods, and locust infestation drastically changing the economic outlook.
Currency depreciation and rising prices
are of particular concern. Moreover, an
increase in intercommunal violence has
driven a new wave of internal displacement, exacerbating an already dire humanitarian situation with 7 million foodinsecure and 1.6 million internally displaced people. Recovery beyond FY21
depends on developments in the oil sector,
resolution of violence, and resilience toagricultural shocks.

Key conditions andchallenges
South Sudan’s development has been undermined by years of conflict and neglectthat can be traced to the pre-independence
era. After two protracted civil wars thatpreceded the 2005 Comprehensive Peace
Agreement which laid the groundworkfor independence in 2011, there was hopethat peace would finally prevail. However, the country descended into conflict inDecember 2013 and again in 2016 as a2015 peace deal collapsed. A revitalizedpeace agreement signed in September
2018 led to the formation of a transitional
government in February 2020. However,intercommunal violence persists and has
been a leading cause of displacement inrecent months.
To date, the lingering impact of the prolonged conflict, which resulted in a major economic crisis, is critically affecting
livelihoods, constraining food availability, and access to basic services for large
segments of the population. It is estimated that about 1.6 million people remaininternally displaced and 2.3 million
South Sudanese refugees are still residing in neighboring countries. Legacy of
economic mismanagement and resistance to reform have resulted in a distorted macroeconomic environment.
Financing of the fiscal deficit led to soaring inflation, adding to an economic crisis with output contacting and widening
exchange rate premium.

COVID-19 effects have been transmitted
through lower oil prices, an increase of
the prices of basic commodities due totrade disruptions, lower remittances
receipts, and restrictions on humanitarian operations on the ground. Parts ofthe country have been affected by aninfestation of locusts and floods, with
FAO estimates indicating substantial
losses in affected areas. In addition todestroying assets, crops, and pasturelands, floods have led to an increasein waterborne and malarial diseases. The
economy is projected to contract in FY20
and FY21. Even if oil prices will recoverin the future, past experiences indicate a
disconnect between oil revenues andliving standards.

Recent developments
Real GDP is estimated to have contracted by -4.8% during FY20 as oil prices
plummeted and private consumption
slumped. The FY20 fiscal deficit widened
to 6.8% of GDP as both commodity andtax revenues underperformed. Monetization of the fiscal deficit as well as supply chain disruptions led to an increase
in inflation. Food prices increased in therange 25 – 105% year-on-year by April as
COVID-19 restrictions affected the flowof trade and access to markets. The average rate of inflation is estimated to haveincreased to 72.2% during FY20 from
63.6% during FY19. Imports from Uganda declined 9.3% year-on-year over athree-month period March – May 2020.

FIGURE 1 South Sudan / Real GDP growth and contributions to real GDP growth

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

Percent of GDP

Poverty rate (%)
120

30
20
10
0
-10
-20
-30
-40
-50
-60
-70

Real GDP per capita (constant LCU)
3500
3000

100

2500

80

2000

60
1500
40

1000

20
2000

2003

2006

2009

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

2012

Exports
Private cons.
GDP

2015

2018

2021

500

0

0
2009

GFCF
Imports

2011

2013

2015

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

MPO 284 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

The South Sudan Pound depreciated
35% during June – August 2020 and theparallel market premium increased to150% by end of August 2020 from 105%
at the end of June 2020.
Recent phone surveys show significant
COVID-19 impacts on households. Lower purchasing power and a multitude ofshocks will likely increase poverty andvulnerability as 52% of respondents reported losing either some or all theirincome from their main income source
post-COVID. In addition, 46% were unable to buy their main staple foods due tolack of money (44%) or higher food prices (11%) and 42% of domestic remittance-receiving households reported a decline, with 16 % reporting a cessation ofthis income source.
Government’s response to COVID-19
included reduction of both the Central
Bank Rate (15% to 13%) and Reserve
Requirement Ratio (20% to 18%) by 2
percentage points in April 2020. Additional measures reduced the Central
Bank Rate by a further 3 percentage
points, down to 10%, and suspended
the regulation of higher minimum paidup capital for commercial banks. In addition, South Sudan has created two
special committees to oversee critical
economic and PFM reforms in response
to COVID-19.

Outlook
The FY21 budget process has been delayed, government resources have shrunk,and the fiscal deficit is expected to rise to8.2% of GDP in 2021. Oil revenues are
expected to decline to 13.5% of GDP in
FY21 from 18% in FY20, while tax revenues are expected to shrink to 1.3% of
GDP in FY21 from 2.5% of GDP in FY20.
South Sudan authorities are looking to theinternational community for support.
South Sudan’s oil sector has continued tobe the primary driver of growth, but further expansion will depend on higher oil
investments. Recently, oil revenue has
been heavily impacted by lower oil prices
and OPEC+ production cuts, with South
Sudan’s oil production down 20,000bpd toan estimated 175,000bpd. Due to COVID19, the government has postponed plans
for an oil licensing round until FY22.
The current account is expected to deteriorate sharply in FY21 with lower oil exports. Private consumption will continue
to decline impacted by inflation, a depreciating local currency, expected lower
crop harvest due to floods, reduced remittance inflows, and conflict. Looking
forward, real GDP is projected to contractby -13.6% in FY21, driven by declining

TABLE 2 South 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)
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

exports and private consumption. Recovery in FY22 is predicated on the assumption of a rebound in the global economy(higher oil prices and remittances) and
resolution of conflict.
Given the reduction in household andbusiness income, fall in wages and remittances as measured by the recent
COVID-impact phone surveys, poverty at$1.90 per person per day is projected toincrease to 82% in FY21 from 76% in FY19.
Resilience to natural disasters and communal conflict is key to reducing vulnerability, especially among the displaced
populations. Going forward, there is anurgent need for a nationally representative household survey to estimate poverty
and monitor changes in welfare of theSouth Sudanese population.

(annual percent change unless indicated otherwise)
2017
-6.9
-21.9
3.0
3.0
18.4
-10.0
-6.9
-16.0
-3.5
-7.2
384.8
-0.7
-0.2
-0.3
85.3
-0.2
72.9
89.2
97.2

2018
-3.5
-17.8
4.0
4.0
27.9
3.2
-3.5
-2.5
15.0
-14.6
121.6
-3.7
0.3
-3.3
59.7
-3.0
74.8
90.3
97.6

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 2009-NB HS. A ctual data: 2009. No wcast: 2010-2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2009) with pass-thro ugh = 0.7 based o n GDP per capita in co nstant LCU.

MPO 285 Oct 20

2019
-0.3
-8.6
10.1
-8.1
10.7
6.9
-0.3
9.9
8.0
-8.7
63.6
-2.6
-0.5
0.0
37.2
0.4
75.9
90.8
97.8

2020 e
-4.8
-9.7
-15.7
47.6
8.2
6.9
-4.8
3.8
8.2
-18.9
72.2
-4.0
-0.2
-6.8
31.5
-6.7
77.8
92.0
98.1

2021 f
-13.6
-13.5
-38.4
32.4
-15.9
-14.9
-13.6
2.9
-13.9
-17.6
32.2
-11.1
0.1
-8.2
37.0
-8.0
82.1
93.8
98.8

2022 f
2.1
1.6
-10.9
14.5
7.0
6.5
2.1
3.2
7.1
-4.9
24.4
-1.4
0.1
-6.0
36.0
-5.9
82.3
94.0
98.8

SUDANKey conditions andchallenges

Table 1

2019

P o pulatio n, millio n

42.5

GDP , current US$ billio n

30.5

GDP per capita, current US$

717.4

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

finance will require successful performance by Sudan under the IMF SMP, followed by clearance of arrears to IFIs and
HIPC debt relief. The process should also
involve the removal of Sudan the from the
U.S. State Sponsors of Terrorism List.

b

b

76.8
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).

The COVID-19 and other shocks will
depress growth significantly, with GDP
growth estimated at -8.4 percent. Fiscalpressures remain acute despite efforts forconsolidation. Severe economic challenges
will remain in the near term. However, abroad macroeconomic stabilization andreform program is being supported by an
IMF Staff Monitored Program (SMP).
The ongoing economic crisis, exacerbatedby COVID-19, is expected to lead to higher poverty rates.

The economic situation in Sudan continues to deteriorate at a rapid pace. Sudan’s
economy has been in recession since 2018,
and real GDP contracted by 2.5 percent in2019. The recession in 2018-2019 reflecteda disruption in economic activities due tosocial turmoil and the acceleration in inflation that sharply reduced real incomes fora large part of the population. With the
COVID-19 emergency and lockdown andmultiple natural disasters, GDP is projected to contract by 8.4 percent in 2020. In
this context, fiscal pressures have become
more acute, leading to a steeper deficit in
the first half of 2020, accelerated monetary
expansion, and resulting higher inflation.
Risks to Sudan’s outlook remain on thedownside. Growth and poverty reduction
prospects may be further delayed due to amore prolonged COVID-19 crisis in theworld or a more severe epidemic in Sudan. While Sudan achieved a major internal peace agreement at the end of August,flare ups of regional unrest remain possible. The population in Sudan has become
increasing frustrated with the continued
economic deterioration, and civil unrest ison the rise throughout the country. If
political resistance prevents the realizationof key reforms to correct the enormous
macroeconomic imbalances in Sudan, theyear 2021 could bring further destabilization and associated high risks. Restoring
debt sustainability and access to external

Recent developments
Growth in 2020 is projected to decline by
8.4 percent in the context of the COVID-19
pandemic. The recession reflects reductions in both public and private consumption and investment, which were negatively impacted by the COVID-19 lockdown, sharp declines in real income frominflation, a locust infestation in agriculture, and massive flooding.
The government continues to struggle
with a large fiscal imbalance. In the firstquarter of 2020, federal budgetary receipts were more than 40 percent lessthan anticipated in the planned budget.
Despite the lower-than-expected fiscal
performance and (monetized) fiscal deficit in the first half of 2020, a budgetaryconsolidation in the order of 3.6 percent
is nevertheless now expected for the yearof 2020. This reflects major savings on the
expenditure side of the budget due to a
sharp reduction in spending on fuel subsidies. It also reflects significant external
support on the revenue + grants side of
the budget, all of which is expected in thesecond half of the year.
Public debt is expected to reach 259.5 percent of GDP in 2020, the vast majority ofwhich is external debt in arrears. Arrears

FIGURE 1 Sudan / Fiscal Balance and Inflation Rate

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

P
Percent
275

Poverty rate (%)
100

Percent of GDP
0

Real GDP per capita (LCU constant)
1000

250
-2

225

80

800

60

600

40

400

20

200

200
-4

175
150

-6

125
100

-8

75

50

-10

25
0

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Fiscal Balance
Sources: WDI, IMF and World Bank staff estimates.

-12

0

0
2009

2011

2013

2015

International poverty rate
Upper middle-income pov. rate

Inflation rate

Source: World Bank. Notes: see Table 2.

MPO 286 Oct 20

2017

2019

2021

Lower middle-income pov. rate
Real GDP pc

on repayment of prior lending from IFIs,
including US$ 1.05 billion now owed to
the International Development Association (IDA), continue to bar it from accessto significant external financing usuallyavailable to developing countries.
The exchange rate on the parallel market
depreciated from 70 to 240 SDG per USD
in the first nine months of 2020 along withthe monetary expansion and inflationarypressures. Sudan will begin a major exchange rate reform in Q4 2020 that unifies
official rates and begins liberalization.
The pace of annual CPI inflation reached
167 percent in August 2020. The current
account deficit is projected to decrease
from 10.5 percent of GDP in 2019 to an
estimated 8.4 percent of GDP in 2020,
partly due to the strengthening of export
prices on the country’s primary export:
gold. Gross international reserves are currently believed to be around only one
month of imports.
The current poverty level for Sudan is
unknown because data from the latest
household survey (2014/15) do not reflect
the impact of the recent economic decline,
high inflation, and the impact of COVID19 in Sudan. Assuming a neutral distribution based on GDP estimates, poverty
rates may have increased consistently inrecent years, to reach in 2019 an estimated
14.9 percent at $1.90/day PPP and 48.3

percent at $3.20/day PPP. A new household survey is urgently needed to provide
a more accurate estimate of the poverty
situation in current times.

Outlook
Sudan is expected to engage in deep reforms in the second half of 2020, supported an IMF SMP and significant mobilized
external support. This has to the potential to put Sudan on a course toward stabilization and the revival of growth. GDP
growth is expected to pick up to 2.5 and3.1 percent, respectively, in 2021 and2022 due to recovery from the covid-19
pandemic and progress in stabilization.
The pace of inflation is also expected tomoderate.
The fiscal deficit should narrow in thenear term in the context of much lower
spending on commodity subsidies, postCOVID improvements in revenue performance, and higher revenues from importtariffs following exchange rate liberalization. Sudan’s ambitious economic andsocial revival program includes exchange
rate policy, subsidy removal, social mitigation measures, greater fiscal transparency, tax reform and anti-corruption, whilesetting a series of benchmarks to guide

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,cmacroeconomic policy toward economic
stabilization that is conditional on externalfinancial commitments from the international community.
The Sudan poverty outlook remains negative. Poverty rates are projected by 2022 toincrease to 20.1 percent at $1.90/day PPP,and 55.4 percent at $3.20/day PPP. Poverty
projection for 2020 is yet to be finalized as
the situation remains fluid and the full
impact of COVID-19 remains unknown.
The rising level of inflation, shortage offuel and other basic commodities and
COVID-19 are expected to continue having negative effects on living conditions.
For example, according to the Bank’s ongoing high frequency survey on COVID19, about 40 percent respondents reported
either a reduction or total loss in income
due to COVID-19. Many people had tostop working because of lockdown
measures imposed to contain the pandemic. The impending economic stabilization
reforms are expected to take time to deliver positive results on poverty.
of lockdown measures imposed to containthe pandemic. The impending economic
stabilization reforms are expected to taketime to deliver positive results on poverty.

(annual percent change unless indicated otherwise)
2017
0.8
-1.0
15.5
0.7
1.5
2.0
0.4
2.5
4.5
-3.5
32.4
-7.2
0.8
-6.5
159.6
-6.0
11.1
41.7
77.5

2018
-2.3
-3.2
-1.1
-2.7
0.8
-0.4
-2.3
-1.5
-1.7
-3.2
63.3
-8.7
1.5
-7.9
185.6
-7.7
12.8
45.1
79.9

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) 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: 2015-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

2019
-2.5
-2.5
-9.8
-1.0
2.3
1.6
-2.5
-1.0
-0.7
-4.8
51.0
-10.5
3.5
-10.8
200.3
-10.5
14.9
48.3
82.4

2020 e
-8.4
-7.9
1.0
-11.3
-9.6
-2.7
-8.4
-5.5
-10.7
-8.9
141.6
-8.4
6.1
-6.9
259.4
-6.9
20.7
56.0
86.3

2021 f
2.5
2.4
2.6
3.3
2.4
3.2
2.5
3.1
2.7
2.0
129.7
-4.8
7.4
-4.0
250.0
-4.0
20.6
55.9
86.3

2022 f
3.1
2.9
1.9
3.7
3.2
2.1
3.1
3.3
3.2
2.9
57.5
-5.8
6.5
-3.1
220.5
-3.1
20.1
55.4
86.1

TANZANIA

Recent developments

Table 1

2019

P o pulatio n, millio n

58.0

GDP , current US$ billio n

60.4

GDP per capita, current US$

1041.4

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

94.2

b

65.0

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).

Tanzania’s solid macroeconomic performance during the past six years is being
put to the test by the COVID-19 pandemic. GDP growth is projected to deceleratefrom an estimated 5.8 percent in 2019 to
2.5 percent in 2020 with an expected rebound near 6 percent over the mediumterm. Estimates using the international
poverty line show the poverty rate increasing from 49.6 percent in 2019 to50.5 percent in 2020, with modest reduction in poverty incidence expected overthe medium term.

Tanzania has experienced only 509 casesof COVID-19 as of May 11 (latest data) but
the country has not been immune to theglobal pandemic. GDP growth is expected
to slow to 2.5 percent in 2020. Tourism, amajor contributor to GDP growth, hasdeclined significantly despite the country
reopening for tourism in June and is expected to underperform during the peakseason of July–October. Leading indicators of private domestic demand show adeceleration. Domestic credit growth has
slowed to 6.9 percent in January–June
2020 from 8.9 percent in the first half of2019. Imports of capital goods, a major
component of private investment, declined by about 24 percent y/y in the second quarter of 2020. Business expectations
for sales and employment for the next six
months are pessimistic. Political uncertainty surrounding general elections may
also be contributing to a delay private
investment this year.
The pandemic’s disruption of global markets is having offsetting effects on Tanzania’s balance of payments, with the net
effect being an expected narrowing ofcurrent account deficit to 2.3 percent of
GDP. Exports of travel services plunged
to US$46.2 million during the second
quarter of 2020 from US$511.5 million ayear earlier. Higher gold prices have alleviated the loss in exports of manufactured goods and services, and the decline
in oil prices has reduced the import bill.
Meanwhile, problems at the borders are

reducing both transit trade and Tanzania’s imports and exports of goods toneighboring countries. International reserves have remained at relatively highlevels of US$5.2 billion as of June 2020
(covering 6 months of projected imports).
The government ended 2019/20 with overall fiscal deficit estimated at 1.5 percent of
GDP. This is a significant improvement
over 2018/19, although fiscal management
continues to suffer from a high level ofdomestic arrears and under-execution ofcapital budget. Although the pandemic
contributed to lower tax collection in
April and May—targets were missed by
17 and 25 percent, respectively—thestrong performance during the previous
quarters have fully attenuated this decline. Public investment has remained
high, at 6.4 percent of GDP in 2019/20 due
to the development of flagship projects
although capital budget was underexecuted by 25 percent. Public spending is
expected to continue growing strongly inthe remainder of calendar year 2020 as theelection nears. To provide support to business during the pandemic, Government
has accelerated clearance of domestic payment and VAT refund arrears. Public debt
remains under 40 percent of GDP, and therisk of debt distress remains low.
Inflation has been low and stable andreached 3.2 percent in June 2020. The Bankof Tanzania (BoT) has pursued an accommodative monetary policy to boost liquidity in the financial sector. BoT reduced thediscount rate by 200 basis points in May
2020 and the minimum reserve requirement ratio, and it has encouraged financial
institutions to consider loans restructuring.

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

FIGURE 2 Tanzania / Actual and projected poverty along international poverty lines and real private consumption per capita

Percent, percentage point

Poverty rate (%)
100

8Real private consumption per capita (constant LCU)
1400

90

1200

80
6

70

1000

60

800

50

4

40

600

30

400

20

2

200

10
0
0

0
2007

2017

2018

Agriculture

2019
Industry

2020f

2021f
Services

2022f

2011

2013

2015

Poverty rate at $1.9
Poverty rate at $5.5

GDP

Sources: The source is National Bureau of Statistics and World Bank staff estimates.

2009

Source: World Bank. Notes: see Table 2.

MPO 288 Oct 20

2017

2019

2021

Poverty rate at $3.2
Real priv. cons. pc

In consequence, commercial interest
lending rates have declined from 16.9
percent on average in 2019 to 16.5 percent as of June 2020.
Estimatessuggestpovertybarelychanged as GDP growth mainly benefits
the non-poor. Based on the national poverty line of PPP US$1.35/capita, poverty
dropped by 0.2 percentage points to 26.2
percent in 2019. As population size continues to increase, the number of poor is
expected to have risen by about 300,000
between 2018 and 2019.
A phone survey conducted in July 2020
among 1000 small and medium sized
firms suggests that around 8 percent ofworkers have lost their job. With one
quarter of the poor relying on the nonfarm sector for their income, poverty islikely to increase by 1–2 percent in 2020.

OutlookOver the medium term, GDP growth isexpected to rebound to 5.5 percent in 2021
and converge to 6 percent thereafter, assuming a vaccine becomes available in
2021 and health systems in most countries
are adequately resourced, and the global
economy starts recovering, albeit sluggishly. The main sources of the recovery

are a rebound in exports, in particular ofservices such as a tourism, higher private
investment and accelerated public spending in flagship projects. The current account deficit is expected to widen to 4
percent of GDP over the medium term as
the growth in capital imports for infrastructure investment outpaces export
growth. An overall fiscal deficit is projected to widen to 2.6 percent of GDP in
2020/21 and to over 3 percent of GDP overthe medium term as capital expenditurescontinue rising and recurrent expenditures remaining controlled.
In 2020, an additional 1.6 million people
are expected to live below the international poverty line of PPP US$ 1.9 perday, compared to 2019. The international
poverty rate is expected to rise to 50.4
percent in 2020 and is projected to drop
marginally over the medium-term, with
the number of poor increasing by around
600,000 per year.

Risks and challenges

Even if the global health crisis is contained, additional trade and logistics restrictions could continue disrupting global trade during the recovery. Moreover,
the absence of a sequential program tosupport the recovery phase could delay
the expected rebound of the economy,
affecting investors and consumers expectations, and thus hindering new investment projects. A full recovery in 2021–
2022 requires government attention toreforms to improve the business environment as a key input to bolster recovery of
the private sector.
Unless growth per capita is substantial
and benefits poor population groups, thepoverty rate will remain unchanged andthe number of poor people will rise due tohigh population growth. Increase in agricultural output benefiting smallholders, aswell as improved coverage and targetingof existing social productive transfer programs will be important to substantiallyreduce poverty. Support to small enterprises affected by the economic downturnis needed to maintain and expand livelihoods that depend on them.

The current outlook is highly uncertain,
and risks are tilted to the downside. A
protracted global health crisis that continues in 2021 could undermine global demand and thus the Tanzanian economy.

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(annual percent change unless indicated otherwise)
2017
6.8
3.7
1.1
15.8
-4.1
-7.1
7.0
5.9
10.6
5.3
5.3
-3.4
1.8
-1.3
28.3
0.2

2018
5.4
5.6
2.0
7.7
-1.7
16.7
5.4
3.4
9.7
3.8
3.5
-3.3
1.7
-2.5
28.0
-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
-1.9
1.6
-2.5
27.3
-0.6
49.3
76.8
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 2018-HB S. A ctual data: 2018. No wcast: 2019. Fo recast are fro m 2020 to 2022.
(b) P ro jectio n using neutral distributio n (2018) with pass-thro ugh = 0.87 based o n private co nsumptio n per capita in co nstant LCU.

MPO 289 Oct 202020 e
2.5
1.1
9.7
3.0
-10.5
-8.0
2.5
3.4
4.5
0.5
3.5
-2.2
0.7
-1.5
25.4
0.1
50.4
77.5
92.1

2021 f
5.5
4.0
6.3
7.9
7.0
8.5
5.5
3.7
9.1
3.8
3.5
-1.1
1.2
-2.5
25.4
-0.8
50.1
77.3
92.1

2022 f
6.0
5.2
8.3
6.7
6.0
7.0
6.0
3.8
9.5
4.6
3.5
-1.1
1.5
-2.1
25.5
-0.6
49.3
76.7
91.8

TOGO

Recent developments

Table 1

2019

P o pulatio n, millio n

8.2

GDP , current US$ billio n

5.5

GDP per capita, current US$

666.3

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

123.8

b

60.8

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).

Following a pick-up in 2019 there is expected to be zero growth in 2020, becauseof COVID-19, with declines in private
consumption and services. In 2020, external and fiscal balances will worsen,
and poverty will rise. Growth and poverty reduction are expected to gradually
recover over the medium term. Downside
risks to the outlook include larger-thanexpected COVID-19 effects, politicaluncertainty, heightened insecurity inneighboring countries, and banking sector vulnerability.

Following a growth pick-up from 4.9 percent in 2018 to 5.3 percent in 2019 (2.7 inper capita terms), economic activity decelerated in early 2020 because of COVID-19.
On the supply side, all sectors haveslowed, especially services, because of thenegative impacts of travel restrictions andborder closings on transportation andtourism and disruptions to retail supply
chains. On the demand side, private consumption has dropped substantially as
incomes fell as a result of containment
measures. Inflation, which averaged 0.7
percent in 2019, accelerated in the first halfof 2020, reaching 1.5 percent (y-o-y) in
July, driven by an increase in food prices
related to supply disruptions.
The current account deficit rose from 3.5
percent in 2018 to 4.3 percent of GDP in
2019, with an increase in capital goods
imports and a slight fall in phosphate andcoffee exports because of a decline in production during the last quarter. The current account deficit was financed throughexternal concessional borrowing.
The tight fiscal stance continued to loosen
in 2019. The deficit increased from 0.8 percent of GDP in 2018 to 1.2 percent of GDP
in 2019, reflecting an increase in public
investment and a slight decrease in government revenues. Public debt declined from75.4 percent of GDP in 2018 to 70.9 percent
in 2019, driven by the clearing of domestic
arrears and nominal GDP growth. In thefirst half of 2020, as the Government fought
the spread of the COVID-19 pandemic,

public expenditures increased by 20 percent, while revenues declined by 15 percent
as the economy contracted.
Togo’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 reached
5.4 months of imports in 2019, driven by
fiscal consolidation in member states andhigher net capital inflows. To support theregional economy and COVID-19 related
extra spending, the BCEAO has implemented a set of monetary and macroprudential measures since March 2020. These
include lowering its policy rate to a fixed
2.5 percent and extending refinancing
operations of 3-month “Covid-19 T-Bills”
at 2.5 percent for limited amounts.
The 2018-19 WAEMU harmonized households survey confirms that poverty andvulnerability remain high and geographically concentrated in rural and remoteareas. Although poverty has declined inrecent years, more than two fifth 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. The extreme poverty rate (atUS$1.9 PPP per day) is estimated to havedeclined to 45.3 percent in 2019 comparedto 46.4 percent in 2018.

Outlook
COVID-19 has significantly deteriorated
Togo´s economic outlook, lowering exports

FIGURE 1 Togo / Real GDP and potential output growth, witha decomposition of contributions to potential output growth

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

Percent, percentage points

Poverty rate (%)

Real GDP per capita (constant LCU)

100

6
5

35000030000080

25000043260200000401500001

100000

0

20

2017

2018

2019

2020

2021

Capital Stock
Working Age Population (15-64)
TFP
Potential GDP
Actual GDP growth
Sources: INSEED and World Bank staff estimates.

50000

2022
0

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 290 Oct 20

Lower middle-income pov. rate
Real GDP pc

and producing domestic supply and demand shortfalls. As a result, growth is currently projected to decline to 0 percent in2020 (-2.4 percent in per capita terms). Assuming a temporary shock with limiteddelayed effects, growth is expected to recover to 3.0 percent in 2021, as exports and domestic activities increase and infrastructure
projects (mainly in the transport and energy
sectors) gradually resume. In the mediumterm, growth is expected to recover andreach 4.5 percent in 2022, driven by the continuous upgrading of public infrastructure
and improvements to the business climate.
The current account deficit is projected toincrease to 6.3 percent of GDP in 2020,reflecting a substantial drop in exports as
economic growth declines for key trading
partners. The deficit is expected to stabilize at around 4.5 percent of GDP in themedium-term, following a slight recovery
of both exports and imports as containment measures are lifted globally. The
current account deficit will remain financed by grants and concessional loans.
WAEMU reserves are expected to decline
to 4.5 months of imports in 2020 as deficits
in member countries increase as they respond to the COVID-19 crisis.
The fiscal deficit is expected to increase to
7.1 percent of GDP in 2020, driven byhigher current spending and lower tax
and non-tax revenues. Tax revenues will

fall, reflecting a significant decline in customs revenues and VAT receipts as economic activity contracts. At the same time,current expenditures are forecast to rise,
driven by an increase in health expenditures to curb the spread of the virus andincreased transfers to protect households
and firms. Public debt as a percent of GDP
is expected to increase from 70.9 percent
of GDP in 2019 to 73.6 percent of GDP in
2020, but to decline over the medium-termas the fiscal deficit is gradually reduced.
The risk of external debt distress will remain moderate, while the overall risk ofdebt distress will remain high.
Extreme poverty is projected to rise to 46.2
percent in 2020 as a result of price increases for basic goods and services and lower
incomes for the poorest and most vulnerable, particularly those working in agriculture and tourism. Government programs,
such as cash transfers to the poorest andmost vulnerable, are expected to slow therise in poverty and to help maintain poverty reduction over the medium-term,with extreme poverty expected to decline
to 45.3 percent in 2022.

and domestic risks are tilted to the downside and depend on the depth and duration of the COVID-19 pandemic. A protracted and deeper crisis could cause real
GDP to shrink by 1.5 percent in 2020, as
lower external and domestic demand andsupply chain disruptions further reduce
economic activity. In addition, rising
security risks in neighboring countries
could weigh on investment, trade, andpublic finances. Internally, unfavorable
weather conditions and the unavailability of inputs could negatively affect agricultural productivity, while the relative
weakness of administrative capacity
could limit the implementation of reforms and private investment. Finally,
contingent liabilities associated with adelay in restructuring two state-ownedbanks could pose a risk to financial stability and fiscal sustainability.

Risks and challenges
Though economic prospects in the medium term remain positive, both external

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)
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(annual percent change unless indicated otherwise)
2017
4.4
-5.9
17.7
-19.1
-2.2
-15.5
4.9
3.4
-4.4
9.4
-0.2
-2.0
-0.3
75.6
1.5
47.9
72.3
89.5

2018
4.9
7.6
13.7
7.1
0.8
4.9
6.7
3.4
1.7
9.9
0.9
-3.5
-0.8
75.4
1.7
46.4
71.5
88.8

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 2015-QUIB B . A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 291 Oct 20

2019
5.3
3.4
-6.5
28.7
3.4
5.1
4.4
5.2
4.2
4.1
0.7
-4.3
-1.2
70.9
1.6
45.3
69.6
88.3

2020 e
0.0
-1.0
-12.4
23.2
-10.1
-1.9
0.0
1.2
0.6
-0.6
1.4
-6.3
-7.1
73.6
-4.1
46.2
71.1
88.8

2021 f
3.0
1.8
18.6
-6.4
7.3
4.7
3.0
3.3
2.2
3.1
1.5
-4.4
-3.5
71.1
-1.1
45.9
70.5
88.7

2022 f
4.5
3.6
-1.5
11.8
8.9
7.7
4.5
5.9
4.6
3.9
2.2
-4.6
-3.0
68.9
-0.6
45.3
69.5
88.3

UGANDAKey conditions andchallenges

Table 1

2019

P o pulatio n, millio n

45.7

GDP , current US$ billio n

33.8

GDP per capita, current US$

738.4

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

a

102.7

a

63.0

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) WDI for School enrollment (201 7); Life expectancy (201 8).

Hit by COVID-19, GDP growth morethan halved to 3.1 percent in FY20, disrupting Uganda’s steady structuraltransformation. The fiscal response waslimited, especially for social transfers,
while monetary policy has been loosened
further, despite inflationary pressures.
The recovery is expected to be gradual,with growth averaging 4.3 percent during
FY21–22, driven by an acceleration after
the 2021 elections. Extreme poverty hasrisen, especially among urban informal
workers, but was limited by the resilienceof food crop output.

Prior to the COVID-19 outbreak, structural transformation was driving a decline in poverty, despite a slowdown inaverage economic growth over the last
decade. The transformation was characterized by a reduction in the total workforce employed in agriculture and a takeoff in industrial production, largely inagro-processing. Notwithstanding shifts
to higher productivity jobs, per capita
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
growth climbed further to 3.7 percent per
year. As a result, total factor productivity
growth remains negative. Furthermore,
the poor remain highly vulnerable toshocks, as seen in the temporary rise inpoverty following the 2016/17 drought.
COVID-19 is threatening to reverse thedeclining poverty trend from the past
decade, with widespread closure of firms,
permanent layoffs in industry and services, and a rapid slowdown of economic
activity for particularly the urban informal
sector. These losses will be further aggravated by weak growth in FY21, which is
expected at about 3 percent due to substantially reduced tourism revenues, andsmaller remittances and FDI inflows thatwill dampen private consumption andinvestment. In addition, credit is likely tobe restricted considering the deteriorating

FIGURE 1 Uganda / Evolution of primary fiscal deficit andpublic debt
Percent of GDP

Recent developments
Hit by the COVID-19 crisis, real GDP
growth more than halved to 3.1 percent in
FY20 from 6.8 percent in FY19. A lockdown that lasted for several months andborder closures instituted in March 2020
have dampened domestic demand andaggravated the effects of the external
shock. Consequently, output contracted
by 3.2 percent in the fourth quarter of
FY20, driven by a deceleration in private
consumption, fall in exports and drop in
externally financed public investments.
The decline in real private consumption
per capita has also increased poverty.
Despite inflationary pressures, the central
bank reduced the policy rate to 7 percent
in June to counteract the economic shock.
The increase in prices of imported consumer goods, from higher taxes to encourage import substitution, led to a morethan doubling of annual core inflation to
5.8 percent in July from 2.5 percent inMarch, which is above the 5 percent core
inflation target. However, the decline in

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

Percent of GDP
55

6asset quality in the banking sector,
marked by an almost doubling of nonperforming loans to 6 percent within threemonths of the COVID-19 crisis hitting
Uganda. Furthermore, the impact of thepandemic appears to be deepening, with
community infections accelerating in thefirst quarter of FY21 (July–September2020). It is unclear how the government
will respond to increasing infections dueto the runup to presidential elections.

Poverty rate (%)

Real GDP per capita (constant LCU)

100

3500000

50

5

45

4

40

300000080

2500000
60

2000000

40

1500000

35

3

30

2

25
20

1

15

0

1000000
20
0

10

2017

2018

2019

Primary fiscal deficit (lhs)

2020

2021

0

2005 2007 2009 2011 2013 2015 2017 2019 2021

2022

International poverty rate
Upper middle-income pov. rate

Total public debt (rhs)

Sources: Ministry of Finance, Planning and Economic Development.

500000Source: World Bank. Notes: see table 2.

MPO 292 Oct 20

Lower middle-income pov. rate
Real GDP pc

crop prices and deceleration in energy priceincreases, together with subdued demand,
have limited the overall price increase.
The economic slowdown has likely narrowed the current account deficit to
7.5 percent of GDP in FY20 from
7.8 percent in FY19. While the contraction
in imports outpaced the slowdown in exports, the financing of the external shortfall changed. Net FDI inflows declined
30 percent in FY20 compared to FY19 andthe government borrowed from IFIs
US$800 million and drew down foreign
reserves by US$200 million, which were at
5 months of imports in July 2020.
With revenues plummeting due to theeconomic slowdown and deferred tax
payments to support businesses, the fiscal
deficit widened to 7.2 percent of GDP in
FY20. The budget for FY21 has not enhanced the protection of the poor but
maintains physical infrastructure as thepriority for government spending.

Outlook
The pandemic is expected to slow the recovery. Real GDP growth set to average
4.3 percent over the next two years, moderated further by pre-election uncertainty.
An expected rebound to 5.9 percent in

FY22 is insufficient to close the output gap
and is predicated on an acceleration in
private consumption and investments andsupported by higher growth in exports as
the global economy stabilizes. The latter isassumed to benefit from the rollout of a
vaccine in 2021. Inflation is expected toreach 6 percent by early 2021—exceeding
the inflation target of 5 percent—but decelerate thereafter to within the target.
The government has budgeted a deficit ofalmost 10 percent of GDP in FY21, driven
by capital spending. Nevertheless, a shortfall of close to 8 percent is expected given
limited financing options. While assessedat low risk of external debt distress, vulnerabilities worsened with public debt
projected at around 50 percent of GDP by
2022, with some public debt liquidity indicators corresponding to countries at highrisk. Risks may deteriorate due to nonconcessional borrowing from foreign commercial banks and more reliance on thedomestic market, where 1-year treasury
bill yields have been between 12–13 percent since January 2020.
The rebound in imports and delayed recovery in exports will see a gradual expansionof the current account deficit to around
8 percent of GDP over the next two years.
The hovering of oil prices around US$40–
45/barrel—three-fourths of the estimatedbreakeven price in Uganda—could further

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)

delay a final investment decision and thus
shift oil exports beyond 2025.
The key transmission channel for the negative impact of COVID-19 on households
is through the labor market. Work stoppages in June and reduced labor income
during March-June 2020 were more pronounced in urban areas and among those
employed in non-farm activities. As a result, extreme poverty is projected to increase. The size of the increase is, however, uncertain given that the full impact ofthe pandemic is still unknown.

(annual percent change unless indicated otherwise)
2017
3.8
1.2
12.9
5.1
31.0
4.7
3.8
2.8
6.8
2.6
5.7
-3.3
2.3
-3.3
33.0
-1.2

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

MPO 293 Oct 20

2018
6.2
6.0
11.6
5.5
9.3
8.8
6.2
4.4
6.5
7.1
3.4
-5.6
2.8
-4.1
36.2
-2.2

2019
6.8
6.3
6.9
9.9
11.2
12.1
6.8
5.3
10.1
5.6
3.1
-7.9
3.5
-4.9
37.3
-2.8

2020 e
3.1
2.7
0.9
2.8
-7.5
-7.8
3.1
4.4
2.3
2.9
2.9
-7.5
2.6
-7.2
40.2
-4.5

2021 f
2.8
1.9
15.9
3.3
6.2
8.3
2.8
3.5
3.0
2.3
5.0
-7.8
2.4
-7.8
46.2
-5.5

2022 f
5.9
4.6
2.1
8.9
14.6
10.2
5.9
4.1
6.9
6.2
5.0
-8.5
3.0
-5.5
49.9
-3.3

ZAMBIA

Recent developments

Table 1

2019

P o pulatio n, millio n

18.1

GDP , current US$ billio n

23.0

GDP per capita, current US$

1266.8Internatio 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 has exacerbatedZambia’s fragile macroeconomic situation and increased poverty and vulnerability. After growing by 1.4 percent in
2019, the economy is projected to contract by 4.5 percent in 2020, reflecting
declines in all sectors except agriculture.
With limited fiscal space to respond tothe crisis, the authorities have largely
relied on monetary policy easing to prop
up domestic demand. A weak rebound is
expected in 2021, but risks are heavily
tilted to the downside.

The COVID-19 pandemic has pushed
into contraction an economy that was
already weakened by persistent drought
and unsustainable fiscal policies. GDP
contracted by 0.3 percent in the firstquarter of 2020 and is projected to contract by 4.5 percent for the year, following a year when GDP growth had
slowed to the lowest rate in two decades.
With the first case of COVID-19 confirmed in mid-March, the authorities
instituted early on measures to control
the spread of the virus and established a
National COVID-19 Preparedness andResponse Plan. Mining and services
have suffered from lower global demandand price outlook and social distancing
measures. The impact of social distancing is amplified by the presence of alarge informal sector, which usuallylacks insurance, savings, or access toformal financial services. Meanwhile, acollapse in investment is driving thecontraction of aggregate demand.
Because of chronically high deficits andrising debt, the authorities currently havelittle fiscal space to respond to the COVID-19 crisis. They are revising the 2020
budget to reflect lower revenues causedby the economic slowdown and to respond to the COVID-19 pandemic withincreased health and social spending.
Domestic revenue remained broadly inline with the budget in the first half of theyear, at 48 percent of planned revenue,
but the authorities expect a decline in

FIGURE 1 Zambia / Interest payment to domestic revenue
ratio
Percent of GDP

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

Percent of GDP
55

6

domestic revenue of more than 15 percent
and more than double the fiscal deficit
compared to the 2020 budget.
Zambia’s debt vulnerabilities have significantly heightened since 2019. The 2019
Debt Sustainability Assessment concluded
that Zambia remained at high risk of debt
distress and that its debt was unsustainable. All indicators of debt carrying capacity have since worsened since then-including lower GDP growth, lower export earnings and fiscal revenues and aweaker exchange rate. The authorities
recently hired debt advisors to help themwith a comprehensive and orderly debt
restructuring. The country’s participationin the Debt Service Suspension Initiative(DSSI) will also help it free up resources
for the COVID-19 response.
The Bank of Zambia has eased monetary
policy in response to the COVID-19 crisis,
despite growing inflationary pressures.
Rapidly falling aggregate demand andfinancial sector stability concerns due tothe COVID-19 pandemic encouraged theauthorities to reduce the policy rate by acumulative 350 basis points, to 8.0 percent.
Combined with the introduction of a Medium-Term Refinancing Facility in April,
the monetary easing is expected to support private sector liquidity and prop up
aggregate demand.
External stability has weakened further inthe face of low exports and debt servicepressures. The current account is expected
to record a deficit of 2.3 percent of GDP in2020 after registering a surplus of 1.1 percent of GDP in 2019. Exports in January–
July 2020 are 11.8 percent lower than in
the same period of 2019, although this has

Poverty rate (%)

Real GDP per capita (constant LCU)

100

10000

80

8000

60

6000

40

4000

20

2000

50

5

45

4

40

35

3

30

2

25
20

1

15

0

0

10

2017

2018

2019

Primary fiscal deficit (lhs)

2020

2021

2022

International poverty rate
Upper middle-income pov. rate

Total public debt (rhs)

Sources: Zambia Ministry of Finance and World Bank estimates.

0

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Source: World Bank. Notes: see Table 2.

MPO 294 Oct 20

Lower middle-income pov. rate
Real GDP pc

been tempered by import compression of
29.1 percent over the same period. Higher
debt service and low capital inflows have
put pressure on foreign exchange reserves, which were $1.4 billion in June
2020. Depreciation of the kwacha by 40
percent since the end of 2019 further
weakens external sustainability.
There has been a considerable fall in household income since the start of the pandemic. A World Bank household monitoringphone 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 of wages. There has
been a considerable reduction in employment in both urban and rural areas. Job
losses have been particularly severe in the
tourism, manufacturing and services sectors. There has been a concerning impact
on the food security of vulnerable households, with a high proportion of respondents reporting skipping meals or runningout of food since the onset of the pandemic.
These results are consistent across urban
and rural parts of Zambia.

Outlook
A gradual recovery is expected in Zambia.
Marginal GDP growth of 1.9 percent is

projected for 2021 and real output shouldreach its pre-crisis rate in 2022. The current account deficit is projected to worsen to 3.1 percent of GDP in 2021, andlower copper export earnings and capital
inflows will likely put pressure on reserves. Given the unsustainable debt position, the authorities intend to start fiscal
consolidation in 2021, with the FY21
budget targeting a fiscal deficit of 9.3
percent of GDP.
Poverty is projected to increase. Simulations of the impact of the COVID-19 pandemic show that the national poverty
headcount rate is expected to increase byaround 2 percentage points in 2020. Thisis largely driven by increases in poverty
in urban areas, and among those relying
on employment income from the informal sector, in particular. Core recurrent
spending, especially social cash transfers,
has suffered in recent years. Only 7.4
percent of the budgeted social cash transfers in FY 20 has been disbursed throughJune. This could be further affected by
the increasing fiscal pressures due to thecrisis, with a substantial impact on themost vulnerable households in the population. Absent decisive policy interventions, poverty is expected to rise by morethan a percentage point from 58.3 percent
in 2018 to 60.5 percent and 60.7 percent in2020 and 2021, respectively.

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

Risks and challenges
Risks to the macroeconomic outlook aretilted to the downside. Domestically, an
increase in the number of COVID-19 cases
and related social distancing measures
could overwhelm the health system, resulting in massive business and job losses,
especially in the urban informal sector. A
slower than expected global recovery
would depress exports, deepen exchange
rate pressures, and further weaken thebase on which the Zambian economy isexpected to recover. It could also lengthen
the time for Zambia to start a full macroeconomic adjustment program to restore
debt sustainability. Moreover, the upcoming 2021 general elections could limit thepolitical will to undertake key reforms tostabilize the economy.

(annual percent change unless indicated otherwise)
2017
3.4
12.5
-8.6
10.2
-3.8
10.9
3.5
9.8
5.4
1.7
6.6
-1.7
4.6
-9.8
65.5
-5.8
58.5
75.2
88.0

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
87.8

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 2015-LCM S-VII. A ctual data: 2015. No wcast: 2016-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 20

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
-9.8
88.4
-5.9
58.6
75.3
88.0

2020 e
-4.5
3.1
11.2
-21.2
7.1
5.4
-4.5
3.7
-5.7
-4.7
12.9
-2.3
2.1
-12.4
95.0
-8.2
60.5
76.7
89.0

2021 f
1.9
3.6
-5.3
2.1
5.2
7.0
1.9
5.0
1.8
1.6
11.5
-3.1
2.2
-10.8
94.0
-5.3
60.7
76.9
89.2

2022 f
3.4
4.5
-7.5
-1.3
10.4
7.2
3.4
4.0
4.5
2.7
10.0
-1.4
3.4
-6.4
93.1
-1.7
60.6
76.8
89.1

ZIMBABWE
Table 1

Recent developments
2019

P o pulatio n, millio n

17.3

GDP , current US$ billio n

13.0

GDP per capita, current US$

749.0

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

a

a

109.9
61.2

Source: WDI, M acro Poverty Outlook, and official data.
Notes:(a) WDI for School enrollment (201 3); Life expectancy (201 8).

The COVID-19 pandemic has further
exacerbated underlying weaknesses withthe economy projected to contract by 10
percent in 2020. Pandemic containment
measures have adversely affected economic activity with services impacted
the most. Inflationary pressures haveintensified, fueled by excessive growth inmoney supply. Poverty levels have increased, as both inflation and food shortages have intensified.

The global COVID-19 pandemic is pushing Zimbabwe deeper into recession,
with GDP expected to contract by 10 percent in 2020 following a decline of 8.1
percent in 2019. Strict pandemic containment measures in place since April 2020
resulted in almost 90 percent of formal
firms closed for nearly two months. Lossof sales was significant and broad-based,
especially for domestic small and medium firms. The services sector, particularly tourism during the lockdown, came to
a complete halt, while transport andtrade have been constrained by restrictions on travel and border crossings.
In July 2020, manufacturing sales were
only half of their level a year earlier as aresult of restricted mobility and reduced
work hours, a sharp fall in demand andcontinued weakening of the domestic
currency. Agriculture performance remained weak as drought conditions persisted and key inputs remained out ofreach due to triple-digit inflation.
Inflation surged to 761 percent year-onyear in August 2020, with food prices
increasing by 865 percent, resulting in asevere loss of purchasing power for thepoor. Inflation was fueled by a rapid exchange rate depreciation, and intensified
cash shortages amid disruptions of local
and global markets. Relaxation of dedollarization measures, reserve money
targeting, and introduction of a forex
trading auction have stabilized the parallel market exchange rate and reduced the

FIGURE 1 Zimbabwe / Exchange rates

differential with the official exchange
rate, since end-June 2020. However, continued quasi-fiscal activities, in part related to COVID response, have underminedfull currency stability and the local currency lost almost 80 percent of its value
in the first eight months of the year.
Domestic challenges and global market
disruptions caused by the pandemic
have depressed imports more than exports, widening the current account surplus to 6.4 percent of GDP in 2020. In thefirst three months of the lockdown up toJune, imports contracted by one-quarter,
year-on-year, as fuel supplies fell drastically and imports were restricted to necessities (food, electricity, and medicines). Cumulatively, imports declined
by 5.7 percent year-on-year in the firsthalf of 2020. The impact of the pandemic
on exports was less pronounced as exports are dominated by minerals which
saw their prices increasing by doubledigits. Migrant remittance inflows arestill high, reflecting the use of official
channels due to travel restrictions andborder closures. Nevertheless, official
reserves remained low, providing a cover of less than one month of imports.
Despite weakening revenues and growing
needs to protect lives and livelihoods, fiscal
deficit is likely to be contained at 1.2 percent of GDP in 2020. Tax revenues fell withweakening domestic demand, increased
use of US dollars as cash, and a lower excise rate on fuel and COVID-related inputs.
Wage adjustments were kept limited in thefirst half of 2020 despite the continuing risein prices. In July, however, salaries wereraised by 50 percent and all civil servants

FIGURE 2 Zimbabwe / Actual and projected poverty rates
and real private consumption per capita
Poverty rate (%)

ZWL$/US$Real private consumption per capita (constant LCU)

100

1400

100

1200

80

1000

80

60

800

40

600

60
40

400
20

200

20
0

Official exchange rate

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

0
Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20

Source: World Bank. Notes: see Table 2.

MPO 296 Oct 20

2019

2021

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

and government pensioners were awarded
a flat allowance in US dollars to prevent
further erosion of purchasing power. Basic
service delivery remained underfunded
and implementation challenges delayed
payment of scaled up social assistance tourban beneficiaries. Fiscal space to mitigate
the impact of the pandemic and support
the post-COVID recovery is constrained,with limited or no recourse to concessional
external financing because of debt arrears.
The COVID-19 pandemic has exacerbatedpoverty. Extreme poverty levels—using
the national poverty line of PPP US$ 1.8
per day—are projected to have risen to 50
percent or 8 million in 2020, up from 42
percent or 6.6 million in 2019. In July 2020,
20 percent of those in urban areas thatwere working for pay before the COVID19 pandemic had lost their jobs as somebusinesses closed. In rural areas, this was
10 percent, according to the high frequency household phone survey conducted inJuly 2020. Thirty percent of householdbusinesses no longer had any revenue.

Outlook
The outlook is gloomy as domestic vulnerabilities are likely to persist, even if
the global pandemic recedes in 2021.

The negative effects of the pandemic anddomestic challenges are expected to linger
in 2021, and Zimbabwe’s economic recovery is likely to be slow. GDP is projected
to grow by 2.9 percent in 2021 as the adverse impacts of the drought subside andbusiness activity starts to recover, but real
GDP is not expected to reach its preCOVID level until after 2022.
The current account surplus is projected tonarrow to 4.3 percent of GDP in 2021, as
rebound of domestic demand pushes up
import spending. Improved global demand
will support modest export growth.
The overall fiscal deficit is projected to average around 3 percent of GDP in 2021–22,
as domestic revenues remain low and fallshort of high social needs. The government
plans to continue with the fiscal adjustment
and a conservative monetary policy will
help ensure stabilization of the economy.
Poverty levels will remain high at 50.0
and 49.2 percent in 2021 and 2022 respectively as the short-term rebound in economic growth is insufficient to make adent on poverty. Given continued population growth (1.4 percent), this is insufficient to reduce the number of extreme
poor. With many competing spending
priorities, high reliance on donor financing for social assistance programs, andweak capacity to reach out to the extreme
poor, especially in urban areas, more

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

than half of the poorest risk being left
without any social assistance.

Risks and challenges
A longer and deeper global recession combined with a severe and lengthy local outbreak in Zimbabwe could lead to a muchlarger contraction of the economy and a
sharper rise in poverty. Further, inflationary pressures might constrain agriculture
recovery, as few farmers will afford the
inputs. Stability of the economy hinges on
the effectiveness of monetary policy
measures to contain money supply
growth and discontinue quasi-fiscal activities. The shortage of foreign currency may
put pressure on prices and wages with ahigh possibility of entering a wage-pricespiral. Risks of social tension remain if themacroeconomic instability continues andexternal financing is not available.

(annual percent change unless indicated otherwise)
2017
4.7
1.4
14.5
23.0
4.7
3.2
4.8
10.0
2.5
5.1
0.9
-1.4
-1.8
-9.8
63.8
-8.8
33.9
61.0
81.3

2018
3.4
2.1
9.2
4.5
4.1
7.7
3.1
18.3
2.1
1.3
10.6
-3.7
-5.1
-5.9
61.4
-4.6
34.0
61.0
81.3

2019
-8.1
-13.4
-28.1
-5.2
-5.1
-21.0
-8.1
-18.3
-6.8
-6.9
255.1
6.3
-3.2
0.3
53.8
1.2
41.9
67.3
85.3

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-P ICES. A ctual data: 2017. No wcast: 2018-2019. Fo recast are fro m 2020 to 2022.
(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 Oct 202020 e
-10.0
-13.7
-29.1
-1.5
-2.7
-15.0
-11.4
-5.3
-6.8
-14.2
654.9
6.4
-3.9
-1.2
63.1
-0.6
50.4
73.5
88.9

2021 f
2.9
3.0
-8.1
9.4
3.5
1.9
2.8
4.9
3.8
2.0
80.0
4.3
-3.5
-3.1
64.9
-2.5
50.0
73.2
88.7

2022 f
3.1
2.9
3.5
0.9
4.5
3.4
3.1
4.9
2.3
3.1
20.0
2.2
-3.2
-2.8
66.1
-2.1
49.2
72.6
88.4

Macro Poverty Outlook

10 /2020