How vaccine economics impacts Africa

In a joint report by Allianz Research and Euler Hermes, it has been projected that the recent breakthroughs in vaccine development will significantly boost global growth in 2021. However, the report also highlights the presence of short-term headwinds and transitional risks, with a complete economic recovery expected in 2022. The report emphasizes the importance of completing vaccine rollouts to vulnerable populations by mid-2021 to ensure sustained growth. Ludovic Subran, the Chief Economist at Allianz, discussed the implications of these findings for Africa in a recent interview. The discussion began by addressing the slow vaccine rollout in Africa and the potential impacts of the emergence of new variants. While acknowledging that Africa has had fewer COVID-19 cases compared to the global average, Subran emphasized the urgency of accelerating vaccination campaigns on the continent. He highlighted the significance of executing vaccination plans effectively in the first semester to support Africa's growth above 3% in 2021. Subran also pointed out the potential growth opportunities for commodity-driven economies like Nigeria, fueled by recovery demand from Asia, the US, and Europe. Furthermore, Subran outlined the factors expected to drive economic growth in Africa in 2021. He highlighted the shift from savings to consumption as people resume spending on sectors like tourism, which have been severely impacted by the pandemic. The Chief Economist pointed out that open economies reliant on tourism and commodities face challenges but expressed optimism about a return to normalcy in these sectors by 2022-2023. He emphasized the importance of confidence, structural reforms, and investments in key sectors like manufacturing and digitalization to support the economic rebound. Regarding the fiscal challenges facing African economies, Subran addressed concerns about the possibility of a fiscal crisis in 2021. He acknowledged that some countries have significant debt repayment obligations in the near term but expressed confidence in their ability to rollover debts, citing favorable commodity prices and liquidity conditions. However, he highlighted specific countries such as Zambia, Angola, and Ghana as areas of concern due to their elevated financing needs and pre-existing vulnerabilities. Subran stressed the importance of anchoring credible public financing trajectories to instill market confidence and support sustainable growth. He emphasized the need for quality spending, reforms to improve the business environment, and targeted support for SMEs to prevent a wave of bankruptcies post-pandemic. Subran cautioned against the risk of zombifying economies through unsustainable debt practices and urged governments to prioritize investment over maintenance costs to drive economic recovery. The interview with Ludovic Subran shed light on the complex landscape of economic challenges and opportunities facing African countries in the wake of the COVID-19 pandemic. As the continent navigates the dual challenges of vaccine rollouts and fiscal stability, strategic policy decisions and targeted interventions will be crucial in shaping a resilient and sustainable economic future for Africa.