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2026 growth in Africa to drop by up to 0.2% due to Iran war: Report
The report titled ‘Impacts of the Conflict in the Middle East on African Economies’, cautions that African economies, which were slowly recovering from the severe consequences of COVID-19, the Russia-Ukraine war and rising trade tariffs, could be among the most affected by the ongoing conflicts in the Middle East.
Growth in African countries is projected to decline by up to 0.2 per cent this year due to the Middle East crisis, according to a joint policy document by the African Union Commission, the African Development Bank Group, the UN Economic Commission for Africa and the UN Development Programme.
The main effects of the conflicts on Africa include surging prices of hydrocarbons, food products and fertilisers.
Kevin Urama, chief economist and vice president for economic governance and knowledge management at AfDB who presented the report on the sidelines of the Spring Meetings of the International Monetary Fund and the World Bank in Washington, DC, recently, urged African governments not to panic or take hasty decisions that could harm their fiscal balances.
The main effects of Middle Eastern conflicts on African economies include surging prices of hydrocarbons, food products and fertilisers, noted the report.
“Eighty per cent of the oil imported into Africa comes from this region, as well as 50 per cent of refined petroleum,” said ECA executive secretary Claver Gatete.
The report recommends, in particular, strategic inflation management to ensure short-term price stability expectations. It cautions oil-exporting countries to adopt strict fiscal discipline by managing windfall revenues prudently, while strengthening debt-monitoring, and using energy reserves strategically.
Where fiscal space allows, it advises that temporary and targeted social protection measures be deployed to shield the most vulnerable populations from the crisis, added the report.
However, the report urged governments to avoid broad-based subsidies that could worsen long-term fiscal deficits, and to diversify sources of energy, inputs and food supplies.
It also recommends that African governments strengthen regional and intra-African trade in oil and fertiliser markets to enhance resilience; and ensure smooth inter-institutional coordination to harmonise strategic monetary and fiscal policies.
At the same time, the report calls upon development partners, multilateral banks and development finance institutions to provide emergency support to African countries through crisis response measures and technical assistance.
It also recommends a speedy operationalisation of the African Continental Free Trade Area (AfCFTA), while strengthening large-scale domestic capital mobilisation.
The report also suggested Africa to diversify its energy mix by accelerating investments in renewable energy and the gas sector.
Fibre2Fashion News Desk (DS)