Sub-Saharan Africa

324 C H A P T E R 5 G L O B A L P R O D U C T I V I T Y

services, which supported productivity gains in the manufacturing sector (Arnold et al. 2016).

Ensure macroeconomic and political stability. Economic and financial crises have proven to hold back productivity in the region, as observed after the GFC and in economic downturns in India and Pakistan in the 1990s. Political instability seems to be a more severe obstacle to the operations of South Asian firms than in other EMDE regions (World Bank 2013b, 2013c). Strengthening economic policy institutions, improving monetary and fiscal policy frameworks, and enhancing financial regulation and supervision can help to provide a stable macroeconomic framework for firms, reduce uncertainty, and boost productivity.

Before the COVID-19 pandemic, SSA had already experienced a broad-based slowdown in labor productivity growth. In the pre-GFC period, productivity growth benefited from strengthening institutions, stronger investment, infrastructure development, improving human capital, and better macroeconomic policy frameworks. By 2013-18, productivity in the region was less than two-thirds that of the EMDE regional average and roughly one-tenth that of advanced economies, amid a commodity price plunge, weakening external demand, and growing domestic fragilities. The COVID-19 pandemic will most likely weigh further on productivity. Ambitious policy efforts will be needed to generate the productivity growth required for per capita incomes in SSA to reach those of other EMDE regions, let alone those of advanced economies. To stimulate labor productivity growth, policies are needed to boost agricultural productivity, increase resilience to climate change, diversify economies, accelerate adoption of digital technologies, and continue human capital development.

Evolution of regional productivity

Stalling post-GFC productivity. Labor productivity growth slowed sharply in SSA after the GFC, to 0.8 percent during 2013-18, from about 2.9 percent during the pre-GFC period of 2003-08 (figure 5.30).

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TFP growth, which accounted for more than half of pre-GFC productivity growth, contracted in the post-GFC period; and the contribution of TFP to productivity growth shrank by more than in any other region during the postGFC period. Oil- and metal-exporting countries experienced the steepest slowdown, amid the commodity price slump of 2014-16, as productivity growth fell to 0.4 percent in the post-GFC period, from 3.2 percent growth before the GFC. The COVID-19 pandemic is likely to have markedly accelerated this slowing trend, with activity in the

16 Data are available for 45 EMDEs in SSA, of which 21 are oil or metals exporters, 19 are exporters of agricultural commodities, and 6 are commodity importers. An economy is defined as a commodity exporter when, on average in 2012-14, either (1) total commodities exports accounted for 30 percent or more of total goods exports or (2) exports of any single commodity accounted for 20 percent or more of total goods exports. Economies for which these thresholds are met as a result of re-exports are excluded. Commodity importers are economies not classified as commodity exporters. Chad is classified as both an oil and an agricultural-commodity exporter.