Sierra Leone’s Economy is Recovering from COVID-19 Contraction Although Uncertainties Persist
Sierra Leone’s economy is projected to recover from the COVID-19 contraction with real GDP expected to rebound by 3.0 percent in 2021, an upward revision of 0.8 percentage point relative to the 2020 forecast, according to the new World Bank Sierra Leone Economic Update launched today in Freetown. The growth rebound reflects the expected recovery of agriculture, mining and services following the easing of COVID-related restrictions and Government’s Quick Action Economic Response Program (QAERP).
Fiscal deficit almost doubled in 2020 due to a combination of revenue shortfalls and spending increases to support the Government’s pandemic response. The deficit is expected to decline gradually to 2.4 percent of GDP by 2023 as COVID-19 related spending is reduced while revenue mobilization improves on the back of the expected economic recovery. To strengthen fiscal sustainability, the report recommends that the authorities should quickly draw up a roadmap for fiscal consolidation, anchored by robust revenue mobilization and expenditure rationalization reforms, to return to the pre-pandemic (2018/19) fiscal path. The authors also highlight the need for government to prioritize structural reforms for diversifying the economy, and these reforms should focus on creating an enabling environment for the private sector to support long-term economic growth and promote decent and quality jobs, which will in turn support determined domestic revenue mobilization.
“It is a welcoming development that Sierra Leone’s economy is slowly recovering from the devastating impact of the COVID-19 crisis, and we are encouraged by the government’s efforts to deal with the crisis and lessen its impact on people’s livelihoods,” said Abdu Muwonge, World Bank Country Manager for Sierra Leone. “However, improving and sustaining the country’s growth prospects will require further attention to policies that strengthen the quality of service delivery in the social sectors, and we remain committed, together with development partners to supporting efforts that aim at an effective turnaround of the economy.”
The 2021 Economic Update devoted a special section to examine the “Welfare and Poverty Effects of the COVID-19 Pandemic” in Sierra Leone. The report found that restrictions put in place to contain the spread of the COVID-19, as well as the downturn in the global economy have led to a small increase in poverty, reversing the previous trend of poverty reduction. Urban areas, particularly the capital city, Freetown, have seen the largest increase in poverty.
During the height of the outbreak, the government provided tax relief to businesses by suspending taxes on essential goods and services. The report recommends that policy priorities over the short to medium-term should focus on strengthening the response to the COVID-19 pandemic by rolling out a strong vaccination program and implementing broad-based macroeconomic reforms to support a quick economic recovery.
“To improve on the current economic outlook, it is important to focus on implementing a robust vaccination program that targets full vaccination of population ‘at risk’ as well as measures to protect people’s livelihoods in the immediate and medium term,” said Kemoh Mansaray, World Bank Senior Country Economist and a lead author of the report. “Sustaining the economic recovery will involve structural reforms to accelerate inclusive economic growth, as well as resuming fiscal consolidation through robust revenue reforms and expenditure rationalization and a prudent monetary policy to support the recovery and stabilize the exchange rate.”