AFD // 2021 Universal Registration Document

PRESENTATION OF AFD Activities of the Agence Française de Développement Group in 2021

at +6.1%. Driven by internal demand and exports, Turkish growth is expected at +9%, despite a new lockdown in April-May and the disruptions of certain supply chains in the industrial sector. However, past macroeconomic imbalances persist, despite this strong economic performance. The country remains exposed to a significant refinancing risk as the confidence of foreign investors was once again shaken by negative signals in terms of monetary policy and the announcement of a tightening of global liquidity. In the Middle East, the business outlook for 2021 remained bleak in Jordan (+2%). The country’s debt trajectory continues to deteriorate, limiting the prospects for recovery in 2022, in a context of persistent unemployment, notably among young people. In Lebanon, the major economic and financial crisis that the country has been facing for several years has evolved into a humanitarian crisis, with the population now experiencing shortages of basic necessities. The absence of any prospect of a resolution to the crisis raises fears of the persistence of deleterious long-term effects on the Lebanese economy and society. Latin America and the Caribbean was the region hardest hit by the crisis in 2020, with a recession of -7%. Economic activity was expected to rebound to +6.7% in 2021. According to the IMF, a resurgence of the epidemic at the end of 2021 was not to be ruled out due to the penetration of the delta variant, despite a vaccination rate which was expected to reach 60% of the population over the period in question. In addition, a busy electoral calendar in 2022 could reactivate the social unrest that the region regularly faces. Capital flows were particularly subdued in the region in 2021 compared to other emerging markets, and the relative increase in risk premiums and yields on local currency bonds reflects investor concerns about inflationary pressures and the consolidation of public finances. Despite the mobility restrictions linked to the health crisis, Brazilian economic growth rebounded to +4.8% in 2021, driven by private consumption, credit growth and the improvement in the terms of trade (notably supporting agriculture). The country’s external position remains solid and the budget deficit was halved in 2021 to -6.2% of GDP, which allowed a marked inflection in the trajectory of public debt, after an increase to nearly 100% of GDP in 2020. However, the electoral context should limit further consolidation of public finances in 2022. Despite shortages in industrial supply chains, the absence of a fiscal stimulus and the tightening of monetary policy, the recovery in Mexico is expected to reach +5.3%, thanks to the knock-on effect of the expected rebound in the US and to higher oil prices. The deterioration of Colombia’s public finances led to the loss of its investment grade status in 2021, in a difficult social context, which was not conducive to budgetary consolidation in the run-up to the elections scheduled for 2022, and despite growth projected at +7.6%. In Ecuador, higher oil prices give the new administration the budgetary space to carry out the fiscal consolidation expected under the IMF programme while the limiting recessive effects that could potentially lead to political and popular opposition. However, the upturn in economic growth remained relatively moderate in 2021, at +2.8%. Argentina’s economic situation remains worrying, as do its public finances, despite the restructuring carried out with private creditors in August ɸ 2020. In 2021, the government was able to use its SDR (1) allocation and negotiate a deferral of its maturities vis-à-vis the Paris Club creditors to cover its debt service, but concluding an agreement with the IMF in the first quarter of 2022 is now imperative to avoid a new payment default.

In 2021, Africa was the region with the lowest economic growth at +3.6% (+3.9% for sub-Saharan Africa). Despite the rise in commodity prices and the upturn in global trade, the gap in terms of access to vaccination and measures to support economies, compared to the rest of the world, is likely to undermine the process of convergence at work prior to the crisis. The crisis has also widened the gaps between countries (diversified economies versus economies dependent on natural resources) and within countries (income and spatial inequalities). In North Africa, Egyptian economic growth should approach its potential with a forecast of +5.2% for the 2022 financial year. Having somewhat restored its budgetary and external room for manoeuvre since 2016, Egypt was able to rapidly take counter cyclical measures with the support of the IMF and donors, and gain access to international financial markets to cover its need for external financing. While the service of Egypt’s external debt remains under control, the State’s borrowing requirements are considerable (over 35% of GDP). Local banks play a key role in covering these financing needs, overexposing the banking system to sovereign risk. Tunisia enters 2022 in a precarious position, which could call into question its ability to honour the service of its external public debt. The power grab by President Saïed, who has suspended Parliament since the end of July ɸ 2021, complicates the discussions around the reforms to be carried out as part of an IMF programme, which is essential to releasing the funds necessary to cover public financing requirements. Moroccan economic growth rebounded strongly in 2021 to +5.7%, buoyed by a good agricultural season and the economic recovery in Europe. The health crisis exacerbated the pressure on public debt, up to 96% of GDP, despite the debt profile remaining favourable. Economic activity in South Africa was up in 2021, at +5%, driven in particular by the recovery of household consumption and exports, despite the July riots and the third wave of Covid-19. The pace of structural reforms should nevertheless remain slow in a difficult socio-political context and South African GDP growth should therefore be sluggish in 2022. In Nigeria, economic growth in 2021 was +2.6%, driven by the recovery in the non-oil sector and the increase in oil prices, although oil production will remain below pre-crisis levels. In Angola, the economy contracted by -0.7% in 2021, the sixth consecutive year of recession for the country. Growth for 2021 was markedly revised downwards, from April, due to the decline in investments and repeated technical problems in the oil sector. The non-oil sector is expected to remain the main driver of economic growth, with trade and agriculture recovering to post results well above pre-pandemic levels. Weakened by the 2014 shock on oil prices, CEMAC should benefit from the increase in prices and return to positive GDP growth, at +2.6% in 2021 and +2.8% in 2022. In terms of economic activity, WAEMU countries generally withstood the crisis better, and for the most part maintained positive growth rates in 2020 (with the exception of Mali and Guinea-Bissau). The upturn in economic activity in the zone in 2021 was particularly marked, at +5.5%, should increase to +6.1% in 2022. While thirty African countries benefited from the Debt Service Suspension Initiative for a carry-over of around US$6.2bn, according to the IMF, the resumption of repayments from 2022 could pose a problem for many African countries. At this stage, the Common Debt Framework has yet to prove fully convincing in operational terms, as the first three countries to apply (Chad, Ethiopia and Zambia) are yet to reach an agreement with all their creditors.

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(1) Special Drawing Right

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2021 UNIVERSAL REGISTRATION DOCUMENT