Productive Capacities, Economic Vulnerability and Growth Volatility in Sub-Saharan Africa

Sub-Saharan Africa (SSA) countries, like most developing countries, face major challenges to achieve strong, sustainable, and inclusive growth with the view to reduce significantly persistent poverty and inequality. Many of these challenges results from a high level of economic vulnerability due to simultaneous shocks, notably the Covid-19 pandemic, climate change and the multiplicity of armed conflicts. Hence the need to study policies and means of strengthening economic resilience to shocks. This paper analyzes the effects of productive capacities on the volatility of economic growth in SSA countries when faced with significant vulnerability. The study covers the period 2000-2018 for 43 SSA countries. Using Generalized Method of Moments (GMM), the results show that economic vulnerability contributes to growth volatility in SSA. However, this effect varies according to the performance of productive capacities. Countries with high productive capacities have greater opportunities to mitigate the effect of economic vulnerability on growth volatility. Some specific dimensions of productive capacities (Institutions, ICT) seem to matter more than others. The results of this study provide important recommendations to policy makers.