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From The World Bank. Last Updated: Dec 14, 2022
Economic growth in Sub-Saharan Africa is set to decelerate from 4.1% in 2021 to 3.3% in 2022, as a result of a slowdown in global growth, rising inflation exacerbated by the war in Ukraine, adverse weather conditions, a tightening in global financial conditions, and the rising risk of debt distress, predicts the World Bank Africa.
Sub-Saharan Africa, home to more than 1 billion people, half of whom will be under 25 years old by 2050, is a diverse continent offering human and natural resources that have the potential to yield inclusive growth and eradicate poverty in the region. With the world’s largest free trade area and a 1.2 billion-person market, the continent is creating an entirely new development path, harnessing the potential of its resources and people.
Slowdown in global growth, rising inflation are factors
Economic growth in Sub-Saharan Africa (SSA) is set to decelerate from 4.1% in 2021 to 3.3% in 2022, as a result of a slowdown in global growth, rising inflation exacerbated by the war in Ukraine, adverse weather conditions, a tightening in global financial conditions, and the rising risk of debt distress. These trends compromise poverty reduction, already set back by the impact of the COVID-19 pandemic. Rising inflation is weighing on economic activity in SSA by depressing both business investments and household consumption. As of July 2022, 29 of 33 countries in SSA with available information had inflation rates over 5% while 17 countries had double-digit inflation.
In SSA, the high pass-through of food and fuel prices to consumer prices has caused inflation to soar to record highs in many countries, breaching the ceiling of central bank targets in most countries which have them. The vast majority of the population in Sub-Saharan Africa is affected by these high food prices as they allocate over 40% of total spending on food.
These economic challenges come at a time when countries’ ability to support growth and protect poor households is severely constrained. The fiscal deficit of the region expanded during the pandemic to 5.6% of GDP in 2020 (from 3.0% of GDP in 2019). In 2022, the deficit amounts to 4.8% of GDP due to consolidation efforts.
Debt is projected to stay elevated at 59.5% of GDP in 2022 in SSA. Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are in high risk of joining them. African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010. Looking ahead, growth in SSA is projected to bounce back to 3.5% in 2023 and 3.9% in 2024. Excluding South Africa and Angola, the Eastern and Southern African subregion is expected to grow to 4.5% next year and 5.0% in 2024. In South Africa, the economy slowed to 0.2 % year-on-year in 2022Q2, from 2.7% in the previous quarter The economy is projected to grow by 1.9% this year, a downward revision of 0.2 percentage point relative to early projections in April. The Angolan economy is one of the major beneficiaries of favorable terms of trade which translate into real growth of 3.1% in 2022, from 0.8% the previous year. Kenya is set to grow 5.0% in 2023 (down from 5.5%) and back up to 5.3% in 2024.
West and Central Africa projected to grow
Excluding Nigeria, the Western and Central Africa subregion is projected to grow at 5.0% in 2023 (up from 4.2%), and growth will firm in 2024 (5.6%). Real GDP growth in Nigeria is expected to slow from 3.6% in 2021 to 3.3% in 2022 as economic growth in the country continues to suffer from an underperforming oil sector. WAEMU countries are set to recover in 2023 from the slowdown in 2022 (4.9%), up to 6.4%, and firming further in 2024 to 7.0%. Growth in Côte d’Ivoire is projected to bounce back from 5.7% in 2022 to 6.8%. After slowing to 4.8% in 2022, growth in Senegal is projected to jump to 8.0% in 2023 and firm to 10.5% in 2024. In Cameroon, the economy will maintain its steady post-pandemic growth in 2023 (4.3%) and 2024 (4.6%), buoyed by investment and private consumption.
The looming threat of stagnation worldwide amid a landscape of multiple new and covariate shocks emphasizes the need for African policymakers to implement policies that accelerate structural transformation through productivity-enhancing growth and creating more and better jobs. Boosting agricultural productivity is essential to drive a growth-enhancing structural transformation process. Amid soaring food prices and supply constraints, policy makers need avoid making previous policy mistakes (bans or tariffs/taxes on exports and imports), and ensure international trade flows.