Economic activity in Sub-Saharan Africa is likely to gather momentum in 2023, though SA, Nigeria and Ghana will continue to pose a significant risk to the region’s overall performance, according to Fitch Solutions.
The unit of Fitch Group, the global financial information services company, expects Sub-Saharan Africa’s overall growth to accelerate to 3.6% in 2023, from 3.3% in 2022, driven mainly by East and Central Africa.
The US-based country risk and industry research firm said the pickup in economic momentum would be driven largely by demand for commodities from China.
GDP growth in China, the world’s second-biggest economy, is expected to improve to 5% in 2023 from 3.3% in 2022 and will support demand for key mining exports from the Democratic Republic of the Congo (DRC), Fitch Solutions said.
In addition to China’s growing demand for commodities, growth in Ethiopia and Tanzania is also expected to strengthen as a result of easing inflation, which is likely to lead to stronger private consumption, while robust fixed investment also continues to support construction activity.
But the good news ends there. “SA, Nigeria and Ghana will continue to underperform,” Fitch Solutions said.
It forecast economic growth in Nigeria will slow to 2.5% in 2023 from 2.7% in 2022, as a result of declining hydrocarbon output.
Ghana will see weaker economic activity as a result of fiscal consolidation under a likely IMF programme, Fitch Solutions added.
Sluggish Southern Africa
Growth in Southern Africa is expected to slow to 2.2% in 2023 from 2.8% a year earlier, mainly as a result of the sluggish SA and Angolan economies.
“We expect growth in SA — the largest economy in Southern Africa — will continue to trend downwards to 1.6% in 2023, from 2.1% in 2022,” Fitch said. “This is due to sticky inflation and monetary tightening, which raises the cost of borrowing for consumers and businesses.”
Angola will also weigh on growth in the sub-region due to challenges in its oil sector, Fitch said.
The forecasts are in line with those of the IMF, which also warned that oil-exporting African countries could lose revenue to clean energy. The IMF said the transition may affect economic and fiscal stability, as well as the valuations of Nigeria’s naira and Angola’s kwanza.
Inflation is also expected to remain elevated in most sub-Saharan African economies in 2023.
Spectre of inflation
Fitch Solutions said that while it expected the average annual inflation rate to ease to 14.2% in 2023 from 17.7% in 2022, reflecting moderating global commodity prices after the sharp rally in 2022, price increases would remain above the 2012-2021 average of 10.5%.
Fitch Solutions said headline inflation in SA, the DRC, Ghana, Kenya, Nigeria, Uganda, and Zambia were likely to remain above the midpoint of their central banks’ target bands.
“All of these markets are net importers of food, fuel or both and were seriously affected by global supply shocks in 2022,” it added.
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