The African continent is projected to outperform the rest of the world in economic growth in 2023 and 2024, the African Development Bank (AfDB) said on Thursday.
Speaking at the launch of the new biannual publication, “Africa Macroeconomic Performance and Outlook”, which will be released in the first and third quarters of every year, bank president Akinwumi Adesina said that despite global volatility Africa’s economic outlook is stable.
He said while global macroeconomic conditions have recently become increasingly uncertain, with the highly volatile external environment spilling over to the continent, “all but one country maintained positive growth in 2022 and outlooks [are] stable for 2023 and 2024”.
According to the report, Africa’s GDP growth is projected to average about 4% in 2023 and 2024 — 0.2 percentage points higher than the 3.8% recorded in 2022 — and higher than the projected world averages of 2.7% and 3.2% in 2023 and 2024, respectively.
Average inflation is forecast to decline from 13.8% in 2022, the highest in more than a decade, to a single digit of 8.8% in 2024.
The report projects that Africa’s average current account deficit will stabilise at about 1.6% of GDP in 2023 to 2024, and for the average fiscal deficit to fall slightly to about 4.1% of GDP in the same period.
“The projected stability in medium-term growth in Africa largely reflects the benefits of policy support in Africa, global efforts to mitigate the impacts of exogenous shocks and rising uncertainty, and stable growth in Asia, one of Africa’s main trading partners,” Adesina said.
But even with the largely positive sentiment towards GDP growth Southern Africa continues to lag.
The AfDB report shows that growth in Southern Africa is estimated to have remained tepid in 2022, declining to 2.5% from 4.3% in 2021, reflecting persistent weaknesses in SA, the region’s largest economy and main trading partner.
SA’s real GDP growth more than halved, to 1.9% in 2022 from 4.9% in 2021, due to subdued global demand, power outages and devastating floods that affected industrial production in KwaZulu-Natal.
The country also experienced a build-up in inflationary pressures that also affected household consumption spending, a key driver of growth.
“SA’s close trade ties with other countries in Southern Africa means that shocks buffeting the country are directly or indirectly transmitted to the rest of the region and, in particular, countries in the Common Monetary Area and the Southern African Customs Union. They experience a near symmetrical shocks to those affecting SA,” AfDB acting chief economist Kevin Urama said.
“This slowdown reflects subdued growth in SA, as higher interest rates, weak domestic demand and persistent power outages weighed on the economy.”
Growth also slowed for West Africa, falling to 3.6% in 2022 from 4.4% in 2021, reflecting decelerations in Ivory Coast and Nigeria, the region’s two large economies.
Urama said though hit by the Covid-19 pandemic, insecurity and weak oil production despite higher international oil prices, Nigeria could benefit in 2023 from ongoing efforts to restore security in its restive oil-producing region.
The report shows that Central Africa was bolstered by favourable commodity prices. Growth in the region is estimated to have been the continent’s fastest, at 4.7%, up from 3.6% in 2021.
North Africa’s economic growth is estimated to have declined by 1.1 percentage point, to 4.3% in 2022 from 5.4% in 2021, due to the sharp contraction in Libya and the drought in Morocco.
For 2023, growth is projected to stabilise at 4.3% supported by a projected strong rebound in the two countries and sustained growth elsewhere in the region.
In East Africa, growth is estimated to have moderated to 4.2% in 2022 from 5.1% in 2021 but is projected to recover to the pre-pandemic average above 5% in 2023.
But even this stable outlook is threatened by several challenges and a confluence of overlapping shocks, including political risk from upcoming national elections in 2023 and 2024, continuing ripple effects of Russia’s invasion of Ukraine that continue to disrupt global supply chains, including Africa’s, and drive food and energy price inflation higher, as well as tightening of global financial conditions and climate change.
Urama said uncertainty about policy continuity in the aftermath of the 2023-2024 general elections, coupled with rising insecurity, could dampen investor confidence, which would constrain investment and further weaken countries’ growth prospects.
Solutions to inflation risks include the co-ordination of a monetary, fiscal and structural policy mix and policy to address rising inflation.
Adesina said accelerating the implementation of the African Continental Free Trade Area also presents an opportunity to create a borderless continent that could underpin a competitive market to cushion economies from multiple shocks.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.