The World Bank is concerned that Sub-Saharan Africa could be facing a “lost decade” of slow economic growth and high inflation, and that it is being weighed down by its two largest economies, SA and Nigeria, who together account for 40%-50% of the region’s GDP.
In its latest Africa Pulse report the Washington-based bank has cut its growth forecast for SA to 0.5% for 2023, down from 2% in 2022 — which made it one of the region’s slowest growing countries in 2022, with a long-term average of below 1% — the slowest in Sub-Saharan Africa.
It has urged SA to stabilise its energy sector and implement the institutional reforms required to stabilise economic activity and lift investment.
World Bank chief economist for Africa Andrew Dabalan said to create the jobs it needs SA has to raise its level of growth by addressing human capital, by improving the quality of education and making individuals more competitive in the labour market, as well as by improving competition across the economy and boosting its exports, especially to the rest of Africa.
The World Bank has revised down its growth forecast for Sub-Saharan Africa to 3.1% for 2023, compared to the 3.5% it forecast in October. This implies per capita income growth of just 0.6% in 2023, which it says “undercuts the region’s capacity to meet the twin goals of reducing poverty and boosting shared prosperity over the medium term”. It expects per capita growth to lift to 1.2% in 2024 and 1.4% in 2025 though it points out this still falls short of accelerating poverty reduction to its pre-Covid-19 level.
However, its report, published ahead of the IMF/World Bank spring meetings in Washington next week, zeroes in on the opportunities the resource-rich Sub-Saharan African region has as the world transitions to a low-carbon economy. Dabalen said this provides a huge opportunity for countries to industrialise and transform their economies but it cannot happen without significant reforms in governance.
Another key potential growth engine is the African Continental Free Trade Agreement, which provides significant opportunities for the region if countries implemented the right policy action and investments to move towards integration, Dabalen said. Around 80% of Sub-Saharan Africa’s trade currently goes abroad but that can be shifted to lift the share of intraregional trade. The political will is there, he said, but it requires a focus on connectivity and making trade logistics work, as well as investment in the necessary payments systems and ensuring countries remove nontariff barriers.
With global interest rates rising and countries such as Ghana having gone into default, high levels of sovereign indebtedness remain a concern for the bank, which estimates that 22 of Sub-Saharan Africa’s 48 countries are in debt distress or at risk of it. The bank supports the Group of 20’s comprehensive framework for resolving debt, which is in process.
Fowever, Dabalen said, it is not very concerned about spillovers from the banking crises in the US and Europe to Africa, because most banking systems in the region are well capitalised and liquid. It was more concerned about a flight to safe assets putting a lot of pressure on the currencies in Sub-Saharan Africa, already under pressure because of high global interest rates.
The bank’s report points to widely divergent growth performances and outlooks among the countries in the region, with some smaller West African and East African countries (Kenya, Rwanda and Ethiopia) outperforming.
Dabalen attributed East Africa’s better growth performance to its countries being more integrated with each other; they also generally do not have much mineral wealth so their economic performance tends to be less volatile than countries that rely heavily on commodity exports, often on a single commodity as in the case of Zambia (copper) and the Democratic Republic of Congo.
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