World Bank revises down Sub-Saharan Africa growth forecast

Sub-Saharan Africa will record growth of just 2.5% in 2023, says the World Bank, which has revised its forecast for the region down from 3.1% in April. However, it has maintained its forecast for SA at 0.5% for 2023, citing SA’s severe energy crisis and transport bottlenecks, which are holding back its economy.

The bank pointed to the underperformance of the region’s six largest economies, including SA, as well as the rising level of instability, violence and conflict for Sub-Sahara’s disappointing growth performance. The continuing overhang of debt and climate-related shocks are also affecting economic activity in the region, which in per capita terms has shown almost no growth over the past decade.

In its latest Africa Pulse report, released on Wednesday, the World Bank also points to Sub-Saharan Africa’s very poor record on job creation and urges action to tackle this.

Just one sixth of the working age population in the region have wage jobs, and current growth patterns generate only three million formal jobs annually, against the more than 10-million youth that join the workforce each year, the report finds.

For the same increase in growth, East Asia creates twice as many new jobs as Sub-Saharan Africa has done in recent years, World Bank chief economist for Africa Andrew Dabalen said.

Africa’s low growth was one reason for this, he said. “High levels of growth mean a higher probability of more jobs, but the most important factor is that growth has to be sustained over long periods,” Dabalen said in an interview on Wednesday.

“Africa’s growth has been very volatile ... and in that situation it is very difficult for businesses to survive and invest and create jobs,” he said.

Another reason job growth was not robust was that a lot of countries in the region relied on a narrow set of sectors for economic growth, and growth was lacking in sectors such as agriculture and services, where many of its people worked.

Lack of growth in the number of new firms held back the creation of good-quality jobs, the report found. Policies and regulations that favoured larger firms inhibited workforce expansion and led to misallocation of resources. Poor infrastructure was also a barrier to entry for new firms, and export diversification remained a significant issue.

Dabalen said SA urgently needed economic growth that was job rich. SA needed to create a competitive environment that supported the entry of medium to large enterprises and it needed to stabilise its infrastructure, particularly in energy and transport.

Macroeconomic stability, investment in people and excellent infrastructure were critical to enabling all the economies of the region to create more jobs, Dabalen said.

The Bank’s latest forecasts were released ahead of the World Bank/IMF annual meetings, which start in Marrakesh next week.

Sub-Saharan Africa’s slow growth in 2023 is down from 2022’s 3.6%. However, the bank expects the region’s growth rate to rebound to 3.7% in 2024 and 4.1% in 2025 as tough financial conditions ease and inflation continues to come down, and as the global economy rebounds, Dabalen said. 

The six large economies in the region — Nigeria, SA, Ethiopia, Kenya, Angola and Sudan — together make up about 65% of the region’s GDP. Nigeria and Angola have been hit by lower international oil prices and currency pressures, and Sudan’s economy is now expected to contract 12% in 2023 because of the war. Excluding Sudan, Sub-Saharan Africa’s growth is expected to be 3.1% for 2023, the report said. 

Joffeh@businesslive.co.za