2023-11-29 16:38:00
(AFRICAN DEVELOPMENT BANK) – The African Development Bank announced on Monday that it had revised downwards its short and medium-term macroeconomic forecasts for Africa, for the years 2023 and 2024. The institution now expects 3, 4% this year and 3.8% next year, compared to 4.0% and 4.3% previously anticipated.
These slightly lower forecasts are explained by the persistent and long-term effects of the Covid-19 pandemic, geopolitical tensions and conflicts, climate shocks, a global economic slowdown, as well as the limited fiscal space available to African governments to adequately respond to shocks and support the gains of economic recovery following the health crisis.
This updated data was published in the “Africa Macroeconomic Performance and Outlook 2023” (MOE) report update, which follows the report “Economic outlook 2023 in Africa » of the Bank Group, published last May.
« The challenging global economic environment and multiple shocks continue to shape Africa’s macroeconomic performance. Persistent inflationary pressures threaten to wipe out any macroeconomic gains made since pandemic risks eased, while the continued depreciation of national currencies in many countries has exacerbated the cost of servicing debt. said Kevin Urama, Chief Economist and Vice President of the African Development Bank Group.
«Faced with regional and global shocks, the Bank remains committed to helping African countries better address these challenges and put economic growth back on track», added Mr. Urama.
In the short term, the MOE update urges African countries to continue implementing restrictive monetary policies to contain inflation. This should be supported by fiscal policies that promote economic diversification and eliminate supply-side constraints.
In the medium to long term, the report calls on governments to scale up effective investments in human capital and physical infrastructure to boost productivity, revive economic growth and create opportunities for more inclusive and sustainable development.
While inflationary pressures are easing globally, they persist in Africa and continue to weigh heavily on the short and medium term economic performance of countries on the continent. Inflation in Africa is now expected to average 18.5% this year and 17.1% in 2024.
According to the revised MOE, this represents an acceleration of 3.4 and 7.6 percentage points, respectively, compared to earlier projections. Persistent inflationary pressures have been largely fueled by supply disruptions in the agricultural sector, higher import inflation due to weakening local currencies, relatively high commodity prices and continued fiscal dominance in several African countries.
Increasing cost-of-living pressures have eroded the purchasing power of Africans, fueling the risk of further increases in the incidence of poverty.
The report notes that slow global economic growth is impacting demand for African exports, a trend that is expected to persist much longer than expected.
The report highlights that the expected economic slowdown in advanced economies and China’s sluggish growth compared to historical trends have weighed on global growth. “This has put additional pressure on African countries, especially those that rely on the Chinese market for their raw material exports. Strengthened policy support in China might promote global economic recovery and trigger positive spillover effects for African countries for which China remains a major trading partner. These factors can help mitigate adverse risks to the economic outlook“, we can read in the report from the African Development Bank.
According to the MOE update, climate shocks, coupled with worsening geopolitical tensions in the Middle East and Russia’s prolonged war in Ukraine, might lead to greater disruptions in global trade and flows. foreign investment. This might trigger a new round of prolonged tightening in global financial conditions, which might put further pressure on the depreciation of national currencies, increase debt servicing costs and exacerbate the continent’s financing shortages.
Staying afloat in the face of local and global shocks
Coordinated monetary and fiscal policies, underpinned by a reduction in fiscal dominance, will be key to rebuilding buffers once morest shocks, according to the updated report.
Targeted and sequenced investments to address supply constraints, including addressing structural weaknesses, would help reverse slowing economic recovery momentum and place African economies on a higher and more sustainable growth trajectory. .
To sustainably reduce inflationary pressures, the report urges African countries to remove constraints that prevent domestic supply from responding to rising international commodity prices, and to boost labor productivity through targeted investments in infrastructure and human capital.
Addressing barriers to increased domestic resource mobilization will help address the current financing shortage, the report said.
Launched in January 2023, the report on “Africa’s Macroeconomic Performance and Outlook” complements the annual report on “African Economic Outlook» of the African Development Bank, which focuses on key emerging policy issues relevant to the development of the continent. The MOE is published in the first and third quarters of each year.
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