It was on the occasion of the publication of its brand new report entitled “Africa’s macroeconomic performance and prospects” that the economists of the African Development Bank (AfDB) announced their verdict: “the estimated average growth of the real gross domestic product (GDP) has slowed from 4.8% in 2021 to 3.8% in 2022, and is expected to stabilize at 4% in 2023-2024”. This is enough to salute “the economic resilience of African countries, despite global uncertainties”.
According to the forecasts of the African Development Bank, “African economies are resilient despite the multiple shocks they have suffered”. According to the specialists of the financial institution, “53 of the 54 African countries should maintain positive growth and stable prospects for the period 2023/2024”.
However, a few months ago, all the economic reports evoked the “big clouds” which threatened the continent. The persistence of the economic shock due to the Covid-19 pandemic, the slowdown in growth, the impacts of climate change, inflation at its highest for more than a decade, and finally the war in Ukraine were at the origin of this pessimism.
But, once morest all expectations, the major institutions are correcting their growth forecasts at the start of the year. The International Monetary Fund and the World Bank have announced that “Africa should overall escape the global recession with GDP growth, certainly, down, but not far from 4% (3.7%)”. Also, economists from the African Development Bank estimate that even if real gross domestic product has slowed from 4.8% in 2021 to 3.8% in 2022, the latter “should stabilize at 4% in 2023- 2024”.
Global and regional risks
Also according to the latest AfDB analyses, “average consumer price inflation increased by 0.9% to 13.8% in 2022, compared to 12.9% in 2021. An additional 15 million people fell into extreme poverty in Africa due to rising global energy and food prices in 2022”.
In the report “Africa’s macroeconomic performance and outlook”, recently published by the AfDB, “all African regions experienced growth in 2022: Central Africa in the lead, thanks to favorable commodity prices (+ 4 .7%), ahead of North Africa (+4.3%), East Africa (+4.2%), West Africa (+3.8%). Southern Africa is slightly stalled with growth of 2.5%”.
Akinwumi Adesina, President of the AfDB, announced that “with 54 countries at different stages of growth, different economic structures and diverse resource endowments, the effects of global shocks always vary by region and country”. He continued, “The slowdown in global demand, the tightening of financial conditions and the disruption of supply chains have therefore impacted African economies differently.”
On the other hand, the report issues a reservation on the outlook, given the current global and regional risks. These risks primarily revolve around soaring food and energy prices, tightening global financial conditions and the related increase in domestic debt servicing costs. Climate change poses equally formidable threats. The ADB report mainly points to the urgency of the debt. According to the Pan-African financial institution, “the level of indebtedness of African States is increasingly alarming. Twenty-three African countries were either in debt distress or at high risk of being in September 2022”. According to the bank’s forecast, “the tightening of global financial conditions might increase the vulnerabilities of several African countries”.
It is important to underline that even before the onset of the global health crisis, African states were already burdened by worrying budget deficits and indebtedness.
Reduce structural budget deficits
The report recommends a series of measures to reduce structural budget deficits and the accumulation of public debt, ensure effective coordination of fiscal and monetary actions and boost intra-African trade. On the debt side, the AfDB would like “support from rich countries, to those with low incomes, which might take the form of additional time granted to repay debts or the reallocation of IMF reserves, the famous Special Drawing Rights ( SDR), to the countries that need it the most”. Requests which, according to the bank’s experts, remain legitimate for the institution, “because the tightening of global financial conditions puts pressure on African national currencies”. According to Kevin Urama, Chief Economist and Acting Vice President for Economic Governance and Knowledge Management at the AfDB, “With Africa’s abundant natural capital, very large youth population and growing economy growth, low-income economies have a great chance of rebounding from shocks, such as the Covid-19 pandemic.” “The good news is that the five fastest growing African economies are expected to regain their place in the ranking of the ten fastest growing economies in the world in the coming years,” he continued.
