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THE 26th EDITION OF THE WORLD BANK’S AFRICA’S PULSE REPORT

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THE 26th EDITION OF THE WORLD BANK’S AFRICA’S PULSE REPORT

 

 

• Economic growth in Sub-Saharan Africa (SSA) is set to decelerate from 4.1% in 2021 to 3.3% in 2022, as a result of a slowdown in global growth, rising inflation exacerbated by the war in Ukraine, adverse weather conditions, a tightening in global financial conditions, and the rising risk of debt distress.
• These trends compromise poverty reduction, already set back by the impact of the COVID-19 pandemic.

• Among Africa’s three largest economies, growth is subdued in Nigeria and South Africa, while the Angolan economy gains from elevated oil prices, an increase in oil production, and good performance of the non-oil sector.

• Growth in SSA is projected to bounce back to 3.5% in 2023 and 3.9% in 2024.

• Excluding South Africa and Angola, the Eastern and Southern African subregion is expected to grow to 4.5% next year and 5.0% in 2024.

• Excluding Nigeria, the Western and Central Africa subregion is projected to grow at 5.0% in 2023 (up from 4.2%), and growth will firm in 2024 (5.6%). WAEMU countries are set to recover in 2023 from the slowdown in 2022 (4.9%), up to 6.4%, and firming further in 2024 to 7.0%.

 

 

 

• The Russia-Ukraine conflict accelerated an already upward-trending inflation in the region. Rising inflation is weighing on economic activity in SSA by depressing both business investments and household consumption. As of July 2022, 29 of 33 countries in SSA with available information had inflation rates over 5% while 17 countries had double-digit inflation.

• Inflation operates as a regressive tax, affecting disproportionately the poor. In SSA, the high pass-through of food and fuel prices to consumer prices has caused inflation to soar to record highs in many countries, breaching the ceiling of central bank targets in most countries which have them. The vast majority of the population in Sub-Saharan Africa is affected by these high food prices as they allocate over 40% of total spending on food.

 

 

 

• These economic challenges come at a time when countries’ ability to support growth and protect poor households is severely constrained. Fiscal space is almost depleted in some SSA countries mainly because of high levels of debt, rising borrowing costs, and depleted public savings. The fiscal deficit of the region expanded during the pandemic to 5.6% of GDP in 2020 (from 3.0% of GDP in 2019). In 2022, the deficit amounts to 4.8% of GDP due to consolidation efforts.

• Debt is projected to stay elevated at 59.5% of GDP in 2022 in SSA. Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are in high risk of joining them. African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010.
• To protect development gains in the region, countries should prioritize protecting the poorest households while maintaining macro-economic stability. This requires implementing coherent monetary, fiscal and debt policies to bring down inflation and generate fiscal space. A failure to tame inflationary pressures could lead to social unrest, intensify conflict, and ultimately ignite political instability.

 

 

 

• Elevated food prices are causing hardships with severe consequences in one of the world’s most food-insecure regions. Hunger has sharply increased in Sub-Saharan Africa in recent years driven by income losses and supply chain disruptions caused by the pandemic, regional and global conflict, extreme weather, and locust infestation. More than one in five people in Africa face hunger — more than double the proportion of any other region.
• Acute food insecurity (IPC Phase 3 or above) is also on the rise: there were 140 million acutely food insecure people in 2022, up from 120 million people in 2021. At least 55 million people across the Horn of Africa are severely food insecure as Ethiopia, Kenya, and Somalia experience the worst drought in 40 years.

 

 

 

• Unless African policymakers take urgent action, food security will continue to worsen—with devastating consequences for the poorest and most vulnerable people in Africa. In a time of crisis and limited resources, it’s imperative that governments find ways to support the poorest households while reorienting their food and agriculture spending toward public goods that yield the best development outcomes.
• Reorienting agricultural spending from poorly targeted subsidies toward public goods can yield massive benefits. A US$1 investment in agricultural research, on average, generates a stream of future benefits equivalent to US$10 (in net present value terms). The benefits from investments in irrigation are also high—with returns in SSA ranging from 17% on large-scale schemes to 43% for small-scale schemes. Scientific innovation and better management of scarce water resources will be key to increase productivity in the face of climate impacts.

 

 

 

• Deepening regional trade (sub-regional and continental) and integration within Africa can also enhance the resilience of food systems to international shocks. Currently, inter-regional trade in agricultural products as a percentage of Africa’s total agricultural trade remains below 20%, one of the lowest in the world. Regional economic communities and the newly minted Africa Continental Free Trade Area (AfCFTA) offer opportunities to lower agricultural trade barriers and create regional markets that can reduce domestic price volatility and stimulate investments in food production, distribution and transport.

 

 

 

 

 

• Growth projections for major economies in Eastern and Southern Africa:

o In South Africa, the economy slowed to 0.2 % year-on-year in 2022Q2, from 2.7% in the previous quarter The economy is projected to grow by 1.9% this year, a downward revision of 0.2 percentage point relative to early projections in April.
o The Angolan economy is one of the major beneficiaries of favorable terms of trade which translate into real growth of 3.1% in 2022, from 0.8% the previous year.
o Kenya is set to grow 5.0% in 2023 (down from 5.5%) and back up to 5.3% in 2024.

 

 

 

 

o Ethiopia will struggle to regain the pre-pandemic performance due to the prolonged conflict in the northern region which drives out investment. The real GDP is expected to grow steadily from 5.3% in 2023 (up from 3.5%) to 6.1% in 2024.

 

 

 

o Botswana and Zambia will grow in 2023 by 4.0% from 3.2 and 3.3%, respectively. While growth is projected to edge down in Botswana (3.7%) in 2024, it is forecast to pick up to 4.2% in Zambia.

Growth projections for major economies in Western and Central Africa:

 

 

 

o Real GDP growth in Nigeria is expected to slow from 3.6% in 2021 to 3.3% in 2022 as economic growth in the country continues to suffer from an underperforming oil sector.
o Chad and the Republic of Congo are set to emerge from two- and seven-year recessions in 2022 and are expected to grow by 3.1 and 1.9%, respectively due to a combination of soaring oil prices, stable oil production, and strong performance of the non-oil sector.
o Growth in Niger is expected to jump by 3.6 percentage points to 5.0% on the back of expansion of the agriculture sector after a severe drought in 2021.
o In Ghana, growth is expected to slow in 2022 to 3.5%, far below the country’s average pre-pandemic performance (7.0%) due to rising public debt, elevated inflation, and a depreciating currency.
o Growth in Côte d’Ivoire is projected to bounce back from 5.7% in 2022 to 6.8%, before edging down to 6.6%.
o After slowing to 4.8% in 2022, growth in Senegal is projected to jump to 8.0% in 2023 and firm to 10.5% in 2024.
o Gabon is expected to continue trending upward, yet at a slow pace. Growth is projected at 3.0% in 2023 (up from 2.7%).
o In Cameroon, the economy will maintain its steady post-pandemic growth in 2023 (4.3%) and 2024 (4.6%), buoyed by investment and private consumption.

 

Robert Tapfumaneyi