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Ph:DR: Growth in sub-Saharan Africa remains weak, dragged down by uncertainty in the global economy, the underperformance of the continent’s largest economies…
Growth in sub-Saharan Africa remains weak, dragged down by uncertainty in the global economy, the underperformance of the continent’s largest economies, high inflation and a sharp deceleration in investment growth, according to a World Bank report released Wednesday. Risks of debt distress remain elevated, with 22 countries in the region at high risk of external debt distress or in debt distress as of December 2022.
In the face of darkening growth prospects and rising debt levels, African governments need to focus more on macroeconomic stability, domestic revenue mobilization, debt reduction and productive investments to reduce extreme poverty and boost shared prosperity in the medium and long term.
Economic growth in sub-Saharan Africa is expected to slow from 3.6% in 2022 to 3.1% in 2023, according to the latest edition of Africa’s Pulse, the World Bank’s April 2023 economic update for Africa. ‘Sub-Saharan Africa. Economic activity in South Africa is expected to weaken further in 2023 (0.5% annual growth) due to the worsening of the energy crisis, while the recovery of growth in Nigeria for 2023 (2.8 %) remains fragile, as oil production remains subdued. Real gross domestic product (GDP) growth in the West and Central Africa subregion is expected to decline to 3.4% in 2023 from 3.7% in 2022, while that of Eastern and Southern Africa would decline to 3.0% in 2023, from 3.5% in 2022.
“Weak growth, combined with debt vulnerabilities and sluggish investment growth, risks losing a decade to poverty reductionsaid Andrew Dabalen, World Bank Chief Economist for Africa. Policymakers need to redouble their efforts to curb inflation, boost domestic resource mobilization and adopt growth-enhancing reforms, while continuing to help the poorest households cope with the rising cost of life. »
Risks of debt distress remain high, with 22 countries in the region at high risk of external debt distress or in debt distress as of December 2022. Adverse global financial conditions have increased borrowing costs and debt servicing costs in Africa, diverting money from much-needed development investment, and threatening macro-fiscal stability.
Stubbornly high inflation and weak investment growth continue to weigh on African economies. Although inflation appears to have peaked last year, it is expected to remain high at 7.5% in 2023 and exceed central bank target ranges in most countries. Investment growth in sub-Saharan Africa fell from 6.8% in 2010-2013 to 1.6% in 2021, with a more marked slowdown in Eastern and Southern Africa than in Western and Central Africa .
Despite these challenges, many countries in the region are showing resilience in the face of multiple crises. These include Kenya, Côte d’Ivoire and the Democratic Republic of Congo (DRC), which recorded growth rates of 5.2%, 6.7% and 8.6% respectively in 2022. In the DRC, the mining sector has been the main driver of growth due to an expansion in capacity and a recovery in global demand. Harnessing natural resource wealth offers the opportunity to improve the fiscal and debt sustainability of African countries, but the report warns that this can only happen if countries adopt the right policies and learn from past booms and busts.
“The rapid decarbonization of the world will bring significant economic opportunities to Africanoted James Cust, Senior Economist at the World Bank. Metals and minerals will be needed in greater quantities for low-carbon technologies such as batteries. If the right policies are in place, these resources could increase tax revenue, expand opportunities for regional value chains that create employment, and accelerate economic transformation. »
In an era of energy transition and increasing demand for metals and minerals, resource-rich governments have an opportunity to better leverage natural resources to fund their public programs, diversify their economies, and expand the economy. access to energy. The report says countries could potentially more than double the average revenue they currently derive from natural resources. Capturing these fiscal resources in the form of royalties and taxes, while continuing to attract private sector investment, requires reforms and good governance. Maximizing public revenues from natural resources would provide a double benefit for people and the planet, by increasing tax revenues and removing implicit subsidies on production. (Source : World Bank Group)
