Date: December 2, 2023 8:01 am
The World Bank’s semi-annual Africa Pulse report warns that Africa risks losing the needed progress it ought to make in the decade as economic growth in sub-Saharan Africa is projected to decelerate to 2.5% this year, down from 3.6% in 2022. In terms of per capita income, the outlook is even more unfavourable.
- “The region is projected to contract at an annual average rate per capita of 0.1% over 2015-2025, thus marking a lost decade of growth.”
The report noted that rising instability, and slow growth in South Africa and Nigeria- the region’s largest economies together with unending uncertainty in the global economy are responsible for the slow growth in the region.
It stated thus,
- “The continued slump of the region’s large economies is dragging down Sub-Saharan Africa’s economic performance. South Africa’s GDP is expected to grow at 0.5 per cent in 2023 as energy and transportation bottlenecks continue. Nigeria and Angola are projected to grow at 2.9 and 1.3 per cent, respectively, due to lower international prices and currency pressures affecting oil and non-oil activity.”
The bank’s Chief Economist for Africa, Andrew Dabalen said the poor and the vulnerable will be at the receiving end of the slow growth as it will translate to slow poverty reduction.
Threats of debt
Africa is also grappling with a debt overhang that is exerting pressure on public finances as global interest rates continue to rise.
The escalating debt situation is causing more countries in the region to be at risk of or already experiencing debt distress.
Additionally, it has elevated the debt-service ratio to a substantial “staggering” level of 31% of revenue in the region in 2022.
- “The share of International Development Association–eligible countries in the region at high risk or already in debt distress has expanded from 27 per cent in 2015 to 55 per cent in 2023 (as of end-June 2023).”
The World Bank went further stating
- “Tightening global financial conditions are increasing sovereign spreads and weakening currencies, thereby amplifying debt burdens and restricting access to global capital markets.”
Weak job creation
The international lender bemoaned the few jobs and opportunities available to Africa’s bourgeoning youth population.
Around 12 million young people enter the job market in the continent with only 3 million formal jobs being created. This situation leaves many young Africans underemployed and engaged in casual or informal labour.
The percentage of urban working-age adults in employment has remained static at 22% to 23% in the past two decades and growth during this period has created many employment opportunities.
Much of the population in the region is rural and engages in agriculture for survival.
It attributed this to the difficulty in scaling for small firms as many of the firms in the region employ less than five employees.
Amidst the geopolitical and economic malaise, the region is facing, the bank expects the East Africa region to grow by 4.1% while the West Africa region to expand by 5.1% in 2023.
Although inflation has been dropping across the region, it still stands above most central banks’ expectations.
- “Amid the domestic headwinds and uncertain global growth, there are ‘pockets of resilience’ in the region. In 2023, the Eastern African community is expected to grow by 4.9 per cent, while the West African Economic and Monetary Union (WAEMU) is set to grow by 5.1 per cent.”