April 11, 2023/FBNQuest
We take a look at the World Bank’s April 2023 edition of the Africa Pulse report, which was published last week. The latest report is an update of the October 2022 edition. The Bank sees economic growth for the sub-Saharan Africa (SSA) region slowing down to 3.1% in 2023. This compares with the Oct ‘22 forecast of 3.5%. The region’s weaker outlook reflects the slow recovery of the global economy, easing but still high inflation rates, as well as the tightening of global and domestic financial conditions. Looking ahead, the bank expects economic growth to rise to 3.7% and 3.9% in 2024 and 2025 respectively.
The bank also projects a slowdown of global growth in 2023, before a modest recovery in 2024, which it attributes to a combination of high inflation and restrictive monetary policy by major central banks around the world.
On the domestic front, Nigeria’s economic growth is expected to decelerate to 2.8% in 2023, before recovering to 3% in 2024 and 2025. This compares with a growth forecast of 3.3% in 2022.
According to the bank, Nigeria’s economic growth will likely be hindered by the subdued performance of the oil sector, as well as challenges of policy implementation by the new administration.
The bank expects declining commodity prices and monetary policy tightening across the sub-Sahara Africa region to reduce inflation to 7.9% in 2023, before decelerating further to 5% in 2024 and 2025. This compares with an estimated headline rate of 9.2% in 2022.
Economic growth in South Africa is forecast to decline to 0.5% in 2023, before picking up to 1.3% and 1.6% in 2024 and 2025. The downward revision is mainly due to the energy crisis which has been exacerbated by the Ukraine-Russia war.
The Bank sees Kenya’s economy growing by 5% and 5.2% in 2023 and 2024 respectively, while Ethiopia’s economy is projected to grow by 6.0% and 6.6% over the same period.
It noted the downside risks to the region’s growth, including the continued Russia-Ukraine conflict, and persistent inflationary pressure which could prompt central banks to tighten monetary policy more aggressively.
Additionally, it highlighted the challenges faced by the region, such as the declining rate of investment growth. It also called for structural reforms that would boost both investment and competitiveness of African businesses.
The Bank pointed out the risks arising from the recent global financial turmoil which could translate to lower demand for the region’s exports.
It noted the rising public debt levels of the region, which could further worsen due to the restricted access to the credit market.
The Bank recommends that central banks in the region implement effective inflation-targeting policies in order to tame rising inflation.
