IEleven months ago, all the economic reports evoked the “big clouds” that threatened the continent. And they came from all over the place : the continuation of the economic shock due to the Covid-19 pandemic, the slowdown in growth, the impacts of climate change, inflation at its highest level in over a decade and finally the war in Ukraine. If a “hurricane of famine” or social unrest could be feared, all these predictions appeared only marginally.
Now, at the beginning of the year, the big institutions are revising their growth forecasts upwards or correcting them. Starting with the International Monetary Fund and the World Bank, which announced that Africa should emerge overall from the global recession with GDP growth certainly declining, but not far from 4% (3.7%).
Forecasts not far from those of the economists of the African Development Bank, “the estimated average growth of the real gross domestic product (GDP) has slowed from 4.8% in 2021 to 3.8% in 2022, and should stabilize at 4% in 2023-2024,” they just announced, welcoming “the economic resilience of African countries,” despite global uncertainties. It was on the occasion of the publication of the brand new AfDB report, entitled ” Africa’s macroeconomic performance and prospects and presented on Thursday 19 January at the institution’s headquarters in Abidjan, Ivory Coast.
Resilient African economies
While the AfDB also indicates that “average consumer price inflation increased by 0.9 percentage points to 13.8% in 2022, from 12.9% in 2021”, and that “15 million more people have fallen into extreme poverty in Africa” due to the global increase in energy and food prices in 2022, Africa has not disintegrated. In detail, all African regions recorded growth in 2022: Central Africa in the lead, thanks to favorable raw material prices (+4.7%), ahead of North Africa (+4.3%), East Africa (+ 4.2%), West Africa (+3.8%). Southern Africa is slightly stalled with a growth of 2.5%, due in particular to the poor performance of South Africa plunged into a serious energy crisis while the country is the locomotive of the sub-region. “With 54 countries at different stages of growth, different economic structures and various resource endowments, the effects of global shocks always vary according to region and country,” said Akinwumi Adesina, president of the pan-African institution, who presented this new report to an audience of economic and political decision-makers with the ambition to provide more up-to-date data that reflects as closely as possible the reality of the continent.Slowing global demand, tighter financial conditions and disrupted supply chains have therefore had impacts different on African economies,” he continued.
Global and regional risks
The report warns about the outlook given current global and regional risks. These risks include soaring food and energy prices, the tightening of global financial conditions and the related increase in domestic debt service costs. Climate change, with its negative effects on food supplies and the potential risk of political change in countries holding elections in 2023, poses equally frightening threats. Or the regional conflicts that are accelerating particularly in Burkina Faso, the Democratic Republic of the Congo, Ethiopia, Mali and Mozambique. Not to mention the political risks due to the national elections scheduled for 2023.
More difficult financial conditions abroad
But the urgency is above all the debt. Thus the Adb warned of the increasingly alarming level of debt of African countries. Twenty-three African countries were either over-indebted or at high risk of being so in September 2022. The issue has come to the fore in recent years and the Pan-African Bank wants to bring the issue to international attention. Because tightening global financial conditions could increase the vulnerability of several African countries. And this in a context in which many states have limited budgetary margins. It should be emphasized that even before the onset of the global pandemic, African states were already burdened with budget deficits and worrying debt.
The report calls for measures to “reduce structural budget deficits and the accumulation of public debt”, as well as “effective coordination of fiscal and monetary actions” and “the promotion of intra-African trade”. On the debt side, the ADB would like support from rich, low-income countries, which could take the form of additional time allowed to repay debts. Or the reallocation of IMF reserves, the famous Special Drawing Rights (SDRs), to countries that need them most. A legitimate call for the institution, as tightening global financial conditions put pressure on African national currencies. “As in many emerging countries, the tightening of financial conditions and the appreciation of the US dollar have had dire consequences for most African economies. They have raised the cost of servicing existing debt and increased the risk of over-borrowing,” the AfDB economists argue.
The example in everyone’s mind is that of Ghana. The country, once cited as an example for its stability and high growth, continues to sink into crisis. With historic inflation above 50%, a collapse of the local currency, pump prices doubling and debt repayments gobbling up half of government revenues, Ghana is in the throes of a severe economic crisis. It’s the worst in decades. Above all, it is the fall in the exchange rate (the cedi), which has depreciated by more than 50% against the US dollar, which has helped to increase the value of the debt by 6 billion dollars. So many facts that should have pushed the country to resort to the debt service suspension initiative, implemented by the G20 to help vulnerable countries in the context of the pandemic. The authorities feared a downgrade of their credit ratings by international rating agencies. A reluctance all the more extensive as the process within this framework takes time. To date only Chad has reached an agreement with its creditors, Zambia should also benefit from it, while for Ethiopia the negotiations have stopped due to the conflict in Tigray.
Countries back on the path to growth
Despite the confluence of multiple shocks, the reopening of Chinese borders after three years of closure and the zero Covid policy, as well as stable growth prospects for Asia could support Africa’s growth in the medium term. The Asian continent accounts for about 40% of the continent’s exports. The five best-performing African economies of the pre-Covid-19 period are expected to grow by an average of more than 5.5% in 2023-2024 and regain their place among the ten fastest growing economies in the world..
These countries are Rwanda (7.9%), Ivory Coast (7.1%), Benin (6.4%), Ethiopia (6%) and Tanzania (5.6%). Other African countries are expected to grow more than 5.5% in 2023-2024. These are Democratic Republic of Congo (6.8%), Gambia (6.4%), Libya (12.9%), Mozambique (6.5%), Niger (9.6%), Senegal (9, 4%) and Togo (6.3%).
Good prospects that lead the economist Jeffrey Sachs, director of the Center for Sustainable Development at Columbia University, to state that African economies are growing and progressing constantly. “Africa can and will consistently achieve growth of 7% or more annually for decades to come. What we will see, based on the resilience we see in this report, is a real acceleration in Africa’s sustainable development, which will make the continent the fastest growing component of the global economy,” said the Secretary-General’s appointee as well of the United Nations Antonio Guterres with the defense of the Sustainable Development Goals “Africa is the place to invest”, he added.