African Development Bank (AfDB) says the continent’s economies are expected to grow faster than global projections this year.
In its Africa’s Macroeconomic Performance and Outlook report , AfDB said the continent’s GDP growth rate decelerated to 3.8 percent in 2022. It is expected to improve to four percent this year.
The improvement, which will see the continent’s growth rate outpace global projections of 2.7 percent, “reflects continuing policy support in Africa and global efforts to mitigate the impact of external shocks and rising uncertainty,” the continental lender said.
AfDB president Akinwumi Adesina said that this recovery and resilience of the continent’s economies, however, come with “cautious optimism” as there are several headwinds still facing the globe’s emerging markets.
“Global financial conditions have tightened and are projected to remain restrictive in the near term, compounded by increased volatility in global financial markets and persistent disruptions in global supply chains,” Dr Adesina said.
According to the report, all the continent’s five regions remained resilient with a steady outlook for the medium-term, despite facing significant headwinds due to global socio-economic shocks.
However, the Macroeconomic Performance and Outlook report identified some risks that the continent is currently facing such as robust monetary and fiscal measures, backed by structural policies, which pose to be a threat to the development of most economies.
Other risks, based on the outlook, include dependence on commodity exports, regional conflicts in “key hotspots like Burkina Faso, Democratic Republic of Congo, Ethiopia, Mali, and Mozambique”; and political risks due to upcoming elections in a number of countries.
Also, many countries on the continent are projected to continue experiencing relatively high inflation rates and negative fiscal and current account balances.
Africa’s Projections in 2023
Headline inflation is expected to ease to about 13.5 percent in Africa, down from 13.8 percent last year, but as many as 11 countries will still record double-digit inflation, with Zimbabwe recording the highest at 120.4 percent and Sudan 78.7 percent.
Consequently, fiscal deficits are also expected to continue narrowing down across the continent, thanks to “fiscal consolidation measures by several countries,” improved revenues from exports due to rising commodity prices, and the recovery of tourism on the continent.
Kenya and Rwanda are projected to have the highest fiscal deficits of 6.7 and 6.6 percent of GDP respectively. Burundi, Rwanda and Tanzania will also record above average budget deficits of 4.8, 4, and 3.1 percent respectively.
Recommendations by AfDB
The report advocated bold policy actions at national, regional, and global scales to help African economies mitigate the compounding risks.
AfDB suggested a series of fiscal and monetary policy interventions to stabilise economies and hasten recovery from the turbulence witnessed in the last two years.
Other recommendations include boosting intra-Africa trade, reforming tax administration regimes, reducing budget deficits, cushioning the most vulnerable in societies, and managing foreign exchange reserves to reduce exchange rate volatilities.
“The bank reiterates its call for accelerating implementation of structural reforms to enhance government-enabled private sector industrialization in key sectors,” Dr Adesina said.
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