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AfDB lowers growth forecasts for 2023-24 amid global challenges

Saturday, 02 December 2023 04:14
AfDB lowers growth forecasts for 2023-24 amid global challenges

(Ecofin Agency) - The institution noted that the revised real GDP growth forecast for Africa will remain higher than the global average and that of all other regions, except Asia.

The African Development Bank (AfDB) announced, in a report published on Wednesday, November 29, a downward revision of its growth forecasts for Africa in 2023 and 2024. This setback came amidst ongoing geopolitical tensions, sluggish global growth, and high-interest rates.

In an update to its report on "Africa’s 2023 Macroeconomic Performance and Outlook," the institution now anticipates a growth of 3.4% this year and 3.8% next year for the entire continent, compared to previous estimates of 4% and 4.3% from last May.

"The slightly lower figures reflect the persistent long-term effects of COVID-19, geopolitical tensions and conflicts, climate shocks, a global economic slowdown, and limited fiscal space for African governments to adequately respond to shocks and sustain post-pandemic economic recovery gains," the bank said.

In this context, the Chief Economist and Vice President of the AfDB Group, Kevin Urama, expressed particular concern about the negative impacts of persistent high inflation and currency depreciation on African economies' performances.

"The entrenched inflationary pressures threaten to reverse all the macroeconomic gains made since the easing of pandemic risks while the continued depreciation of domestic currencies in many countries has exacerbated debt service costs," he emphasized.

33 countries face economic setback with downward revision

In Central Africa, growth is expected to decrease from 5.3% in 2022 to 4.1% in 2023, a rate 0.8 percentage points lower than the May projections. The decline between 2022 and 2023 reflects persistent security and political challenges, particularly in Chad, the Central African Republic, and the Democratic Republic of Congo.

Growth forecasts in East Africa for 2023 have been revised downward by 0.7 percentage points to 3.4%. The ongoing conflict in Sudan, coupled with increasing debt vulnerabilities and high debt servicing costs in Ethiopia and Kenya, overshadow the prospects of high-growth countries in the region such as Rwanda and Tanzania.

In North Africa, growth is expected to decrease from 4.7% in 2022 to 4% in 2023, a 0.7 percentage point downward revision from May 2023. This is attributed in part to currency devaluations (Egypt) and high inflation (Tunisia and Algeria).

Southern Africa continues to experience disappointing growth, projected to be 1.6% in 2023, down from 2.8% in 2022. This is amid persistent weakness in South Africa, the region's largest economy, where severe electricity problems have impacted economic productivity.

In West Africa, real GDP growth is expected to fall to 2.8%, down from 3.3% in the May forecast, mainly due to the immediate effects of fuel subsidy reforms and exchange rate issues in Nigeria, debt problems in Ghana, and the negative impact of terrorism on the agricultural sector in Sahelian countries.

The report, however, indicates that the revised projected real GDP growth for Africa will remain higher than the global average and that of all other regions, except Asia. According to the International Monetary Fund's World Economic Outlook published in October 2023, global growth is expected to average 3.0% in 2023, while Asia's is projected to be 4.6%.

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ECOFIN AGENCY offers a selection of articles translated from AGENCE ECOFIN. Founded in 2011, Agence Ecofin is a leader in Francophone Pan-African economic news, particularly in West and Central Africa. The agency publishes daily news on nine African economic sectors: Public Management, Finance, ICT, Agribusiness, Energy, Mining, Transport & Logistics, Communication, and Training.

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