Africa's economic recovery in 2022 will face not only financial and economic challenges but also political and security ones. Out of the 54 African countries, 41 are expected to experience a nominal depreciation of their national currencies against the dollar by the end of 2022. The information was revealed in a report published last week by the Economist Intelligence Unit (EIU).

According to the institution, this forecast lies on the risks that still weigh on African economies, despite the post-Covid-19 global economic recovery. The risks could jeopardize the implementation of certain trade and investment agreements on the continent. EIU expects increased currency volatility, given the varied and contradictory factors that will affect the region. These factors include the lasting effects of the pandemic and weak economic recoveries, strained national finances and bullish commodity markets, the search for yield by international investors, and a rise in annual inflation, among others. 

This depreciation should accentuate the inflationary pressures that have accelerated in recent months in several African countries, EIU says. Also, the long-awaited economic recovery in Africa is undermined by difficulties such as the slow pace of the vaccination campaign on the continent, the emergence of new variants, and the persistence of political and security crises.

The report identified Ethiopia and Sudan as the two countries that are expected to experience the largest depreciation of their currencies in 2022. This comes at a time when public financing needs continue to grow, pushing African countries to borrow more and more on the bond market.

Last year, several SSA countries, including Benin, Kenya, Senegal, Ghana, and Côte d'Ivoire, were able to raise significant financing on the bond market when the pandemic was hitting hard. According to the IMF, the economic recovery of sub-Saharan Africa in 2022 should be less significant than last year. It is expected to grow by 3.7% this year, compared with an estimated 4% in 2021.

Nearly 30 African states will experience average annual consumer price inflation of 5% or more in 2022, while 10 - including Angola, Ethiopia, Nigeria, Zambia, and Zimbabwe - will have double-digit inflation, EIU says.

Moutiou Adjibi Nourou