By Christabel Ligami
Africa’s economic growth has decreased considerably over the past year to a growth rate of 3.6 per cent in 2022. This follows a 4.6 per cent rebound from the COVID-19 crisis in 2021, says an overview report of recent economic and social developments in Africa by the Economic Commission for Africa (ECA).
The overview report was presented at the Experts meeting ahead of the 55th Conference of African Ministers of Finance, Planning and Economic Development in Addis Ababa, Ethiopia by Adam Elhiraika, ECA Director, Macroeconomics & Governance Division.
According to the report, owing to a slowdown in the global economy, a rise in prices fueled by the Ukrainian conflict, climate change and worsening international economic and financial conditions, growth in Africa has been negatively affected, as a result of the multiple economic shocks over the period.
“The increase in global demand, higher crude oil prices, the loosening of COVID-19 restrictions in most countries and the resulting increase in domestic consumption and investment significantly contributed to the initial resurgence,” noted Mr Elhiraika.
However, he said in the developing world, Africa has been the fastest expanding region after East and South Asia.
The report shows that growth in Africa in 2022 was mainly driven by growth in the East, North and West African sub regions. It was estimated that growth in East Africa would reach 5.1 per cent in 2022 and stabilize around the same level in 2023.
“Growth in the sub region will continue to be driven by the rebound of service and industrial activity, higher State spending, increased trade, recovery of the tourism sector, closer regional linkages through the East African Community and increased infrastructure investments, in particular in Rwanda and Uganda,” says the report.
In Central Africa, it was estimated that growth would reach 3.4 per cent in 2022, up from 1.4 per cent in 2021, mainly driven by growth in Cameroon and Gabon, owing to an increase in oil prices coupled with strong domestic production in both countries.
In West Africa, Senegal is expected to continue experiencing remarkable improvement in its rate of growth in 2023 owing to the commencement of hydrocarbon exports, which is coinciding with rising natural gas prices.
Owing to the continued weakness of the oil sector, however, the real GDP growth of Nigeria was predicted to decelerate from 3.6 per cent in 2021 to 3.3 per cent in 2022. The West African subregion’s growth is expected to rise slightly from 3.6 in 2022 to 3.8 per cent in 2023.
Growth in North Africa is expected to accelerate from 3.9 per cent in 2022 to 4.8 per cent in 2023, largely because of the expected rise in demand in the Eurozone.
As a result, demand for exports from North African countries will increase, the number of tourist arrivals will rise, and remittance inflows are expected to increase in 2023. Such countries as Algeria, Morocco and Tunisia are expected to experience positive effects, as they conduct higher levels of trade with the Eurozone.
Slow growth is expected in most Southern African countries, led by the subregion’s largest economy, South Africa, and reaching a subregional average of 2.8 per cent.
While the number of poor people in Africa declined between 2020 and 2021, it rose again by 18 million between 2021 and 2022, with 545 million people living in poverty.
144 million non-poor were at high risk of falling into poverty, implying that 10 percent of Africa’s population were vulnerable to fall into poverty in 2022.
Based on the report findings, ECA recommends that African governments should design and implement credible macroeconomic frameworks to build production capacity and enhance value addition and job creation and structural transformation; mobilize domestic resources through effective tax policies and the use of other innovative mechanisms and instruments, including financial flows from carbon markets and stimulate private sector investment; develop their domestic financial markets with sound and effective regulatory frameworks and regional depth.
“Effective coordination between monetary and fiscal policy is critical to reduce inflation while shielding the most vulnerable households,” said the ECA Director.
“The current international financial architecture needs to be reformed to enable African countries gain access to resources more easily and at a lower cost.”
He added that countries need to take advantage of the AfCFTA to accelerate industrialization and diversification.
The current international financial architecture needs to be reformed so as to enable African countries to gain access to resources more easily and at a lower cost. Such instruments as the Liquidity and Sustainability Facility and the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative could grant access to lower borrowing costs and save African Governments, said Mr Elhiraika.