Africa (Commonwealth) _ The World Bank announced on Monday that it has reduced its prediction for sub-Saharan Africa’s economic growth this year from 3.4% to 3%, primarily because of the civil war-related economic devastation in Sudan.
However, the bank stated in its most recent regional economic forecast report, Africa’s Pulse, that growth is anticipated to stay comfortably above the 2.4 percent growth of the previous year due to increased private consumption and investment. “This recovery is still essentially in slow gear,” World Bank head economist for Africa Andrew Dabalen said during a press briefing on Monday. The report’s growth forecast for next year is 3.9%, which is higher than its earlier estimate of 3.8%. According to the paper, officials will be able to begin reducing high lending rates after inflation has subsided in many nations.However, the research pointed out that armed conflict and natural disasters, including droughts, floods, and cyclones, continue to pose a significant threat to the development projections.
The Bank further claimed that regional growth in 2024 would have been fifty percent higher and consistent with its original April projection if not for the conflict in Sudan, which decimated economic activity and resulted in massive displacement, famine, and other hardships.
The most developed economy in the region, South Africa, is predicted to grow by 1.1% this year and 1.6% in 2025, up from 0.7% the previous year. The survey predicts a 5% increase in Kenya, the wealthiest country in East Africa, this year, and a 3.3% increase in Nigeria this year and 3.6% in 2025.
During the 2000-2014 commodity supercycle, the sub-Saharan Africa area grew at a strong annual average of 5.3%, but when commodity prices plummeted, output began to sag. The COVID-19 pandemic hastened the slowness. “It would be catastrophic if that continued cumulatively for a long time,” Dabalen cautioned.Dabalen noted that many economies in the region lacked both public and private investments, and that the modest rebound in foreign direct investments that started in 2021 was still present.
“To be able to recover more quickly and reduce poverty, the region wants much, much larger levels of investments.”High debt servicing expenses in nations like Kenya, which was shattered by fatal protests against tax hikes in June and July, are another factor impeding growth throughout the region.
Dabalen attributed the “stunnying levels of interest payments” to governments’ decision to borrow from financial markets rather than the low-cost financing provided by organizations such as the World Bank throughout the past ten years.According to him, the bulk of the world’s economies’ foreign debt is owing to China and bond market investors, and it has increased from 150 billion dollars ten and a half ago to roughly 500 billion dollars now.
Following four years of default, Ghana, Ethiopia, Zambia, and Chad have restructured their debt under the Common Framework initiative of the G20. While the other countries have finished restructuring their debt, Ethiopia is still in the process of doing so.
“There will be a lot of ‘wait and see’ games going on as long as these debt issues are not resolved, and that is not good for the countries, and definitely not good for the creditors as well,” he stated.
Earlier this year, the World Bank predicted that, of all regions, Sub-Saharan Africa would see the highest growth in the working-age population over the next three decades, with a projected net gain of 740 million people by 2050.
It stated that just around 3 million new formal wage jobs are presently created annually, putting the region’s economy in a precarious position as up to 12 million young people will enter the labor market annually over the next few decades.
As waning inflationary pressures permit interest rate reductions, which would boost private investment and consumption, SSA growth is expected to accelerate from 3% in 2023 to 3.5% in 2024 and roughly 4% yearly in 2025–2026. From 1.8 percent in 2023 to 2.4 percent in 2024 and an average of 2.6 percent in 2025–2026, growth in the three biggest economies in the region is predicted to pick up speed. However, this is significantly slower than the typical increase for the area.
