African GDP growth stabilizes in 2023.
Average African GDP growth stabilizes in 2023 despite recent headwinds, says new African Development Bank (ADB) report. Unfavorable global conditions have led to rising inflation, higher debt service costs and an increased risk of excessive debt in developing countries
African economies remain resilient and with a stable outlook this year and next, despite tight global financial conditions, predicts the African Development Bank (AFDB) in a new report.
The report Africa's Macroeconomic Performance and Prospects in 2023 (MEO), estimates that the average African GDP will stabilize at 4% over the next two years, against 3,8% in 2022.
The report
Presenting the report on February 17, 2023, on the sidelines of the 36th Assembly of the African Union in Addis Ababa, Chief Economist and Vice President of the AfDB, Kevin Urama, said that the continent could benefit from the high demand for its raw materials. raw materials, as countries look for food and energy alternatives in response to the disruptions caused by the war in Ukraine.
The continent, he noted, remains a treasure trove for smart investors globally, but must strive for higher growth rates, more inclusive economies, and greater resilience to external shocks, ensuring that average African GDP stabilizes.
“The projected stable outlook for 2023-2024 reflects continued policy support in Africa, global efforts to mitigate the impact of external shocks and rising uncertainty in the global economy,” he said.
The new publication, to be released in the first and third quarters of each year, will provide an up-to-date, evidence-based assessment of the continent's recent macroeconomic performance and short- and medium-term outlook amid dynamic global economic developments.
The economic evolution
Unfavorable global conditions have led to rising inflation, higher debt service costs and an increased risk of excessive debt in developing countries, including Africa.
Urama urged bold political actions:
“To close the significant financing gaps in Africa, it is imperative to adopt policies that can mobilize and leverage private finance for development in Africa”.
"As with many economies in emerging markets, tightening financial conditions and the appreciation of the US dollar have had disastrous consequences for most African economies."
“It has also become difficult for African countries to access international capital markets for new financing,” he said.
Most African currencies, especially in commodity-exporting countries, have lost substantial value against the dollar in 2022 due to monetary policy tightening in the United States. Depreciation rates ranged from 21% in Malawi to 69% in South Sudan.
Urama warned that currency weakness in Africa's most globally integrated economies, such as Algeria, Kenya, Nigeria and South Africa, could persist into 2023, affecting average African GDP.
“The main drivers of currency depreciation include tighter global financial conditions,” Urama said.
African countries’ budget positions have already been strained by policy responses to Covid-19 and support for vulnerable populations against rising food and energy prices, in a context of high debt and impacts of climate change.
Other economic headwinds include the knock-on effects of rising geopolitical tensions, particularly the Russian invasion of Ukraine. These conditions are pushing price stability beyond the control of most central banks.
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Picture: © 2023 AfDB
