BusinessDay
NigeriaDecides2023

Sub-Saharan Africa’s economic growth to decelerate to 3.3% in 2022 – World Bank

…projects elevated debt level at 58.6% of GDP

The World Bank has reviewed downwards the economic growth outlook for Sub-Saharan Africa (SSA) to 3.3 percent in 2022 from the initial projection of 3.6 percent in April, due to the slowdown in global growth and the ongoing crisis between Russia and Ukraine.

This was revealed in the bank’s latest Africa’s Pulse, a bi-annual analysis of the near-term regional macroeconomic outlook, where it noted that global headwinds are slowing Africa’s economic growth as countries continue to contend with rising inflation and hindering progress on poverty reduction.

This new projection is also a 19.5 percent decline from the 4.1 percent SSA achieved in 2021.

“The war in Ukraine is exacerbating already high inflation and weighing on economic activity by depressing both business investments and household consumption, the risk of stagflation comes at a time when high interest rates and debt are forcing African governments to make difficult choices as they try to protect people’s jobs, purchasing power and development gains,” the bank said.

The report added that although African governments spent 16.5 percent of their revenues servicing external debt in 2021, yet the region’s debt level is projected to stay elevated at 58.6 percent of GDP in 2022.

“Eight out of 38 IDA-eligible countries in the region are in debt distress, and 14 are at high risk of joining them, high commercial borrowing costs make it difficult for countries to borrow on national and international markets, while tightening global financial conditions are weakening currencies and increasing African countries’ external borrowing costs.”

Read also: Nigeria’s debt to balloon further while Angola’s is seen falling says World Bank report

The report also noted that as of July 2022, 29 of 33 countries in SSA had inflation rates over 5 percent while 17 countries had double-digit inflation, adding that elevated food prices are causing hardships with severe consequences in one of the world’s most food-insecure regions.

“Hunger has sharply increased in SSA in recent years driven by economic shocks, violence and conflict, and extreme weather. More than one in five people in Africa suffer from hunger and an estimated 140 million people faced acute food insecurity in 2022, up from 120 million people in 2021,” it stated.

Andrew Dabalen, World Bank chief economist for Africa, said these trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic, adding that the threat on long-term human development raises concern, seeing the impact of high food prices on people struggling to feed their families,

“This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience,” he said.

The bank stated that the interconnected crises come at a time when the fiscal space required to mount effective government responses is all but gone, adding that in many countries, public savings have been depleted by earlier programmes to counter the economic fallout of the COVID-19 pandemic, though resource-rich countries in some cases have benefited from high commodity prices and managed to improve their balance sheet.

According to the World Bank, this challenging environment makes it essential to improve the efficiency of existing resources and to optimise taxes. In addition, creating a better environment for agribusiness and facilitating intra-regional food trade could also increase long-term food security in a region that is highly dependent on food imports.

“In the agriculture and food sector, for example, governments have the opportunity to protect human capital and climate-proof food production by re-orienting their public spending away from poorly targeted subsidies toward nutrition-sensitive social protection programmes, irrigation works, and research and development known to have high returns,” the bank stated further.