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Prospects for Economic Growth in Africa

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Prospects for Economic Growth in Africa

Africa’s economic momentum is moving towards sustainable growth. This trend is mainly driven by the outstanding economic performance of the « Lions of Africa », a group of emerging economies and countries with remarkable economic growth rates on the continent.

Economic growth on the African continent

With Africa’s vast potential and advantages in many areas, the continent’s economic growth is promising. In addition, African governments and heads of state are making efforts, embodied in initiatives and strategies, to achieve the continent’s development goals by 2030.

First and foremost, regional integration promises to be a powerful engine for growth. In particular, the African Continental Free Trade Area (AfCFTA) aims to create a single market for goods and services across the continent. The market serves as a lever for intra-African trade.

Second, much of the potential for economic growth lies in the exploitation of natural resources and renewable energy. For example, the continent is particularly rich in solar energy, which can help lower production costs and reduce dependence on fossil fuels.

Finally, according to the latest World Bank figures, several African countries are experiencing growth rates above the global average, illustrating the region’s economic potential.

However, realizing this potential depends largely on effective regional integration, the transition to renewable energy sources, and the ability of countries to sustain high growth rates.

Despite efforts and initiatives, the challenge of inclusive growth and development remains in the region. Income disparities vary considerably from country to country, reflecting the continent’s economic, social, and political diversity.

GDP trends in the Africa region

The evolution of Africa’s GDP has shown that its economic resilience has faced major challenges. Over the years, the continent has experienced uneven GDP growth. According to World Bank projections for 2023, Africa’s average GDP is expected to stabilize at 4 %. Among the continent’s emerging economies, Ethiopia stands out with particularly rapid average GDP growth.

It should be stressed that Africa’s economic growth outlook is subject to continuous revision due to various factors such as resilience to COVID-19, post-pandemic recovery, the rise of the digital economy, and financial inclusion.

Africa’s most developed countries

Africa’s most developed countries, commonly referred to as the ‘African Lions’, include South Africa, Nigeria, Egypt, and Morocco. South Africa’s GDP was 405.9 billion USD in 2022. Morocco’s GDP reached 134.18 billion USD, while Egypt’s nominal GDP in constant terms was estimated at 477 billion USD for the same year.

Other countries show impressive growth rates, such as Libya, which, despite a period of national reconciliation, recorded growth of 37.5 %, followed by Djibouti at 9.9 % and Botswana at 7.5 %. Finally, according to the World Bank, Kenya, Tunisia, Rwanda, and Botswana are the fastest-growing countries in Africa.

Role of Sub-Saharan Countries

Sub-Saharan Africa plays a key role in Africa’s economic growth. Despite challenges such as the COVID-19 pandemic and falling commodity prices, the region has shown strong economic resilience of Africa. Immediately following the effects of the pandemic, sub-Saharan Africa began an economic recovery that will be sustained by a GDP growth rate of 4.7 % in 2021.

It can be argued that the sub-Saharan region has considerable economic potential, not least because of its natural resources such as oil, gas, and minerals, which offer enormous economic opportunities in response to international calls for a transition to a low-carbon economy. However, the undervaluing of these resources is leading to inadequate levels of productivity, thereby hampering economic growth.

Sub-Saharan countries therefore need to strengthen their resilience and implement structural reforms aimed at diversifying their economies, improving competitiveness, and stimulating domestic activity. In addition, as mentioned above, investment in human capital is crucial to ensure inclusive growth.

Challenges in Sub-Saharan Africa

Sub-Saharan Africa faces several economic challenges. The slowdown in global growth, the lingering effects of the COVID-19 pandemic, and socio-political and security tensions in several countries are major obstacles and challenges for the continent.

  • Inflation, driven by the destabilization of the foreign exchange market, remains a major challenge for some countries, such as the DRC.
  • Weak external demand and tighter global financial conditions have hampered the post-COVID recovery in many countries.
  • Congestion in South Africa’s energy and transport sectors has also contributed to a slowdown in growth.
  • Closer economic ties with China, while generally beneficial, can also pose risks in terms of economic dependence.

In addition, the expansion of domestic consumption and demand, as well as the development of the physical resources needed for technology-intensive sectors, remain challenges to raising growth and productivity, particularly in key sectors such as agriculture and manufacturing.

Outlook for African economic development in 2023

By 2023, economists predict a significant economic recovery in some parts of Africa, albeit with persistent challenges such as rising debt and food insecurity. The African Development Bank highlights the critical role of private finance in supporting climate action and green growth on the continent.

In the North Africa region, growth is expected to decline by 1.1 %, mainly due to a contraction in Libya and a drought in Morocco. However, growth is projected to stabilize at 4.3 % in 2023, boosted by a strong recovery expected in these two countries.

In Sub-Saharan Africa, economic growth is expected to slow to 2.5% in 2023, after reaching 3.6 % in 2022. This is mainly due to bottlenecks in the energy and transport sectors in South Africa.

Overall, the economic outlook remains positive and stable for 2023, with an expected recovery to 4 % and further consolidation to 4.3 % in 2024. It is estimated that 18 African countries will experience growth rates above 5% in 2023, rising to 22 in 2024.

IMF Forecasts for Africa in 2023

According to the International Monetary Fund (IMF), the economic outlook for Africa in 2023 remains positive overall, despite the global economic slowdown. The IMF forecasts average real GDP growth in Africa of 4.1 %, up from 3.8 % in 2022 and above the global average. However, there are differences between regions:

  • Sub-Saharan Africa is expected to see growth slow to 3.6 %, followed by a rebound to 4.2 % in 2024.
  • West Africa, on the other hand, is expected to grow by 3.3 % in 2023.

The IMF also points out that global inflation will fall from 8.8 % in 2022 to 6.6 % in 2023, reaching 4.3 % in 2024. However, it will remain above pre-pandemic levels.

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