The latest World Bank report indicates that growth recovery in Nigeria for the year is still fragile as oil production remains subdued.
The report, Africa’s Pulse, released yesterday in Washington DC said growth across Sub-Saharan Africa remains sluggish.
It blamed the development on uncertainty in the global economy, high inflation, a sharp deceleration of investment growth and the underperformance of the continent’s largest economies.
Nigeria and South Africa are two of the continent’s largest economies.
The report urged African governments to sharpen their focus on macroeconomic stability, domestic revenue mobilisation, debt reduction, and productive investments to reduce extreme poverty and boost shared prosperity in the medium to long term.
“Economic growth in Sub-Saharan Africa is set to slow from 3.6 per cent in 2022 to 3.1 per cent in 2023, according to the latest Africa’s Pulse, the World Bank’s April 2023 economic update for Sub-Saharan Africa. Economic activity in South Africa is set to weaken further in 2023 (0.5 per cent annual growth) as the energy crisis deepens, while the growth recovery in Nigeria for 2023 (2.8 per cent) is still fragile as oil production remains subdued.
“The real Gross Domestic Product (GDP) growth of the Western and Central Africa subregion is estimated to decline to 3.4 per cent in 2023 from 3.7 per cent in 2022, while that of Eastern and Southern Africa declines to three per cent in 2023 from 3.5 per cent in 2022,” said a World Bank statement on the report.
The bank’s Chief Economist for Africa, Andrew Dabalen, said: “Weak growth combined with debt vulnerabilities and dismal investment growth risks a lost decade in poverty reduction. Policy makers need to redouble efforts to curb inflation, boost domestic resource mobilisation, and enact pro-growth reforms—while continuing to help the poorest households cope with the rising costs of living.”
The report shows that debt distress risks remain high in 22 countries at high risk of external debt distress or in debt distress as of December 2022.
“Unfavourable global financial conditions have increased borrowing costs and debt service costs in Africa, diverting money from badly needed development investments and threatening macro-fiscal stability.”
The report also shows that high inflation and low investment growth continue to constrain African economies. It added that inflation is set to remain high at 7.5 per cent for 2023, and above central bank target bands for most countries.
“Investment growth in Sub-Saharan Africa fell from 6.8 per cent in 2010-13 to 1.6 per cent in 2021, with a sharper slowdown in Eastern and Southern Africa than in Western and Central Africa.
“Despite these challenges, many countries in the region are showing resilience amidst multiple crises. These include Kenya, Cote d’Ivoire, and the Democratic Republic of Congo (DRC) who grew at 5.2 per cent, 6.7 er cent, and 8.6 per cent respectively in 2022. In the DRC, the mining sector was the main driver of growth due to an expansion in capacity and recovery in global demand. Harnessing natural resource wealth provides an opportunity to improve fiscal and debt sustainability of African countries, but the report cautions that this can only happen if countries get policies right and learn the lessons from the past boom and bust cycles,” the bank said.
World Bank Senior Economist James Cust said rapid global decarbonisation would bring significant economic opportunities to Africa.
“Metals and minerals will be needed in larger quantities for low carbon technologies like batteries—and with the right policies—could boost fiscal revenues, increase opportunities for regional value chains that create jobs, and accelerate economic transformation,” Cust said.
According to the report, countries could more than double their average revenues from natural resources. “Tapping these fiscal resources in the form of royalties and taxes while continuing to attract private sector investment requires the right kinds of policies, reforms, and good governance. Maximizing government revenues derived from natural resources would offer a double dividend for people and planet by increasing fiscal space and removing implicit production subsidies,” the report notes.