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What prospects for the African economy in 2023?

Françoise Rivière and Mathieu Morando About Françoise Rivière and Mathieu Morando
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Thursday January 19th, 2023, at 11:02 AM
In Africa according to
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What prospects for the African economy in 2023?

In 2022, Africa experienced a more marked recovery than anticipated, but also an accentuation of the structural weaknesses of its economies.

Africa has managed to return to a pace of growth similar to that seen before the pandemic faster than other regional economies, including some developing economies. However, many challenges remain, starting with the high level of public and private debt. External financing needs remain significant.

The springs of recovery

After an unprecedented recession in 2020 (-1,3%), real growth for 2021 was finally assessed at +4,3%, a marked upward revision compared to the first estimates. Part of the growth in 2021 is mechanically explained by the catch-up of the recession recorded in 2020 in the context of the global pandemic (technical rebound).

Apart from this rebound effect, African growth in 2021 is in fact very close to that observed on average before the pandemic (+3,0%, against +3,2% average annual growth rate for the period 2015-2019 ). It will accelerate in 2022 to reach 4,0% according to the IMF estimates (note that the figures announced for 2022 and 2023 in this article are based on forecasts and are therefore subject to revision).

Figure 1. Growth by major regions.
IMF, World Economic Outlook Database, October 2022; AFD calculations, Provided by the author

The sharp rise in commodity prices has been favorable to African extractive economies: stimulated by the increase in energy demand, in particular from China, oil prices and base metal prices had already experienced a significant increase in 2021 , a progression that amplified in 2022 in the context of the conflict in Ukraine and its inflationary consequences.

More structurally, the continent's most diversified economies benefited from a more buoyant international environment at the end of the pandemic, following the increase in global demand.

Due to population growth, which remains rapid on the continent (+2,5% average annual growth between 2015 and 2020, against +1,1% globally), catching up in terms of GDP per capita is much slower there. For this reason, Africa will not return to its pre-pandemic GDP per capita level until 2023 (Chart 2), when most other regions were able to recover it as early as 2021.

Chart 2. GDP per capita by major region of the world (index base 100 in 2019).
IMF, World Economic Outlook Database, October 2022; AFD calculations, Provided by the author

More resilient diversified economies

Within the continent, the recovery from 2021 was mainly driven by the most diversified economies, structurally more able to rebound in the event of external shocks.

They show higher and more stable growth rates over a long period than more specialized economies, because they are less subject to fluctuations in commodity markets or tourist flows. These economies had also managed to maintain a certain dynamism at the height of the pandemic (+1,8% real growth in 2020), in contrast to the recession recorded everywhere else.

They resumed in 2021 with a fairly sustained growth rate (+4,4%), which will continue to increase in 2022. Estimated at +5,1%, the growth of diversified African economies will almost return to its average level in 2022 before the crisis, and it is announced at +4,8% in 2023. Six of these diversified economies are thus among the ten most dynamic economies in Africa over the recent period: Senegal, Niger, Rwanda, Ivory Coast, Benin and Togo.

Chart 3. Evolution of real GDP by category of country.
IMF, World Economic Outlook Database, October 2022; AFD calculations, Provided by the author

Between 2015 and 2019, the growth of countries exporting extractive resources is relatively sluggish and no longer even covers population growth. Benefiting from the rise in commodity prices in the context of the global recovery, average growth for African oil-producing countries stood at +3,1% in 2021, and will accelerate slightly in 2022.

Finally, in Africa as elsewhere, the countries whose economic activity is highly dependent on tourism have been the more affected by the health crisis, in intensity (-7,7% in 2020) and in duration: after the technical rebound in 2021, growth remained tenuous in 2022, at +1,4%, it should only accelerate in 2023, at +3,4% according to current IMF projections.

Deteriorated debt situations and generally reduced room for maneuver for States

The pace of recovery observed in Africa since 2021 is not marked enough to erase the profound consequences of the successive crises recorded in the past, such as the fall in per capita income in many countries, the rise in poverty and unemployment, etc.

The structural weaknesses that deeply affect the continent pre-existed, but have been amplified in the recent period. In view of the significant demographic dynamism that the region is still experiencing, the rate of growth is proving insufficient to substantially improve access to foodstuffs and basic services, to finance the necessary public infrastructure and to create number of jobs to absorb the workforce arriving on the labor market. In this context, we note a decrease in the human development index (HDI) in 2020 and again in 2021, and it is very likely that school closures and the deschooling of a large number of children observed during the pandemic will have an additional impact on the “education” component of the HDI in the years to come.

Faced with these well-identified issues, the ability of governments to act is now partly burdened due to rapidly increasing indebtedness and significantly tightened financial conditions for countries that have access to external financing. None of the 36 African countries covered by a debt sustainability analysis (these analyses, conducted by the IMF and the World Bank, cover low-income developing countries eligible for the poverty reduction and growth trust fund) is no longer classified as low risk of debt distress.

In addition, the debt structure has evolved in a direction that makes debt restructuring much more difficult: in 2022, more than half of the public debt will be domestic, ahead of external obligations, the share of bilateral and multilateral creditors representing less than a fifth of the public debt.

High financing needs

In a context marked by inflation and the tightening of financing conditions on international markets, the continent's financing needs remain substantial.

In 2021, the IMF estimated at more than 400 billion dollars for the period 2021-2025 the financing needs of the African continent, a figure undoubtedly vastly underestimated as inflation continues and 'emergency' spending, such as that aimed at limiting the effects of food insecurity, has since increased. The growing costs of adapting to climate change will be added to these estimates (up to 50 billion dollars per year at a minimum will be necessary).

The IMF also points out that many countries in sub-Saharan Africa will struggle to simply meet the basic needs of their populations if they cannot count on a significant increase in international financial assistance. And yet, official development assistance (ODA) disbursements have fallen significantly according to the OECD, from a level of 4,5% as a percentage of the GDP of recipient countries in the 1990s to less than 3% more recently. .


For a more detailed analysis of these issues, read “African Economy 2023”, published by La Découverte in January 2023.The Conversation

Francoise Riviere, Head of the Economy and Strategy Unit, Africa Department, AFD, French Development Agency (AFD) and Matthew Morando, Economist, French Development Agency (AFD)

This article is republished from The Conversation under Creative Commons license. Read theoriginal article.

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