In the face of challenging global economic environment and multiple shocks, the African Development Bank has revised its short to medium-term macroeconomic forecast for Africa, for 2023 and 2024 downwards to 3.4% and 3.8%, from 4.0% and 4.3%.
The published 2023 Africa’s Macroeconomic Performance and Outlook (MEO) update, a follow-up to the Bank Group’s 2023 Africa Economic Outlook released in May, indicates that the slightly lower figures reflect the persistent long-term effects of COVID-19, geopolitical tensions and conflicts, climate shocks, a global economic slowdown, and limited fiscal space for African governments to adequately respond to shocks and sustain post-pandemic economic recovery gains.
The published update shows that inflationary pressures are receding globally, but it still remain persistent in Africa and continue to weigh heavily on the continent’s short-to-medium term economic performance. Africa’s inflation is now projected to average 18.5% and 17.1% for both 2023 and 2024.
In his view The Bank Group’s Chief Economist and Vice President, Prof Kevin Urama stated: “The challenging global economic environment and multiple shocks continue to shape Africa’s macroeconomic performance. The entrenched inflationary pressures threaten to reverse all the macroeconomic gains made since the easing of pandemic risks while the continued depreciation of domestic currencies in many countries has exacerbated debt service costs.” He however reiterated the readiness of the bank to resolutely “support Africa countries to overcome these challenges and put economic growth back on track”.
The update findings further shows that the revised inflation rates represent an acceleration of 3.4 and 7.6 percentage points respectively from the earlier projection. The inflationary pressure has largely been fuelled by supply shocks in agriculture, stronger imported inflation due to weaker local currencies, relatively high commodity prices, and the persistence fiscal dominance in several African countries.
The elevation of the cost-of-living, with the increase in poverty index, slow global economic growth, low demand for Africa’s export, lackluster growth in China, geopolitical tensions in the Middle East and the Russian war on Ukraine, among other factors are to potentially have militating effect against Africa’s economic growth performance.
To sustainably reduce the inflationary pressures, African countries were urged to remove the obstacles preventing domestic supply from responding to higher international commodity prices and labor productivity through targeted infrastructure and human capital investment.
Africa’s Macroeconomic Performance and Outlook report complements the African Development Bank’s annual African Economic Outlook report, which focuses on key emerging policy issues relevant to the continent’s development. It was launched in January 2023, and is published in the first and fourth quarters of each year.