Addressing multiple shocks can turn around Africa’s economic growth: ECA Macroeconomics Chief
Addis Ababa, March 16, 2023 (FBC) – Africa’s economic growth is projected to rise slightly to 3.9% after a considerable decrease to 3.6 per cent over the past year in 2022, says an overview report of recent economic and social developments in Africa by the Economic Commission for Africa (ECA).
Presenting the report’s analysis at the on-going Experts meeting ahead of the 55th Conference of African Ministers of Finance, Planning and Economic Development in Addis Ababa, Ethiopia, Adam Elhiraika, ECA Director, Macroeconomics and Governance Division centred the complex economic and financial picture on the confluence of shocks that slowed down the global economy. These include the COVID-19 pandemic impact, the rise in prices fueled by the conflict in Ukraine and extreme weather patterns.
“The result is that Africa currently accounts for the largest share of the world’s poor, with 149 million previously non-poor Africans now facing the risk of falling into poverty,” he said.
The global picture is different. In 2022, Africa saw the fastest expansion among developing world countries after East and South Asia. This is due to improvements in East, North and West African sub-regions, which drove Africa’s overall growth.
“We can project, based on our analysis that East African countries will continue to show improvements, driven by the rebound of service and industrial activity, higher State spending, increased trade, recovery of the tourism sector, closer regional linkages through the East African Community and increased infrastructure investments, in particular in Rwanda and Uganda,” said Elhiraika.
In North Africa, growth is expected to accelerate from 3.9 per cent in 2022 to 4.8 per cent in 2023, largely because of the expected rise in import demands in the Eurozone.
“As a result, demand for exports from North African countries will increase, the number of tourist arrivals will rise, as will remittance inflows. Countries such as Algeria, Morocco and Tunisia are expected to experience positive effects, as they conduct higher levels of trade with the Eurozone,” explained Elhiraika.
He said that in Central Africa, strong domestic production in Cameroon and Gabon has contributed to Africa’s growth in the push to respond to the global increase in oil prices. And in West Africa, Senegal is expected to continue experiencing remarkable improvement in its rate of growth in 2023 owing to the commencement of hydrocarbon exports, which is coinciding with rising natural gas prices.
Further, West Africa’s growth is expected to rise slightly to 3.8 per cent in the course of 2023; while slow growth is expected in most Southern African countries led by the subregion’s largest economy, South Africa, reaching a subregional average of 2.8 per cent.
“Ultimately, governments need effective coordination between monetary and fiscal policy – this is critical for reducing inflation while shielding the most vulnerable households,” said the ECA director.
Moreover, to make inroads in meeting the SDGs, governments need to improve macroeconomic fundamentals and deepen structural transformation. They also need to “enhance domestic resource mobilization, reduce illicit financial flows and integrate innovative mechanisms and instruments such as green financing and carbon markets to spur and stimulate investments,” he said, adding that the African Continental Free Trade Area – AfCFTA must be accelerated to speed up industrialization and diversification.
Change, he said, needs to go beyond the national level. A reform of the global financial architecture is key to accessing the much-needed affordable long-term financing with better lending terms by multilateral development banks, stressed Elhiraika, adding that the Liquidity and Sustainability Facility and the Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative could grant access to lower borrowing costs and allow African Governments to meet the SDGs.