The African Development Bank released a revised forecast for the continent's economic growth, with Africa's GDP expected to grow by 3.4% and 3.8% in 2023 and 2024, respectively, down from 4.0% and 4.3% in May.
Overall, the lower forecast is due to the negative long-term effects of COVID-19, climate shocks such as the El Niño weather phenomenon, which could lead to lower crop yields, and the escalation of geopolitical tensions in the Middle East, which could result in higher energy prices, the AfDB explained.
In addition, the projected economic slowdown in advanced economies and weak growth in China, compared to historical trends, are constraining global growth, including in Africa.
"This has placed additional strain on African countries, especially those dependent on the Chinese market for commodity exports," the report stressed.
The largest decline in GDP growth is projected for Central Africa (-0.8% compared to May), which the report attributed to "ongoing security and political challenges, particularly in Chad, the Central African Republic, and the Democratic Republic of the Congo."
In East Africa, the identical figure was revised downward by 0.7% to 3.4%, due to armed clashes in Sudan, combined with rising debt vulnerabilities and high debt servicing costs in Ethiopia and Kenya. However, growth in the region could resume to 5.1% by 2024, supported by large investment projects in the agribusiness, retail, manufacturing, tourism, and energy sectors.
The adjusted 2023 forecast for North Africa was also -0.7% of the May forecast.
"North Africa has been hampered by negative terms of trade shocks, large currency devaluations (in Egypt), and a high inflation environment (particularly in Algeria and Tunisia) that continue to constrain economic activity," the report noted.
Economic growth in Southern Africa is also forecast to be lower as the energy crisis in South Africa hits the country's output. In West Africa, the report attributes the economic decline to Nigeria's "shock therapy" in the form of fuel subsidies and exchange rate reforms, as well as Ghana's debt problems and the negative impact of terrorism on the agricultural sector in the Sahelian countries.
In addition, the report indicated that the continent, as a whole, continues to face severe inflationary pressures on short- and medium-term economic performance. Africa's inflation is estimated to average 18.5% and 17.1% in 2023 and 2024, respectively.
Furthermore, targeted and sustained investments which address supply-side challenges, including structural weaknesses, will help reverse the slowdown in economic recovery and put African economies on a higher and more sustainable growth path.