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How Africa Is Poised for Economic Growth

World finance graphic. (Adobe Stock)
World finance graphic. (Adobe Stock)

In a report earlier this month, the African Development Bank Group (AfDB) said Africa's economy is expected to grow at an average rate of 4% in 2023 and 2024, surpassing the global projections of 2.7% and 3.2% respectively.

The AfDB, a regional development finance institution based in Abidjan, Ivory Coast, released its biannual Macroeconomics Performance and Outlook Report, which provides comprehensive analysis of the economic situation and outlook for African countries.

Here are some highlights.

Africa's growth performance and outlook (2020-2024)

The AfDB is expecting stable and resilient growth across all five African regions "despite the confluence of multiple shocks" including the increasing effects of climate change, ongoing COVID-19 pandemic and spillover effects of conflict and insecurity in Africa and Russia's invasion of Ukraine.

According to the report, these external factors have caused significant instability in financial markets worldwide which led to inflationary pressures, higher costs of capital and debt repayment, disruption of global supply chains and a decrease in demand from major export markets such as Europe and China, which are major trading partners for Africa.

The African Development Bank Group's projected growth performance and outlook for Africa by region, 2020–2024.
The African Development Bank Group's projected growth performance and outlook for Africa by region, 2020–2024.

North Africa

The report says the economic growth rate in North Africa reached 4.3% in 2022 compared to 5.4% in 2021, largely due to the severe contraction in Libya and the drought in Morocco.

However, it is predicted to remain stable at 4.3% in 2023, with a sustained growth in other parts of the region. But the report also shows a 0.9% decline in real GDP in 2024, attributing it to the fluidity in Libya’s political situation and climate shocks.

East Africa

The report foresees East Africa's growth rate to return to its pre-pandemic level above 5.0% in 2023 and 2024.

Rwanda is projected to be the fastest-growing country in the region in 2023 and 2024, with growth rates exceeding 7%, driven by increased infrastructure spending.

Meanwhile, Uganda and Ethiopia are also expected to experience strong growth in 2023 and 2024, surpassing 5%, due to advancements in the oil sector for Uganda and ongoing investment in infrastructure for Ethiopia.

Despite a diverse production structure in East Africa, most countries in the region are mainly commodity importers and are therefore affected by high international prices, as well as frequent climate shocks and insecurity, especially in the Horn of Africa.

West Africa

Growth in West Africa has decelerated to 3.6% in 2022, down from 4.4% in 2021, due to slowdowns in the two largest economies in the region, Ivory Coast and Nigeria. But sustained economic performance in the region’s more diversified economies is expected to drive the average regional growth to 4.1% in 2023 and 4.3% in 2024.

The report adds that Nigeria's growth prospects weakened due to uncertainty and insecurity ahead of the 2023 general elections and limited investment. Therefore, real GDP growth is estimated to be at 3.1% in 2023 before slowly rising to 3.3% in 2024.

Meanwhile, Ivory Coast's growth is projected to increase from 6.8% in 2022 to 7.2% in 2023 due to investments in logistics infrastructure and energy projects.

Senegal's growth is expected to accelerate from 4.7% in 2022 to 10.2% in 2023, driven by potential oil and gas exports and recovery in tourism and agriculture.

Central Africa

The AfDB report forecasts Central Africa will see a slight drop in growth from 4.7% in 2022 to 4.3% in 2023 and 4.2% in 2024, as global demand picks up and domestic conditions improve. This will drive consumer demand and investment, after a period of risk aversion during COVID-19.

Southern Africa

The report shows that economic growth in southern Africa has declined from 2.5% in 2022 to 2.3% in 2023, citing South Africa, the region’s largest economy and main trading partner, which has been hampered by higher interest rates, weak domestic demand and persistent power outages.

In contrast, according to the AfDB report, the region is expected to see a modest 0.5% rebound and reach 2.8% growth by 2024.

Top 5 African nations with projected GDP growth

The AfDB report also provided each African country's average predicted GDP growth for 2023 and 2024. The top five nations include Libya, Niger, Senegal, Rwanda and Ivory Coast.