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Slower 2023 Growth for Many Sub-Saharan Economies

FILE: A dilapidated sign for Eskom, the South African electricity authority, stands next to electricity pylons and Table Mountain in the distance near Cape Town on January 22, 2023.

JOHANNESBURG - Sub-Saharan Africa's biggest economies will grow slower this year, crippled by chronic electricity supply problems in South Africa and cash shortages in Nigeria, a Reuters poll found, while softer commodity prices will also weigh.

The April 19-24 Reuters survey suggested growth would slow in Nigeria and South Africa to 2.7% and 0.4% this year from official figures for 2022 of 3.1% and 2.0%, respectively.

These two economies make up more than half of the continent's gross domestic product so substantially impact the region's economic prospects.

"Two years of high inflation and tightening monetary conditions mean that households in SSA [Sub-Saharan Africa] are in for a tough 2023," said Jacques Nel, head of Africa macro research at Oxford Economics.

Nel added the growth hot spots will again be in east and west Africa, but the former regional champions, Kenya and Ghana, will undoubtedly lose those titles this year.

Ghana is battling its worst economic crisis in a generation, brought on by currency depreciation and growing debt coupled with high interest rates. The poll suggests growth will slow further to 2.1% this year from 3.1% last year, uncharacteristic of the 5.1% and higher in the previous year.

Kenya's fiscal sustainability has also come into question recently, although the poll suggested it would grow 5.0% this year from 5.6% last year.

Dollar strength and critical shortages across the continent have made economic activity cumbersome and added tricky inflation dynamics in key countries like Nigeria, Ghana and South Africa.

Inflation was expected to slow to a yearly average of 14.7% in 2024 from 35.4% this year, as authorities have administered 160 basis points of interest rate hikes in this cycle.

Analysts at Capital Economics reckon recently-released inflation figures from Sub-Saharan Africa's two biggest economies are likely to put pressure on policymakers in Nigeria and South Africa to raise interest rates further.

For the two, March consumer inflation numbers were higher than in February, confirming the fight against higher prices has not yet been won.

The poll suggests inflation will be 5.8% this year in South Africa, near the top-end of its central bank's comfort level of 3%-6%, while that of Nigeria was expected to average 19.0%.

Capital Economics said core price pressures showed no sign of easing in either Nigeria or South Africa and probably remain too high for policymakers' tastes.