The World Bank has revised its 2024 economic growth forecast for sub-Saharan Africa, lowering it from 3.4% to 3% due to the severe economic toll of the ongoing civil war in Sudan. Despite this setback, growth is still projected to improve from last year’s 2.4%, largely supported by increased private consumption and investment, according to the latest regional economic outlook report, Africa’s Pulse.
Andrew Dabalen, the World Bank’s Chief Economist for Africa, described the recovery as being “in slow gear,” signaling that while growth has returned, it remains modest and faces significant challenges. The report suggests that moderating inflation in many African nations will provide some relief, enabling central banks to ease their elevated lending rates.
Sudan’s civil war has had a devastating impact on the region, not only causing widespread destruction and displacement but also dragging down the overall growth rate. The World Bank estimates that if not for the conflict in Sudan, the region’s 2024 growth could have been 0.5% higher, in line with earlier forecasts.
Looking ahead, the World Bank anticipates growth in sub-Saharan Africa to rise to 3.9% in 2024, slightly above the previous projection of 3.8%. However, this forecast remains vulnerable to risks, including ongoing conflicts, climate-related disasters like droughts, floods, and cyclones, and the long-standing issue of high debt levels in many nations.
Country-Specific Projections
South Africa, the region’s most advanced economy, is expected to grow by 1.1% in 2023 and 1.6% in 2025, reflecting only modest improvements from the 0.7% recorded last year. Nigeria, the continent’s largest economy, is forecast to grow by 3.3% this year, with an increase to 3.6% by 2025. Kenya, East Africa’s richest economy, is expected to see a more robust expansion of 5% in 2023.
The Legacy of the Commodity Supercycle
From 2000 to 2014, sub-Saharan Africa enjoyed an average annual growth rate of 5.3%, buoyed by a global commodity boom. However, this momentum began to slow after commodity prices collapsed, a slowdown further exacerbated by the COVID-19 pandemic. Dabalen warned that continued sluggish growth could have catastrophic long-term consequences for the region, particularly in efforts to reduce poverty.
A major challenge facing sub-Saharan Africa is the lack of both public and private investment, which has remained weak despite a modest recovery in foreign direct investment (FDI) since 2021. Dabalen stressed the need for significantly higher investment levels to accelerate economic recovery and reduce poverty.
Rising Debt and Its Consequences
Debt remains a critical issue for many countries in the region. High debt service costs are placing enormous pressure on national budgets, particularly in countries like Kenya, which experienced deadly protests against tax hikes earlier this year. Dabalen highlighted the “staggering levels of interest payments” many African countries face, attributing the problem to a shift in borrowing strategies over the past decade. Governments have increasingly turned to financial markets for loans, moving away from lower-cost credit provided by institutions such as the World Bank.
The region’s total external debt has surged to approximately $500 billion, up from $150 billion just 15 years ago, with much of the debt owed to bond market investors and China. Several countries, including Chad, Zambia, Ghana, and Ethiopia, have defaulted on their debt obligations in recent years and are undergoing restructuring processes under the G20’s Common Framework initiative. While Chad, Zambia, and Ghana have completed their restructurings, Ethiopia is still negotiating its debt overhaul.
Dabalen emphasized that unresolved debt issues are causing uncertainty, delaying investment and recovery efforts, and undermining the prospects for both the debtor countries and their creditors.
As the region grapples with these complex challenges, the World Bank’s report underscores the need for a coordinated approach to address the risks of conflict, climate disasters, and unsustainable debt, while also fostering investment to stimulate long-term growth.
