2023 has been a difficult year for African economies – IMF asserts
This year 2023 the International Monetary Fund (IMF) notes, has been a very difficult year for sub-Saharan African economies.
In the Fund’s October 2023 Regional Economic Outlook Report, the IMF painted a challenging picture for sub-Saharan African economies, citing a tumultuous year marked by a confluence of factors.
According to the IMF, the inflationary shock triggered by Russia’s war in Ukraine has reverberated globally, leading to higher interest rates, a slowdown in international demand, widened spreads, and persistent exchange rate pressures.
Consequently, growth in 2023 for Africa is projected to decline for the second consecutive year, settling at 3.3 percent compared to 4.0 percent in the previous year.
While the IMF anticipates a rebound in 2024, with growth expected to rise to 4.0 percent, it underscores the need for vigilant policy measures by African governments.
The positive outlook by the IMF is however, contingent on robust performances in non-resource-intensive countries, signaling a potential divergence in economic trajectories within the region.
Despite signs of improvement in macroeconomic indicators, the report by the IMF highlights several key challenges that demand decisive policy action by African governments in order to achieve the projected 4 percent growth rate for 2024 and they include;
Inflationary Pressures: Inflation remains persistently high, with 14 countries experiencing double-digit inflation. Even in countries with explicit inflation targets, the rate remains above the set targets, posing a significant challenge to economic stability.
Exchange Rate Volatility: Sub-Saharan Africa grapples with substantial exchange rate pressures, indicating vulnerability in the region’s economic landscape. The persistence of these challenges requires strategic interventions to stabilize currency markets.
Debt Vulnerabilities: The report underscores elevated debt vulnerabilities, citing ongoing funding challenges due to high borrowing rates. The rollover of debt is identified as a formidable challenge, particularly as half of the low-income countries in the region face high risk or are already in debt distress.
Economic Divergences: While a recovery is underway, the IMF points out widening economic divergences within the region. Notably, per capita incomes in resource-intensive economies remain subdued, raising concerns about uneven economic growth.
The IMF however, cautions that the anticipated rebound is not guaranteed, emphasizing the need for sustained reform efforts, political stability, and proactive measures to address external risks. The report underscores the delicate tradeoffs that policymakers must navigate to ensure a resilient and inclusive recovery for sub-Saharan Africa in the face of the aforementioned challenges.
