Sub-Saharan Africa’s GDP growth faces headwinds, raising concerns for poverty reduction
According to the recently released Global Economic Prospects report, GDP growth in Sub-Saharan Africa (SSA) is expected to face further declines, posing significant challenges for the region’s economic development and poverty reduction efforts. The report projects a decline to 3.2 percent in 2023, followed by a moderate pickup to 3.9 percent in 2024. However, the recovery is projected to be uneven across countries, with several major economies facing significant obstacles to growth.
One of the key concerns highlighted in the report is the deceleration of economic growth in South Africa. The projected growth for the country in 2023 is a mere 0.3 percent, primarily due to the adverse impact of widespread power outages on economic activity. These power outages, coupled with other structural challenges, have contributed to the persistence of inflationary pressures, further dampening growth prospects in the country.
In Nigeria, the largest economy in SSA, the growth outlook is also underwhelming. The report highlights that growth is expected to remain barely above population growth rates. This means that the pace of economic expansion is far slower than what is required to make significant strides in reducing extreme poverty. The challenges facing Nigeria’s economy, including structural bottlenecks, weak infrastructure, and limited diversification, pose substantial hurdles to achieving sustainable and inclusive growth.
However, the downgrades in economic outlook extend beyond the major regional economies. Many countries in SSA are grappling with elevated costs of living, which are restraining private consumption, and tighter policies that are holding back investment. These factors have combined to hinder economic recoveries and impede growth prospects across the region.
Furthermore, the report highlights the impact of global financial conditions and weak global growth on the SSA region. These external factors, combined with domestic vulnerabilities, have further constrained economic recoveries and limited the potential for robust growth. As a result, the forecast suggests that recoveries in the region will remain subdued, exacerbating the challenges faced by governments in achieving their development objectives.
A particularly alarming aspect of the report is the projection for per capita income growth in SSA. The forecast indicates that per capita income is expected to grow by less than 1 percent annually on average over the forecast horizon. Moreover, in more than a fifth of the region’s economies, including the three largest, average per capita income growth in 2023-24 is expected to be below 0.5 percent, with negative growth in over a tenth of the countries. These figures paint a bleak picture for poverty reduction efforts, as nearly 40 percent of SSA’s population will find themselves living in countries with lower per capita incomes in 2023 than they did in 2019.
The implications of these economic trends are significant. The stagnant per capita income growth and slow overall GDP expansion raise concerns about the region’s ability to alleviate poverty and achieve sustainable development goals. Without substantial improvements in economic performance and the implementation of effective policies, the region’s poverty reduction efforts may face significant setbacks.
Sub-Saharan Africa’s GDP growth is facing headwinds, with the region expected to experience further declines in the near term. Challenges such as power outages, inflation, structural weaknesses, and tight global financial conditions are hampering economic recoveries and limiting growth prospects. The bleak outlook for per capita income growth raises concerns about poverty reduction efforts, as a significant proportion of the population is expected to live in countries with lower per capita incomes in 2023 compared to 2019. Addressing these challenges will require concerted efforts from governments, policymakers, and international partners to implement sound economic reforms, foster investment, and promote inclusive growth to drive sustainable development in the region.
