The African Development Bank (www. AfDB. org) has revised down its short- and medium-term macroeconomic forecasts for Africa for 2023 and 2024 to 3. 4% and 3. 8% from 4. 0% and 4. 3%.
The decline figures reflect the persistent long-term effects of COVID-19, geopolitical tensions and conflicts, climate crises, the global economic slowdown and the limited fiscal space available to African governments to adequately respond to crises and maintain the progress of the post-pandemic economic recovery.
The updated data was released on Thursday, November 29, in the Africa Macroeconomic Outlook and Performance (EOM) Update for 2023, a follow-up to the Bank Group’s Africa Economic Outlook 2023 (https://apo-opa. co/3N6vYsH). Published in May.
Although inflationary pressures are easing globally, they persist in Africa and continue to weigh heavily on the continent’s economic functionality in the short to medium term, according to the update. Inflation in Africa is now expected to average 18. 5% and 17. 1% in 2023 and 2024, respectively.
Professor Kevin Urama, Chief Economist and Vice President of the Bank Group, said: “The challenging global economic environment and crises continue to shape Africa’s macroeconomic performance. Persistent inflationary pressures threaten to erase any macroeconomic progress made since the dangers of the pandemic were mitigated, while the continued depreciation of national currencies in many countries has exacerbated debt-servicing costs.
“In the face of regional and global shocks, the Bank remains resolute in supporting African countries to better navigate these challenges and put economic growth back on track,” he added.
In the short term, the Ministry of Education’s update urges countries to continue to implement restrictive financial policies to engage inflation. This should be supported through fiscal policies that promote economic diversification and remove supply-side constraints.
In the medium and long term, it urges governments to increase effective investments in human capital and physical infrastructure to boost productivity, regain momentum for economic expansion, and create opportunities for more inclusive and sustainable development.
The revised inflation rates constitute an acceleration of 3. 4 and 7. 6 percentage points, respectively, compared to the previous projection. Current inflation pressures have been largely fueled by source shocks in the agricultural sector, higher imported inflation due to weak local currencies, and elevated commodity prices. and continued fiscal dominance in several African countries.
Increasing cost-of-living pressures have eroded the purchasing power of Africans, posing the threat of further increase in poverty.
Among the findings of the update: The sluggish economic expansion is weighing on demand for African exports, a trend that is expected to persist for much longer than expected.
It also emerges that the expected economic slowdown in complex economies and lackluster expansion in China by old standards are weighing on the expansion.
“This has put increased pressure on African countries, especially those that rely on the Chinese market for their commodity exports. A stronger China policy can contribute to the global economic recovery and have positive effects for African countries for which China remains a major trading partner. These points can help mitigate adverse risks to the economic outlook,” the report states.
Conversely, the Ministry of Education’s 2023 update notes that climate shocks, coupled with worsening geopolitical tensions in the Middle East and Russia’s extended invasion of Ukraine, may lead to further disruptions to global industry and foreign investment flows. This may simply cause a new circular of extended tightening of global monetary conditions, most likely to exert additional depreciation pressures on national currencies, increasing debt-servicing prices, exacerbating emerging debt service prices, and worsening the continent’s financing shortage.
Staying afloat in the face of global crises
The Education Ministry’s update notes that fiscal and coordinated policies, underpinned by an easing of fiscal dominance, will be key to rebuilding reserves in the face of shocks.
Targeted and phased investments to address source constraints, in addition to addressing structural weaknesses, would counteract the slowdown in economic recovery momentum and put African economies on a higher and more sustainable path of expansion.
To sustainably reduce inflationary pressures, the report urges African countries to remove barriers to domestic sources to respond to emerging foreign commodity costs and increase labour productivity through targeted investments in infrastructure and human capital.
Addressing obstacles to greater domestic resource mobilization will address the current funding shortage.
Launched in January 2023, the Africa Macroeconomic Outlook and Performance report complements the African Development Bank’s annual Africa Economic Outlook report, which focuses on key emerging policy issues applicable to the continent’s development. The MOE is published in the first and fourth quarters of each year; This update precedes the 2024 edition of the MOE, which highlights changing macroeconomic situations in the face of unprecedented shocks.
Click here (https://apo-opa. co/4a9zJaW) for more information and to download the report.
Media Contact: Emeka Anuforo Department of Communication and External Relations media@afdb. org
About the African Development Bank Group: The African Development Bank (AfDB) Group is Africa’s leading progressive financial institution. It contains 3 separate entities: the African Development Bank (AfDB), the African Development Fund (ADF), and the Nigerian Trust Fund (NTF). ). With a presence in 34 African countries and an external workplace in Japan, the AfDB contributes to the economic and social progress of its 54 regional member states. For more information: www. AfDB. org
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