This year, Africa’s economic growth will drop to 3.4 per cent, down 0.6 percentage points from the four per cent growth recorded in 2021 due to new macroeconomic shocks.
The latest Africa Pulse report, a biannual analysis of Africa’s macroeconomic outlook by the World Bank, released on Wednesday, said inflation and higher living costs contribute to the decline.
According to the report, the decrease is from economic shocks, including effects of new Covid-19 variants, inflation, supply disruptions, rising public debt, climate shocks and a general slowdown in the global economy, especially in the US and China.
“The slowdown in growth reflects challenges facing Africa before the Ukraine crisis but have been exacerbated by the war,” said Albert Zeufack, the World Bank’s chief economist for Africa.
The report suggests that the impacts of the Russia-Ukraine war on African economies should be negligible because of “limited trade exposure”.
“Resource-rich countries, especially their extractive sectors, will see improved economic performance due to the war in Ukraine, while non-resource rich countries will experience a deceleration in economic activity,” the World Bank said in a statement on Wednesday.
Countries rich in metal and mineral resources like DR Congo and Zambia are expected to grow by 4.8 per cent in the next two years. The report states that metal prices surge due to increased demand from a general transition from fossil fuels.
However, the situation will be different for non-resource rich countries like Uganda, which imports more than 25 per cent of its wheat from Russia and Ukraine and is also poor in metal and mineral resources.
East Africa and southern Africa are expected to register the highest growth. The World Bank says it is “characterised by a diversified economy that is more integrated than other regions in sub-Saharan Africa”.
In addition, Kenya’s subsidies to oil marketers “have contributed to stopping fuel prices from rising”, but the global financier warns that “it will place pressure on public finance if the war continues”. Kenya’s economic growth rate in 2022 is expected to fall by 1.7 percentage points to about 3.3 per cent.
Rwanda, whose economy grew by 10.9 per cent last year, is projected to register the highest decline in the region, falling by 3.3 per cent in 2022.
Following the dim projections, the World Bank says that it is highly unlikely that Africa will reduce poverty or achieve inclusive growth anytime soon, as mounting inflation will aggravate the situation.
“As African countries face continued uncertainty, supply disruptions and soaring food and fertiliser prices, trade policy can potentially play a key role by ensuring the free flow of food across borders,” Mr Zeufack said.
“Amid limited fiscal space, policymakers must look to innovative solutions such as temporarily reducing or waiving import duties on staple foods to provide relief to their citizens.”