World Bank cuts Sub-Saharan Africa economic growth to 2.5%

The World Bank has said economic growth in Sub-Saharan Africa is forecast to decelerate to 2.5 percent in 2023, from 3.6 percent in 2022.

In its Africa’s Pulse report, which was released on Wednesday in Washington DC, the World Bank said Sub-Saharan Africa’s economic outlook remains bleak amid an elusive growth recovery.

The World Bank further points out that rising instability, weak growth in the region’s largest economies, and lingering uncertainty in the global economy are dragging down growth prospects in the region.

Africa’s Pulse is a bi-annual publication of the Office of the Chief Economist in the World Bank Africa Region. It analyses the short term economic prospects for the continent and current development challenges, as well as a special development topic.

In Uganda, the World Bank projects that real GDP growth is estimated to reach 5.7 percent in FY 2022/23, albeit still below the pre-Covid-19 projection of 6.5 percent.

In per capita terms, the World Bank said growth in Sub-Saharan Africa has not increased since 2015. In fact, the region is projected to contract at an annual average rate per capita of 0.1 percent over 2015-2025, thus potentially marking a lost decade of growth in the aftermath of the 2014-15 plunge in commodity prices.

“The region’s poorest and most vulnerable people continue to bear the economic brunt of this slowdown, as weak growth translates into slow poverty reduction and poor job growth,” said Dr Andrew Dabalen, World Bank Chief Economist for Africa. 

“With up to 12 million young Africans entering the labor market across the region each year, it has never been more urgent for policymakers to transform their economies and deliver growth to people through better jobs,” he added.

Despite the gloomy outlook, there are a few bright spots. Inflation is expected to decline from 9.3 percent in 2022 to 7.3 percent in 2023 and fiscal balances are improving in African countries that are pursuing prudent and coordinated macroeconomic policies.

In 2023, the Eastern African community (EAC) is expected to grow by 4.9 percent while the West African Economic and Monetary Union (WAEMU) is set to grow by 5.1 percent. However, debt distress remains widespread with 21 countries at high risk of external debt distress or in debt distress as of June 2023.

Overall, current growth rates in the region are inadequate to create enough high-quality jobs to meet increases in the working-age population. Current growth patterns generate only 3 million formal jobs annually, thus leaving many young people underemployed and engaged in casual, piecemeal, and unstable work that does not make full use of their skills.

The World Bank advises that creating job opportunities for the youth will drive inclusive growth and turn the continent’s demographic wealth into an economic dividend.

“The urgency of the jobs challenge in Sub-Saharan Africa is underscored by the huge opportunity from demographic transitions that we have seen in other regions. This will require an ecosystem that facilitates private-sector development and firm growth, as well as skill development that matches business demand,” said Mr Nicholas Woolley, World Bank Economist and contributor to the report. 

The development of labor-intensive manufacturing seems to be missing in Africa, limiting further effects for the indirect job creation in support services and international trade. This may be partly due to a lack of capital, which continues to hamper the structural transformation required for good quality jobs.

The World’s Africa’s Pulse report states that while the region contributes 12 percent of the global working age population, Sub-Saharan Africa owns only 2 percent of the global capital stock. This means people have fewer assets with which to be productive in Sub-Saharan Africa, compared to other regions.

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