World Bank raises Sub-Saharan Africa growth to 3.4 per cent
Heavy police and military deployment in downtown Kampala as traders close their shops to protest the exorbitant taxes imposed on them by URA. Photo | Abubaker Lubowa
What you need to know:
- The higher growth level will enable countries in the region to register trade/exporting earnings and improve the standard of living among other benefits
The World Bank Group has expressed optimism that increased private consumption and declining inflation are supporting an economic growth rebound in Sub-Saharan Africa Uganda inclusive.
The higher growth level will enable countries in the region to register trade/exporting earnings and improve the standard of living among other benefits.
In the latest Africa’s Pulse report which was presented on April 8 in Washington DC, the World Bank projects that growth will rebound in 2024, rising from a low of 2.6 per cent in 2023 to 3.4 per cent in 2024, and 3.8 per cent in 2025.
The World Bank states that while inflation is cooling across most economies, falling from a median of 7.1 to 5.1 per cent in 2024, it remains high compared to pre-Covid-19 pandemic levels.
Additionally, the World Bank stresses that while the growth of public debt is slowing, more than half of African governments grapple with external liquidity problems, and face unsustainable debt burdens.
The Africa’s Pulse reveals that Public debt in Sub-Saharan Africa is expected to decline from 61 per cent of GDP in 2023 to 57 per cent of GDP in 2024. However, the risk of debt distress remains high.
This April 2024 Africa’s Edition which has been themed tackling inequality to revitalize growth and reduce poverty in Africa is to be officially released during the World Bank/International Monetary Fund Spring meeting which starts on April 15 to April 19 and brings together the finance ministers, central bank governors, and academia of the 190 member states.
Overall, the report underscores that despite the projected boost in growth, the pace of economic expansion in the region remains below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction. Moreover, due to multiple factors including structural inequality, economic growth reduces poverty in Sub-Saharan Africa less than in other regions.
“Per capita GDP growth of 1 per cent is associated with a reduction in the extreme poverty rate of only about 1 perc ent in the region, compared to 2.5 per cent on average in the rest of the world,” said Dr Andrew Dabalen, World Bank Chief Economist for Africa.
He added: “In a context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. There needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society.”
The report highlights that external resources to meet the gross financing needs of African governments are shrinking and those available are costlier than they were prior to the pandemic.
It also points out that political instability and geopolitical tensions weigh on economic activity and may constrain access to food for an estimated 105 million people at risk of food insecurity due to conflict and climate shocks. African governments’ fiscal positions remain vulnerable to global economic disruptions, necessitating policy actions to build buffers to prevent or cope with future shocks.
“Inequality in Sub-Saharan Africa remains one of the highest in the world, second only to the Latin America and Caribbean region, as measured by the region’s average Gini coefficient,” the report states.
It further shows that access to basic services, such as schooling or healthcare, remains highly unequal despite recent improvements. Disparities also exist in access to markets and income-generating activities, irrespective of people’s skills. Taxes and poorly targeted subsidies may also have an outsized impact on the poor.
“Inequality in Africa is largely due to the circumstances in which a child is born and accentuated later in life by obstacles to participating productively in markets and regressive fiscal policies," said Dr Gabriela Inchauste co-author of the report.
“Identifying and better addressing these structural constraints across the economy offers a road map for a more prosperous future,” she added.
Africa’s Pulse calls for several policy actions to foster stronger and more equitable growth. These include restoring macro-economic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor.
