Kristalina Georgieva, IMF Managing Director
African economies to rebound in 2024
Africa’s economic activity will likely slow again this year amid taxing headwinds but is expected to recover in 2024, according to the International Monetary Fund’s latest regional outlook.
Growth in sub-Saharan Africa’s gross domestic product is forecast to edge down to 3.3% from 4% in 2022 before bouncing back to 4% next year, the IMF said in the report, released Tuesday in Marrakech.
“A long-awaited rebound is on the horizon. Inflation is falling, public finances are stabilizing, and growth is poised to increase,” the IMF said. “Still, even though the outlook is less ominous, it is too early to celebrate.”
The region was slammed by the pandemic and surging food prices after Russia’s invasion of Ukraine, with soaring inflation leading to aggressive interest-rate increases around the world. That’s led to a vicious funding squeeze in Africa amid rising debt-service costs and weakening currencies.
Even so, the IMF voiced cautious optimism.
“Model estimates suggest the region’s economic recovery may already have started,” the IMF wrote in an analysis that carried the hopeful title, “Light on the Horizon?”
South Africa, which accounts for 19.5% of the regional economy and is being hobbled by rolling power shortages and infrastructure bottlenecks, is seen playing a key role in the upswing.
Growth in its economy, which is forecast to slow to 0.9% this year from 1.9% in 2022, is predicted to accelerate to 1.8% in 2024, the IMF said, based partly on continued improvements in the supply of the country’s electricity.
Nigeria, the region’s other economic powerhouse which has undergone painful reforms since President Bola Tinubu took office in May, is poised to expand 2.6% this year and 3.1% next.
The IMF sees those gains extending to four-fifths of sub-Saharan Africa, though it warned that a two-speed recovery would persist, with nations who depend heavily on exporting raw materials lagging better-diversified economies.
Factors aiding the upturn include the end of the pandemic, more resilient-than-expected consumption and a gradual decline in the rate of inflation around the world.
Still, a recovery isn’t guaranteed, with heavy debt burdens and elevated borrowing costs stressing public finances. More than half of the region’s low-income countries are either at high risk of debt distress or are already experiencing it.
Even those not in that category have seen the average yields on their outstanding eurobonds rise to above 12% from 7% before the pandemic.
That makes it potentially hard for countries to roll over maturing debt, with the IMF noting that upcoming eurobond repayments of around $6 billion in both 2024 and 2025 are of “particular concern.”
