Despite the tightening of global financial conditions, African Development Bank (AfDB) in its new report projection has disclosed that African economies will remain resilient with a stable outlook in 2023 to 2024.
AfDB’s report themed ‘Africa’s Macroeconomic Performance and Outlook (MEO) 2023’ has estimated Africa’s average GDP to stabilize at 4% in the next two years, up from 3.8% in 2022.
AfDB’s Chief Economist and Vice President, Professor Kevin Urama in the report communicated that the continent could benefit from high demand for its commodities as countries seek alternatives for food and energy, in response to disruptions caused by the war in Ukraine.
The continent, he noted, remains a treasure trove for smart investors globally, but it must strive for higher growth rates, more inclusive economies, and greater resilience to external shocks.
“The stable outlook projected for 2023 to 2024 reflects the continuing policy support in Africa, global efforts to mitigate the impact of external shocks, and rising uncertainty in the global economy.”
Professor Kevin Urama
According to the Chief Economist, the new publication to be released in the first and third quarters of each year will provide African policymakers, global and domestic investors, researchers, and other development partners with an up-to-date evidence-based assessment of the continent’s recent macroeconomic performance, and short-to-medium-term outlook amid dynamic global economic developments.
“To meet the significant financing gaps in Africa, it is imperative to enact policies that can mobilize and leverage private financing for development in Africa.”
Professor Kevin Urama
Current Outlook Of The African Currency
The unfavorable global conditions, as indicated by Professor Kevin Urama, have led to rising inflation, higher debt servicing costs and increased risk of debt distress in developing countries, including Africa.
“As in many emerging market economies, tightening financial conditions and the appreciating US dollar have had dire consequences for most African economies.
“It has also become difficult for African countries to access international capital markets for new financing.”
Professor Kevin Urama
Most African currencies, especially in commodity-exporting countries, lost substantial value against the dollar in 2022 due to monetary policy tightening in the United States. “The depreciation rates ranged from 21% in Malawi to 69% in South Sudan,” he said.
Cautioning about the depreciatory nature of most African Currencies, Urama noted that currency weaknesses in Africa’s more globally integrated economies, such as Algeria, Kenya, Nigeria, and South Africa, may persist in 2023.
“Key drivers of the currency depreciations include the tightened global financial conditions and weak external demand, macroeconomic imbalances, constrained revenues, weak investment flows, and political risk aversion associated with countries’ election cycles.”
Kevin Urama
According to him, African countries’ fiscal positions have already been stretched by Covid-19 policy responses and support for vulnerable populations against rising food and energy prices, amid high debt and the impacts of climate change.
Other economic headwinds, he said, include the spillover effects of rising geopolitical tensions, particularly the Russian invasion of Ukraine, adding that: “These conditions are pushing price stability beyond most central banks’ grasp.”
