Africa’s performance lags in global rating as inflation lingers, says AfDB

Onome Amuge

The African Development Bank Group (AfDB) has revealed that Africa is yet to reap the benefits of declining inflation experienced in other parts of the world, with the average inflation rate on the continent rising to 17.8 per cent in 2023, the highest level in 10 years.

The AfDB, in its latest Macroeconomic Performance and Outlook (MEO), noted that the second most populous continent after Asia,saw the pace of economic growth slow in 2023,while inflation continued to rise. However, the bank is hopeful of a rebound in 2024.

In his introduction to the report at the sidelines of the 37th ordinary session of the assembly of the African Union, Akinwumi Adesina, the president of the African Development Bank,noted that high inflation has had a significant impact on people’s lives in Africa, eroding their purchasing power and affecting their livelihoods.

Addressing the international dignitaries convened in Addis Ababa,Ethiopia, Adesina said, “Today, as we gather here, like other regions of the world, Africa continues to face multiple crises, including rising cost of living, weakening economic growth, a tightening of global financial conditions, shortage of concessional resources, increasing effects of climate change, lingering impacts of health pandemics, conflict, and geopolitical tensions.

The interaction of these global and regional crises with existing regional structural weaknesses threatens to halt Africa’s gradual economic recovery and is hindering socioeconomic developments.

The release of Africa’s Macroeconomic Performance and Outlook 2024 in this first quarter of the year, therefore, comes at an opportune time as countries need regular diagnostics and targeted policy actions to tackle these multiple crises.”

The report stated that high global interest rates and the depreciation of many African currencies against the US dollar have increased the cost of servicing debt, which has constrained investment and social spending needed to spur growth.

The AfDB’s  analysis showed that economic growth in Africa slowed to 3.2 per cent in 2023, compared to 4.1 per cent in 2022.  However, it noted that despite this slowdown, Africa is still the second-fastest-growing region in the world, behind Asia.

The report also noted that despite the region-wide slowdown, 15 African countries managed to post growth rates of more than 5 per cent in 2023. This was attributed to a combination of factors, including higher investment spending, a rebound in tourism, and a strong performance by the mining sector.

“Despite the growth slowdown in 2023, the continent’s economies remain resilient, with growth in 2024 projected to rise to 3.8 percent,” the ABD said in its report.

The projected higher growth reflects efforts to diversify economies and boost consumer consumption, it said.

While the African Development Bank is cautiously optimistic about Africa’s medium-term growth prospects, it warns that there are still significant risks, both global and regional, that could impact growth.

According to the report, the continent’s economic growth is expected to rebound if the global economy remains resilient, infrastructure projects on the continent deliver results, and countries facing debt challenges make progress on debt restructuring and fiscal consolidation.

Concerning growth projections based on regional outlook, the report projected that East Africa will experience the fastest economic growth in 2024, at 5.1 per cent. This is followed by West Africa, which is expected to grow at 4.0 per cent. North and Central Africa are projected to grow at 3.9 per cent and 3.5 per cent respectively, while Southern Africa is expected to grow the slowest, at 2.2 per cent.