By Cynthia Ezekwe
The World Bank Group has projected that global economic growth will decline to 2.1 per cent, in the second half (H2) of 2023, as a result of the protracted effects of the overlapping negative shocks of the pandemic, the Russian federation’s invasion of Ukraine, and the sharp tightening of monetary policy to contain high inflation.
The World Bank Group disclosed this in its flagship report tagged “June 2023 Economic Prospects,’’ noting that global growth is projected to slow significantly in the second half of this year, with weakness continuing in 2024.
“Global growth is expected to slow to 2.1 percent in 2023 before rebounding to 2.4 percent in 2024. The weakness in activity projected for this year is widespread across countries, especially in advanced economies. The primary driver of the short-term dynamics continues to be the combination of elevated inflation, alongside the global monetary policy tightening it has provoked. The drag from these factors is expected to peak this year before gradually dissipating. In the longer term, global output is expected to decelerate because of a broad-based slowdown in all the fundamental drivers of growth,’’ the report noted.
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On a regional basis, growth in sub-Saharan Africa is projected to slow to 3.2 percent in 2023, as external headwinds, persistent inflation, higher borrowing costs, and increased insecurity weigh on activity, as recoveries from the pandemic remain incomplete in many countries, with elevated costs of living tempering the growth of consumption.
The report pointed out that fiscal space has narrowed further, while surging import bills and higher debt burdens have heightened financing needs, adding that the baseline projection for 2024-25 envisions a pickup in growth, per capita incomes are expected to expand much more slowly than needed to make progress in reducing extreme poverty.
“Risks to the baseline remain tilted to the downside. These include a deeper-than-expected global economic slowdown, deteriorating terms of trade, higher inflation along with further domestic and international monetary policy tightening, renewed financial distress in advanced economies, and more adverse weather events. Materialization of these risks would not only dampen growth, but also exacerbate poverty and limit the ability of many countries to strengthen climate resilience,’’ it said.
The World Bank further noted that the three largest economies in sub-Saharan Africa including Nigeria, South Africa, and Angola, which are projected to grow by about 2.1 percent annually over 2023-24, a rate more than 2 percentage points per year below the 2000-19 average, are expected to continue to inhibit the overall growth of the region.
It stressed that in addition to multiple external and domestic headwinds, many of these countries are confronted with increased fragility because of pervasive insecurity and political instability, as well as persistent poverty.
Meanwhile, growth in Nigeria is projected at 2.8 percent in 2023, revised down marginally since January, and is forecast to inch up to 3.0 percent in 2024. This translates to per capita income growth of only 0.4 percent a year on average in 2023-24, far slower than that needed to make significant inroads into mitigating extreme poverty.
“With continued structural challenges in the oil sector expected to keep oil production below the average of the last five years, growth is projected to be driven mainly by the non-oil sector,’’ the report emphasised.
It also pointed out that foreign exchange restrictions, high living costs, security challenges, and limited fiscal space are expected to constrain growth momentum, adding that financing needs are projected to remain elevated, due to higher borrowing costs, lower oil production and prices, and persistent fiscal and external pressures amid weak domestic revenue mobilisation.
In light of the above, the World Bank Group pointed out that recent bank failures calls for a renewed focus on global financial regulatory reform, adding that global cooperation is also necessary to accelerate the clean energy transition, mitigate climate change, and provide debt relief for the rising number of countries experiencing debt distress.
“At the national level, it is imperative to implement credible policies to contain inflation and ensure macroeconomic and financial stability, as well as undertake reforms to set the foundations for a robust, sustainable, and inclusive development path,’’ it added.