Sub-Saharan Africa economic prospects dulled by Nigeria’s underperforming economy, IMF reports

Onome Amuge

Sub-Saharan Africa’s growth trajectory is set to slow down in the first half of 2024, according to a recent projection by the International Monetary Fund (IMF).

The IMF attributed this deceleration to lagging performance in Nigeria, the largest economy in the region, which fell short of expectations in the first half of 2024, thus dragging down overall economic activity in the sub-Saharan African region.

In its World Economic Outlook report for October 2024, the Washington-based organisation highlighted that this downward revision represents a 0.2 percentage point reduction in its growth forecast for 2024 and a 0.1 percentage point reduction for 2025, compared to its earlier projection in April.

Despite the current downturn, the IMF projected a gradual recovery in the region’s GDP growth, which is anticipated to rise from an estimated 3.6 percent in 2023 to 4.2 percent in 2025.

According to the IMF, the projected growth can be attributed to a combination of factors, such as the fading impact of prior weather shocks and easing supply constraints, which are expected to contribute to an improved economic environment and ultimately drive a resurgence of growth in the sub-Saharan African region.

While the IMF has revised its projections for Nigeria’s economic growth, it still foresees a notable expansion over the coming years.

The IMF’s new projections for Nigeria anticipate a 3.5 percent growth in 2024 and 3.7 percent growth in 2025. The projection is aligned with Nigeria’s National Bureau of Statistics’ (NBS) most recent GDP figures, which reported a year-on-year real GDP growth of 3.19 percent in the second quarter of 2024.

In its World Economic Outlook report, the IMF highlighted that although the overall global economic outlook has remained relatively stable, with minimal changes to the projections since April, there have been notable shifts within specific country groupings due to recent shocks and policy developments.

According to the IMF, the most prominent changes were observed in emerging markets and developing economies, where adjustments to the forecast reflected the impact of various shocks, including inflationary pressures, policy responses, and other macroeconomic factors that influenced growth trajectories across these economies.

The IMF’s World Economic Outlook report underscored that the downward revisions to the growth projections for the Middle East and Central Asia and sub-Saharan Africa were driven by multiple factors, including disruptions in the production and shipping of commodities (particularly oil), conflicts, and civil unrest in some countries.

Conversely, the report highlighted that the positive momentum of demand for semiconductors and electronics, fueled by significant investments in the field of artificial intelligence, has underpinned growth prospects for emerging Asian economies, resulting in an upward revision to the region’s economic outlook.

The report noted that when compared with the previous projections made in April, the growth projections for emerging market and developing economies were revised upward by 0.1 percentage point for 2024.

This upward revision was primarily driven by an improvement in the growth outlooks for China and India, which outweighed the downward adjustments made to the growth forecasts for sub-Saharan Africa, the Middle East, and Central Asia.

The IMF, in its World Economic Outlook report, emphasized that inflation forecasts for emerging and developing economies in Europe, the Middle East and North Africa, and sub-Saharan Africa remain elevated, with many economies still facing double-digit inflation rates.

According to the IMF, several factors are contributing to this trend, including the lingering effects of past currency depreciation, administrative price adjustments, and underperformance in the agriculture sector in certain countries (such as Egypt and Ethiopia), all of which have played a significant role in driving inflationary pressures across these regions.

The IMF, in its World Economic Outlook report, emphasized that inflation forecasts for emerging and developing economies in Europe, the Middle East and North Africa, and sub-Saharan Africa remain elevated, with many economies still facing double-digit inflation rates.

According to the IMF, several factors are contributing to this trend, including the lingering effects of past currency depreciation, administrative price adjustments, and underperformance in the agriculture sector in certain countries (such as Egypt and Ethiopia), all of which have played a significant role in driving inflationary pressures across these regions.