Thursday, February 9, 2023

Here is what the World Bank forecasts for Sub-Saharan Africa

The World Bank has published its 26th edition of the pulse report which has forecast that Sub-Saharan Africa (SSA)’s economy is set to decelerate from 4.1 percent in 2021 to 3.3 percent in 2022. The bank says the deceleration is as a result of a slowdown in global growth, rising inflation exacerbated by the war in Ukraine, adverse weather conditions, a tightening in global financial conditions, and the rising risk of debt distress. 

The bank says among Africa’s three largest economies, growth is subdued in Nigeria and South Africa, while the Angolan economy will gain from elevated oilprices, an increase in oil production, and good performance of the non-oil sector.

Excluding South Africa and Angola, the Eastern and Southern African sub-region is expected to grow to 4.5 percent next year and 5.0 percent in 2024 while the Western and Central Africa sub-region, excluding Nigeria is projected to grow at 5 percent in 2023 (up from 4.2%), and growth will firm in 2024 (5.6%). 

The World Bank researchers say that the Russia-Ukraine conflict accelerated an already upward-trending inflation in the region. Rising inflation is weighing on economic activity in SSA by depressing both business investments and household consumption. As of July 2022, 29 of 33 countries in SSA with available information had inflation rates over 5 percent while 17 countries had double-digit inflation.

Botswana’s inflation, according to Statistics Botswana’s Consumer Price Index (CPI) quickened to its highest level this year driven by price rises for fuel, food and miscellaneous services. In August, The Consumer Price Index (CPI) data shows that annual inflation rate was 14.6 percent in August 2022, as opposed to 14.3 percent in July 2022, registering a rise of 0.3 percentage points. The increases in prices were mainly reflected through transport which rose by 9.3 percent due to rise in retail pump prices of fuel approved by the Botswana Energy Regulatory Authority (BERA) in late June 2022. Recently the energy regulator slightly slashed fuel prices saying global prices have been cooling down in the past two months. The impact of the recent fuel price slash will be reflected on the September CPI figures due on October 15.

The World Bank says Inflation operates as a regressive tax, affecting disproportionately the poor.

“In SSA, the high pass-through of food and fuel prices to consumer prices has caused inflation to soar to record highs in many countries, breaching the ceiling of central bank targets in most countries which have them. The vast majority of the population in Sub-Saharan Africa is affected by these high food prices as they allocate over 40 percent of total spending on food”, said the World Bank.

The bank also noted that the economic challenges come at a time when countries’ ability to support growth and protect poor households is severely constrained. Fiscal space is almost depleted in some SSA countries mainly because of high levels of debt, rising borrowing costs, and depleted public savings.The fiscal deficit of the region expanded during the pandemic to 5.6% of GDP in 2020 (from 3.0% of GDP in 2019). In 2022, the deficit amounts to 4.8% of GDP due to consolidation efforts.

According to Botswana’s Budget Strategy Paper for 2023, the country’s budget deficit will rise more than expected during the current financial year, but will narrow done for the incoming years, lower than also anticipated.

The BSP sets the tone for the government’s next financial year projections and with the 2023/24 financial year set to begin in April next year, officials at the Finance Ministry estimates that Botswana will record a budget deficit of 3.4 percent of Gross Domestic Product (GDP) in the current 2022/23 fiscal year, from 3.2 percent that was estimated earlier this year in February.

According to the 2023 BSP the country’s total Revenues and Grants are forecast to reach P71.6 billion, while Total Expenditure is expected to register P79.2 billion, yielding a budget deficit of P7.7 billion, or -3.4 percent of GDP for the financial year 2022/23.  The deficit, according to the ministry, reflects an increase in salaries of public officers. In May this year, the Botswana government announced that the negotiation process of salaries and conditions of service of the public service with five trade unions for the financial years 2022/23, 2023/24 and 2024/25 was concluded with an agreement of 5 percent hike for the three consecutive financial years.

The Treasury also says that the stubborn deficit has been supported by the “cushioning” measures took by government, aimed at alleviating the population against the effects of rising commodity prices. In July this year, Finance Minister Peggy Serame given economic risks and uncertainties, the Government is aware of the economic stresses on households and businesses caused by higher inflation, and had considered ways to alleviate some of those stresses.

“Government has developed and approved a package of temporary measures to offset the impact of higher inflation”, said Serame in late July 2022.

[By the numbers]

Growth projections for major economies in Eastern and Southern Africa:

South Africa, the economy slowed to 0.2 % year-on-year in 2022Q2, from 2.7% in the previous quarter. The economy is projected to grow by 1.9% this year, a downward revision of 0.2 percentage point relative to early projections in April.

The Angolan economy is one of the major beneficiaries of favorable terms of trade which translate into real growth of 3.1% in 2022, from 0.8% the previous year.

Kenya is set to grow 5.0% in 2023 (down from 5.5%) and back up to 5.3% in 2024.

Ethiopia will struggle to regain the pre-pandemic performance due to the prolonged conflict in the northern region which drives out investment. The real GDP is expected to grow steadily from 5.3% in 2023 (up from 3.5%) to 6.1% in 2024.

Botswana and Zambia will grow in 2023 by 4.0% from 3.2 and 3.3%, respectively. While growth is projected to edge down in Botswana (3.7%) in 2024, it is forecast to pick up to 4.2% in Zambia.

Growth projections for major economies in Western and Central Africa:

Real GDP growth in Nigeria is expected to slow from 3.6% in 2021 to 3.3% in 2022 as economic growth in the country continues to suffer from an underperforming oil sector.

Chad and the Republic of Congo are set to emerge from two- and seven-year recessions in 2022 and are expected to grow by 3.1 and 1.9%, respectively due to a combination of soaring oil prices, stable oil production, and strong performance of the non-oil sector.

Growth in Niger is expected to jump by 3.6 percentage points to 5.0% on the back of expansion of the agriculture sector after a severe drought in 2021.

In Ghana, growth is expected to slow in 2022 to 3.5%, far below the country’s average pre-pandemic performance (7.0%) due to rising public debt, elevated inflation, and a depreciating currency.

Growth in Côte d’Ivoire is projected to bounce back from 5.7% in 2022 to 6.8%, before edging down to 6.6%.

After slowing to 4.8% in 2022, growth in Senegal is projected to jump to 8.0% in 2023 and firm to 10.5% in 2024.

Gabon is expected to continue trending upward, yet at a slow pace. Growth is projected at 3.0% in 2023 (up from 2.7%).

In Cameroon, the economy will maintain its steady post-pandemic growth in 2023 (4.3%) and 2024 (4.6%), buoyed by investment and private consumption.

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