- On the Sidelines of the thirty seventh Odd Session of the Meeting of the African Union – Addis Ababa, Ethiopia – 16 February 2024
Honourable Ministers,
His Excellency, Ambassador Albert Muchanga, Commissioner for Financial Improvement, Commerce, Tourism, Trade and Minerals, African Union Fee,
Governors of the African Improvement Financial institution Group,
Members of the Diplomatic Corps accredited to the Federal Democratic Republic of Ethiopia,
Professor Jeffrey Sachs, Director of the Middle for Sustainable Improvement, Columbia College,
Professor Abebe Shimeles, Honorary Professor, College of Cape City, and Advisor, Ministry of Finance, Ethiopia
Govt Administrators of the African Improvement Financial institution Group,
Senior Administration and Workers of the African Improvement Financial institution Group,
Distinguished Company,
Members of the Media,
Girls and Gents,
Welcome to this presentation of the February 2024 version of Africa’s Macroeconomic Efficiency and Outlook of the African Improvement Financial institution Group.
This report is a biannual publication that we launch within the first and third quarters of every yr. It enhances the African Financial Outlook, the African Improvement Financial institution’s annual flagship publication, which we launch at our Annual Conferences every Could.
The Macroeconomic Efficiency Outlook report offers African policymakers, African and world traders, researchers, and different improvement companions with an up-to-date evidence-based evaluation of Africa’s current macroeconomic efficiency and short-to-medium time period outlook amid dynamic world financial developments.
As we speak, as we collect right here, like different areas of the world, Africa continues to face a number of crises, together with rising value of dwelling, weakening financial progress, a tightening of world monetary circumstances, scarcity of concessional sources, growing results of local weather change, lingering impacts of well being pandemics, battle, and geopolitical tensions.
The interplay of those world and regional crises with present regional structural weaknesses threatens to halt Africa’s gradual financial restoration and is hindering socioeconomic developments.
The discharge of Africa’s Macroeconomic Efficiency and Outlook 2024 on this first quarter of the yr, subsequently, comes at an opportune time as international locations want common diagnostics and focused coverage actions to deal with these a number of crises.
Our estimates reveal that Africa’s common actual gross home product declined to three.2% in 2023, down from 4.1% in 2022. The momentum of Africa’s progress restoration has slowed towards a backdrop of the a number of crises that I’ve talked about.
Regardless of the difficult world and regional financial setting, 15 African international locations have posted output expansions of greater than 5%. The report reveals that Africa is projected to stay the quickest rising area on the earth, after Asia, exceeding the worldwide common of three% in 2023. It’s forecasted that Africa will account for 11 out of the 20 quickest rising economies on the earth in 2024.
We venture that progress on the continent will rebound to three.8% in 2024. We anticipate this progress to be broad-based, though home provide bottlenecks equivalent to shortfalls in electrical energy technology are nonetheless lingering.
Inflationary pressures in Africa have heightened and stay strongly entrenched, lagging enhancements in the remainder of the world. Common inflation has remained excessive, at an estimated 17.8% in 2023, the best it has been in additional than a decade.
Fiscal deficits have improved, as faster-than-expected restoration from the pandemic helped shore up income. This has led to a stabilisation of the typical fiscal deficit at 4.9% in 2023, like 2022, however considerably lower than the 6.9% common fiscal deficit of 2020. The stabilisation can be because of the fiscal consolidation measures, particularly in international locations with elevated dangers of debt misery. With the worldwide economic system mired in uncertainty, fiscal positions on the African continent will stay vulnerable to world shocks.
The confluence of upper world rates of interest, wider sovereign debt spreads, and trade charge depreciations have elevated debt servicing prices. By November 2023, 21 African international locations had been at excessive danger of debt distress or already in debt misery. Sovereign spreads have eased from their peak early in 2023 however borrowing prices are prone to stay elevated regardless of deliberate charge cuts in Europe and america.
We venture that financial progress will regain reasonable energy so long as the worldwide economic system stays resilient, disinflation continues, funding in infrastructure tasks stays buoyant, and there may be sustained progress on debt restructuring and monetary consolidation.
Nevertheless, key draw back dangers stay to the outlook, equivalent to persistent inflation. Rising geopolitical tensions—which may disrupt commerce and funding flows—may push up meals and commodity costs and delay the much-needed easing of financial circumstances worldwide. This may in flip jeopardise fiscal consolidation. Elevated regional conflicts and political instability have a tendency to extend defence spending, diverting sources away from improvement and social assist.
Boosting Africa’s progress momentum requires daring insurance policies. Tackling persistent inflation will want a mixture of restraining financial coverage, coupled with fiscal consolidation and secure trade charges. However structural reforms and strategic industrial and agricultural insurance policies stay the important thing to speed up financial diversification and strengthen the export sector. It’s attainable to strengthen structural transformation by investing in human capital.
On the fiscal entrance, what’s wanted is to mobilise home sources and accelerated implementation of reforms. For instance, it will likely be crucial to digitalise and simplify tax administration methods and formalize the casual economic system. Together with this, we suggest strengthening governance and institutionalising debt administration capability. Additionally extremely fascinating are reforms to the worldwide monetary structure to make it extra tailored to Africa.
Boosting Africa’s progress would require bigger swimming pools of financing and a number of other coverage interventions.
First, much more effort must be put into home useful resource mobilization. The event of native capital markets will go a good distance in mobilizing home capital to satisfy rising expenditure wants of nations.
Second, rising debt service prices for a lot of international locations, worsened by weakening of a number of native currencies requires {that a} cheap stability be achieved between exterior and home borrowing, particularly with better deal with lending in native currencies to mitigate rising international trade dangers.
Third, international locations have to do a greater job of managing and deriving better income from their huge pure sources, by higher governance, transparency, avoiding switch pricing and guaranteeing that applicable worth is generated from royalties and taxes.
Fourth, the G20 widespread framework must be accelerated. Whereas progress has been made in coordinating official and business collectors phrases for restructuring of debt for Niger, Zambia, Ethiopia and Ghana, there may be nonetheless quite a bit to do to ship debt therapy for 21 international locations on the danger of excessive debt misery.
Fifth, the rechanneling of Particular Drawing Rights (SDRs) to African Improvement Financial institution, to be used as hybrid capital can leverage the SDRs by as much as 4 instances. A $5 billion SDR re-channeling from SDR-rich international locations to the African Improvement Financial institution can ship $20 billion of further low-interest and long-term financing in assist of the revitalization of African economies.
I now invite you to hearken to an in depth presentation of the important thing findings of the 2024 Africa Macroeconomic Efficiency and Financial Report.
Thanks.
