- On the Sidelines of the 37th Ordinary Session of the Assembly of the African Union - Addis Ababa, Ethiopia - 16 February 2024
Honourable Ministers,
His Excellency, Ambassador Albert Muchanga, Commissioner for Economic Development, Trade, Tourism, Industry and Minerals, African Union Commission,
Governors of the African Development Bank Group,
Members of the Diplomatic Corps accredited to the Federal Democratic Republic of Ethiopia,
Professor Jeffrey Sachs, Director of the Center for Sustainable Development, Columbia University,
Professor Abebe Shimeles, Honorary Professor, University of Cape Town, and Advisor, Ministry of Finance, Ethiopia
Executive Directors of the African Development Bank Group,
Senior Management and Staff of the African Development Bank Group,
Distinguished Guests,
Members of the Media,
Ladies and Gentlemen,
Welcome to this presentation of the February 2024 edition of Africa’s Macroeconomic Performance and Outlook of the African Development Bank Group.
This report is a biannual publication that we release in the first and third quarters of each year. It complements the African Economic Outlook, the African Development Bank’s annual flagship publication, which we launch at our Annual Meetings each May.
The Macroeconomic Performance Outlook report provides African policymakers, African and global investors, researchers, and other development partners with an up-to-date evidence-based assessment of Africa’s recent macroeconomic performance and short-to-medium term outlook amid dynamic global economic developments.
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.
Our estimates reveal that Africa’s average real gross domestic product declined to 3.2% in 2023, down from 4.1% in 2022. The momentum of Africa’s growth recovery has slowed against a backdrop of the multiple crises that I have mentioned.
Despite the challenging global and regional economic environment, 15 African countries have posted output expansions of more than 5%. The report shows that Africa is projected to remain the fastest growing region in the world, after Asia, exceeding the global average of 3% in 2023. It is forecasted that Africa will account for 11 out of the 20 fastest growing economies in the world in 2024.
We project that growth on the continent will rebound to 3.8% in 2024. We expect this growth to be broad-based, although domestic supply bottlenecks such as shortfalls in electricity generation are still lingering.
Inflationary pressures in Africa have heightened and remain strongly entrenched, lagging improvements in the rest of the world. Average inflation has remained high, at an estimated 17.8% in 2023, the highest it has been in more than a decade.
Fiscal deficits have improved, as faster-than-expected recovery from the pandemic helped shore up revenue. This has led to a stabilisation of the average fiscal deficit at 4.9% in 2023, like 2022, but significantly less than the 6.9% average fiscal deficit of 2020. The stabilisation is also due to the fiscal consolidation measures, especially in countries with elevated risks of debt distress. With the global economy mired in uncertainty, fiscal positions on the African continent will remain vulnerable to global shocks.
The confluence of higher global interest rates, wider sovereign debt spreads, and exchange rate depreciations have increased debt servicing costs. By November 2023, 21 African countries were at high risk of debt distress or already in debt distress. Sovereign spreads have eased from their peak early in 2023 but borrowing costs are likely to remain elevated despite planned rate cuts in Europe and the United States.
We project that economic growth will regain moderate strength as long as the global economy remains resilient, disinflation continues, investment in infrastructure projects remains buoyant, and there is sustained progress on debt restructuring and fiscal consolidation.
However, key downside risks remain to the outlook, such as persistent inflation. Rising geopolitical tensions—which could disrupt trade and investment flows—could push up food and commodity prices and delay the much-needed easing of monetary conditions worldwide. This would in turn jeopardise fiscal consolidation. Increased regional conflicts and political instability tend to increase defence spending, diverting resources away from development and social support.
Boosting Africa’s growth momentum requires bold policies. Tackling persistent inflation will need a mix of restraining monetary policy, coupled with fiscal consolidation and stable exchange rates. But structural reforms and strategic industrial and agricultural policies remain the key to accelerate economic diversification and strengthen the export sector. It is possible to reinforce structural transformation by investing in human capital.
On the fiscal front, what’s needed is to mobilise domestic resources and accelerated implementation of reforms. For example, it will be critical to digitalise and simplify tax administration systems and formalize the informal economy. Along with this, we recommend strengthening governance and institutionalising debt management capacity. Also highly desirable are reforms to the global financial architecture to make it more adapted to Africa.
Boosting Africa’s growth will require larger pools of financing and several policy interventions.
First, a lot more effort needs to be put into domestic resource mobilization. The development of local capital markets will go a long way in mobilizing domestic capital to meet rising expenditure needs of countries.
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Second, rising debt service costs for many countries, worsened by weakening of several local currencies requires that a reasonable balance be achieved between external and domestic borrowing, especially with greater focus on lending in local currencies to mitigate rising foreign exchange risks.
Third, countries need to do a better job of managing and deriving greater revenue from their enormous natural resources, through better governance, transparency, avoiding transfer pricing and ensuring that appropriate value is generated from royalties and taxes.
Fourth, the G20 common framework needs to be accelerated. While progress has been made in coordinating official and commercial creditors terms for restructuring of debt for Niger, Zambia, Ethiopia and Ghana, there is still a lot to do to deliver debt treatment for 21 countries at the risk of high debt distress.
Fifth, the rechanneling of Special Drawing Rights (SDRs) to African Development Bank, for use as hybrid capital can leverage the SDRs by up to 4 times. A $5 billion SDR re-channeling from SDR-rich countries to the African Development Bank can deliver $20 billion of additional low-interest and long-term financing in support of the revitalization of African economies.
I now invite you to listen to a detailed presentation of the key findings of the 2024 Africa Macroeconomic Performance and Economic Report.
Thank you.
