Dear Subscriber,
African countries are in limbo…
It’s been a tough year for African countries, who never really caught a break from the painful impact of the COVID-19 pandemic. Since 2020, Africa’s GDP has moderately grown, but it is expected to slow to 3.5% in 2023. Forward to today, import costs are higher for a commodity-dependent continent, no thanks to the Russian-Ukraine war. With inflation slightly easing from 14.47% in 2022 to 13.98% in 2023, food insecurity has climbed in Africa. Not only that, SSA countries’ currencies have crashed by 8% against the dollar in the last one year. This has not only increased debt burdens but also interest payments. According to the IMF, external debt to GDP in Africa is projected to slow to 40.26% in 2023 from 40.46% in 2022. Times are tough, but as they say, it’s not over until the fat lady sings.
…and there’s no way out, yet!
At the just concluded African Union (AU) summit held in Addis Ababa, all external and internal issues affecting African countries were discussed, from food insecurity to coups to drought. But no clear resolves on the way forward was given. The only unified anthem from African leaders is that foreign help from multilateral institutions and advanced economies cannot be overemphasized. The bright spot is that there is renewed appetite for Africa from the United States, China, the United Kingdom and France. According to the latest investment report by UNCTAD, investments into Africa grew by 113% to $83bn in 2021 from $39bn in 2020, with South Africa ($41bn) and Egypt ($5bn) as countries leading the pack.
SSA’s giants are struggling!
The giants of SSA, who account for 55% of the region’s GDP, are gasping for air with tumultuous events ravaging their economy. The IMF in its recent outlook projects the region to grow by a miserly 3.5%, down from 3.9% in 2022. Nigeria is facing the brunt of policy change, while South Africa is facing a power crisis that is costing the economy about 899mn rand ($51mn) per day, reducing the country’s growth prospects. As if things were not bad enough, Kenya is also battling a precarious fiscal position, with its external reserves down in Q1’23 by 14.29% to $6bn before it starts to pick up in April to $7.5bn in June 2023. The country recently released a new Finance Act, increasing VAT on all energy products from 8% to 16%. Combined with the lingering drought, food and transport prices have skyrocketed, with deadly protests that have led to the loss of lives, properties and even businesses. Meanwhile, Ethiopia’s political quagmire continues as people are still shut out from social media.
In this edition of the FDC Afriscope, we analyse burning macroeconomic and political issues plaguing Africa.
Enjoy your read!
