On October 25, the IMF (International Monetary Fund) published a report entitled “Sub-Saharan Africa Regional Economic Outlook. Between reforms and great hope.” According to IMF staff, African leaders face three main obstacles as they work to reduce macroeconomic imbalances. First, regional growth, projected at 3.6% in 2024, is generally weak and uneven, although a moderate recovery is expected in 2025. Barriers to growth include conflicts, insecurity, periods of drought, electricity shortages . Second, domestic and external financing conditions remain constrained. Many countries are unable or unable to access funding. Third, the complex pressures of high poverty, lack of inclusion and employment opportunities, and poor governance create major difficulties in many countries.
Economic growth in the region is still relatively weak
The IMF staff forecast a GDP growth rate for sub-Saharan Africa of 3.6% in 2024 and 4.2% next year. The region’s growth rate in 2024 is estimated to be low. Note that the expected growth of DR Congo is 4.7% in 2024 and 5.0% in 2025 compared to 8.4% in 2023 and 8.8% in 2022, ie a decrease. The 5 African countries that will experience sustained economic growth in 2024 are Botswana (6.5%), Ivory Coast (6.5%), Ethiopia (6.1%), Mauritius (6.1%) and Rwanda (7.0%) . Paradoxically, there is no major oil country among them. Regional economic growth is expected to accelerate moderately to 4.2% in 2025. Constraints to growth include conflict, insecurity, periods of drought and electricity shortages. Structural weaknesses in the business climate and governance hamper economic diversification efforts. Other factors affecting regional growth include conflicts and insecurity (Sahel, DR Congo), the impact of drought on agriculture (Malawi, Zambia and Zimbabwe) and hydroelectric power production, more widespread electricity shortages ( Guinea, Madagascar, Mali, Central African Republic, DR Congo), and macroeconomic tightening. The economic outlook may improve after reforms, but risks abound. The region’s outlook is clouded by high levels of uncertainty as a result of social and political unrest, climate change and the spread of diseases such as monkeypox (Mpox).
Sub-Saharan Africa is also exposed to downside risks related to the global economic outlook. These are the volatility of the global financial markets, the intensification of conflicts and the volatility of commodity prices, the slowdown in economic activity in developed and large emerging countries, especially China, the continuation of geo-economic fragmentation. For example, the DR Congo is very vulnerable to external shocks as almost 80% of its copper and cobalt exports go to China. A continuation of recent trends, namely the weakening of international cooperation, the rise of protectionism and, more generally, an economic policy marked by an inward outlook, could disrupt trade.
Seek reforms in the context of social pressures
The emerging social tensions in some countries are exacerbated by rapid increases in the cost of living and the short-term effects of macroeconomic adjustments. The result is social discontent and political pressure that complicates the implementation of reforms. So governments must engage in a difficult balancing
They have to solve two difficult things, namely economic stability and social pressures. Inflation is still in double digits in almost a third of the countries. The region’s inflation rate is projected at 18.1% in 2024 and 12.3% in 2025. Leaders have tightened monetary policy to curb inflation. Therefore, inflation is falling in most countries in the region. For DR Congo, inflation is forecast at 17.8% in 2024 and 9.2% in 2025. This is still high. According to the IMF, although difficult, factors of vulnerability and social frustration will be mitigated with reforms aimed at ensuring more sustainable and inclusive growth, especially by promoting economic diversification and creating opportunities. In order to gain public support, it is essential to protect the most vulnerable from the cost of adjustments and to ensure that reforms create adequate jobs. This is assuming inclusive economic growth, which is often not the case.
The IMF staff recommends that the authorities adjust the economic policy mix to restore and support macroeconomic stability. The challenge is to develop public policies in a time of social discontent and to know how to implement those reforms. Support for broad and deep reforms can be mobilized by reducing inequality and poverty, by engaging in broad dialog with people, and by promoting inclusive growth. Amendments must be designed and phased appropriately. To strengthen competitiveness and reduce adjustment costs, exchange rate depreciation is often unavoidable given the low level of foreign exchange reserves. This is 4.1 months of imports of goods and services in 2024. The level forecast for 2025 is 4.2 months and reserves of at least 6 months are needed for a country to be comfortable. In the Democratic Republic of the Congo, the reserves are only 2.0 months in 2024 and 2.2 months in 2025. Faced with often unorthodox budgetary management, the Congolese authorities must choose between spending these reserves and shortages of goods have imports or depreciate the exchange rate and create a surge in inflation.
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What are the key factors influencing Sub-Saharan Africa’s economic growth in 2024?
Interview Between Time.news Editor and Economic Expert on Sub-Saharan Africa’s Economic Outlook
Editor (Time.news): Welcome! Today, we’re diving into the recently released IMF report on Sub-Saharan Africa’s economic outlook. I’m thrilled to have Dr. Jessica Ndlovu, an economist specializing in African markets, with us. Dr. Ndlovu, the report suggests that growth in the region is projected to be weak, at just 3.6% for 2024. Can you shed some light on the factors contributing to this low growth rate?
Dr. Ndlovu: Thank you for having me! The IMF report highlights several crucial barriers to growth in Sub-Saharan Africa. These include ongoing conflicts and insecurities, which disrupt economic activities, as well as environmental issues like droughts that affect agricultural output. Additionally, electricity shortages remain a significant challenge, limiting industrial productivity and overall economic growth.
Editor: That’s insightful. You mentioned conflicts and insecurities. Could you elaborate on how they specifically hinder economic progress?
Dr. Ndlovu: Absolutely. In regions like the Sahel and the Democratic Republic of the Congo, ongoing violence not only displaces populations but also deters both local and foreign investment, creating a cycle of instability. Economic infrastructure is often damaged and businesses are unable to operate effectively. This instability breeds further uncertainty, which can stifle growth as potential investors and businesses often look for stable environments to thrive.
Editor: The report also touched on financing constraints. Many countries in the region are finding it difficult to access the necessary funds. How does this financing gap affect economic reforms?
Dr. Ndlovu: The lack of access to domestic and external financing can be a significant impediment to implementing necessary reforms. Governments may want to invest in infrastructure, education, or health services to stimulate growth, but without adequate financing, these plans cannot be realized. It creates a challenging environment where even the most well-intentioned policies may be left unimplemented, thus affecting long-term economic stability.
Editor: With inflation projected to be quite high in the coming years—especially in countries like the DRC—how do governments strike a balance between managing inflation and addressing social pressures?
Dr. Ndlovu: That’s indeed a tightrope walk for many governments. High inflation erodes purchasing power, and with a significant portion of the population living below the poverty line, any policies need to be carefully crafted to avoid exacerbating social discontent. Governments need to establish a monetary policy that curbs inflation without stifling economic growth, all while ensuring that the most vulnerable communities have support during these transitions. Public engagement and dialog are essential to build trust and gain the necessary support for these reforms.
Editor: Speaking of reforms, the IMF suggests that inclusive growth is critical for long-term success. In your opinion, what measures should leaders prioritize to promote inclusive economic growth?
Dr. Ndlovu: Leaders should focus on promoting economic diversification beyond traditional sectors. Creating opportunities across various industries, particularly in technology and agriculture, can foster resilience. Moreover, investing in education and skills training is vital so that more people can participate in a diverse economy. Ensuring strong governance to reduce corruption and promote transparency will also help attract investment and public trust, which are critical components of inclusive growth.
Editor: It sounds like economic growth in Sub-Saharan Africa hinges greatly on a multifaceted approach involving stability, investment, and governance. As we look towards potential improvements in 2025, what do you think are the biggest risks that could derail this progress?
Dr. Ndlovu: The global economic outlook plays a significant role here. Volatility in commodity prices, especially with many African economies relying on resource exports, can lead to economic shocks. Local conflicts could also escalate or evolve in ways that further destabilize regions. Moreover, the ongoing effects of climate change pose risks to agriculture, while social discontent can undermine necessary reforms. Hence, it will require concerted efforts from both national governments and international partners to navigate these complexities.
Editor: Thank you, Dr. Ndlovu, for sharing your expertise. It’s clear that while Sub-Saharan Africa faces significant challenges, there are paths forward through thoughtful reforms and inclusive policies.
Dr. Ndlovu: Thank you for having me! It’s a crucial time for the region, and I’m hopeful that with the right strategies, we can see positive changes ahead.