Africa’s economic growth projected at 3.4% for 2024, but uncertainties loom large, says World Bank

Onome Amuge

Sub-Saharan Africa’s economy is expected to rebound from a low of 2.6 per cent in 2023 to 3.4 percent in 2024 and 3.8 percent in 2025, buoyed by increased private consumption and declining inflation. However, this rebound remains highly uncertain, and is subject to a number of downside risks, according to a World Bank report.

The World Bank’s Africa’s Pulse report highlights the fragility of the region’s economic recovery, noting that a number of factors are hindering its progress. These include ongoing uncertainty in the global economy, rising public debt, natural disasters, and conflict and violence. 

Amidst the challenges of growing debt burdens, climate change, and conflict, Africa’s Pulse report notes a glimmer of hope in the form of increasing private consumption and declining inflation in sub-Saharan Africa. However, the report warns that this recovery is fragile and needs to be supported by comprehensive policy reform to address deep-rooted inequality and ensure sustainable growth that reduces poverty. 

While inflation is falling across most African economies from a median of 7.1 to 5.1 per cent, the report noted that inflation will still be high compared to pre-pandemic levels. In addition to high inflation, African governments are also facing significant debt burdens. Public debt growth is projected to slow down, but still remains at an unsustainable level for many countries. In addition, over half of African governments are struggling with liquidity problems, making it difficult to finance their debts and meet their financial obligations. 

Overall, the report underscores that despite the projected boost in growth, the pace of economic expansion in the region remains below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction. 

According to  Andrew Dabalen, World Bank chief economist for Africa,“Per capita GDP growth of 1 percent is associated with a reduction in the extreme poverty rate of only about 1 percent in the region, compared to 2.5 percent on average in the rest of the world.”  

Debalen noted that in the context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone and needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society.

The World Bank also warned that external financing, such as foreign aid and investment, which African governments rely on to help finance their budgets, is declining. At the same time, the cost of these funds is rising, making it more difficult for governments to access the resources they need. Political instability and geopolitical tensions were  also seen to be  affecting economic activity in the region and may limit access to food for the estimated 105 million people who are at risk of food insecurity due to conflict and climate shocks. 

Inequality is one of the key challenges facing Sub-Saharan Africa, according to the report. The region has the second-highest levels of inequality in the world, after Latin America and the Caribbean, as measured by the Gini coefficient. Even though access to basic services like education and healthcare has improved, there is still a lot of inequality in access to these services. In addition, people with low incomes often have less access to markets and opportunities to earn income, regardless of their skills or qualifications. The report also noted that tax policies and subsidies may disproportionately affect the poor.

The report recommended several policy actions to promote stronger and more equitable growth in Sub-Saharan Africa. One key recommendation is to restore macro-economic stability by addressing fiscal and debt vulnerabilities, while also protecting and enhancing social spending. The report called for measures to promote inter-generational mobility, including investing in quality education and creating more opportunities for young people. It also highlighted the importance of improving market access and promoting competition, as well as the need to design fiscal policies in a way that does not place too much of a burden on the poor.