KEY POINTS
- The World Bank cut its growth forecast for sub-Saharan Africa to 3 percent.
- Sudan’s conflict and high debt levels pose significant risks to recovery.
- Inflation moderation may create room for interest rate cuts in 2024.
The World Bank has revised its 2024 growth forecast for sub-Saharan Africa, lowering it from 3.4 percent to 3 percent. The economic fallout from Sudan’s civil war has significantly impacted the region, dampening recovery efforts and hindering economic stability, according to the bank’s latest Africa’s Pulse report.
Despite this reduction, the region’s growth is expected to surpass last year’s 2.4 percent, with higher private consumption and investment driving economic activity. The World Bank projects the region’s economy will grow by 3.9 percent in 2025, slightly improving from the earlier 3.8 percent forecast.
Conflict and climate pose risks to recovery
World Bank Chief Economist for Africa, Andrew Dabalen, emphasized that the conflict in Sudan has hindered progress, warning that growth could have been 0.5 percent higher if not for the ongoing unrest. “This is still a recovery that remains in slow gear,” Dabalen said.
In addition to conflict, the region faces risks from climate-related events, such as droughts, floods, and cyclones, which continue to disrupt growth. These challenges have contributed to lower investment inflows, exacerbating poverty levels.
According to Reuters, the report highlighted the need for enhanced public and private investments, noting that recent foreign direct investment (FDI) inflows remain insufficient for robust economic recovery. “The region requires larger investments to accelerate growth and reduce poverty,” Dabalen stressed.
Inflation eases, but debt and fiscal issues persist
As inflation moderates across several African countries, policymakers may find room to ease interest rates and support economic growth. However, high debt service costs continue to burden many economies. Countries like Kenya have experienced unrest in response to recent tax hikes aimed at addressing fiscal challenges.
Dabalen warned that elevated debt levels could stall growth. External debt in the region has surged to $500 billion, up from $150 billion just 15 years ago. The debt restructuring efforts under the G20’s Common Framework have made progress, with countries like Ghana, Chad, and Zambia successfully restructuring their debts. Ethiopia, however, is still working through the process.
“Unless these debt issues are resolved, both investors and creditors will remain cautious, creating further uncertainty,” Dabalen noted.
The report also provided economic forecasts for key regional players. South Africa is expected to grow by 1.1 percent in 2024, improving to 1.6 percent in 2025. Nigeria’s economy is projected to expand by 3.3 percent this year, increasing to 3.6 percent in 2025. Meanwhile, Kenya’s economy is forecast to grow by 5 percent in 2024.
