*Projects Nigeria, S’Africa to pick up
Ndubuisi Francis in Abuja
Although Africa faces economic headwinds this year, the International Monetary Fund (IMF) has projected that six of the top-10 performing economies in the world in 2024 are to come from the continent.
This optimistic projection was revealed as part of the IMF’s economic outlook for the region in 2024.
Some of the top performers were Cote d’Ivoire at 6.6 per cent and Tanzania at 6.1 per cent.
The IMF economic outlook revealed that the smaller-sized African economies were expected to contribute significantly to the overall growth trajectory, compensating for the subdued performances of heavyweight nations like South Africa and Nigeria, which jointly account for two-fifths of Africa’s $2 trillion economy.
According to the IMF, while the larger economies face hurdles, the collective vigour of the smaller nations is anticipated to make a positive impact in a region grappling with persistent poverty and inequality.
However, the report pointed out that their smaller size won’t be enough to make up for less-stellar performances by South Africa and Nigeria, which together account for two-fifths of Africa’s $2 trillion economy.
But collectively, they are helping to make a difference in a region that remains severely challenged by poverty and inequality, it said.
“Sub-Saharan Africa’s growth prospects are brightening. Eight of the region’s top-10 biggest economies – which together account for another 40 per cent of regional GDP – will grow by a strong five per cent on average,” said Bloomberg Africa Economist Yvonne Mhango.
It noted that both Cote d’Ivoire and Tanzania have done good job of diversifying their economies and attracting foreign investment.
As a result, the IMF predicted that regional growth improving moderately to four per cent in 2024 from 3.3 per cent in 2023. And while the two heavyweights were not likely to deliver quicker output in the near term, both Nigeria and South Africa are pursuing reforms that may yield benefits over time.
The IMF forecasted growth in Nigeria picking up to about three per cent this year and next, while South Africa was projected to expand by 1.8 per cent and 1.6 per cent over the two years, up from a tepid 0.9 per cent in 2023.
According to the chief economist for Africa and the Middle East at Standard Chartered Bank, Razia Khan, “Big picture Africa, the external environment is difficult. But reforms matter, and this will be the crux of the growth turnaround that we expect in both South Africa and Nigeria.”
Nigerian President Bola Tinubu has embarked on aggressive measures to relax the country’s foreign-exchange regime and remove costly fuel subsidies.
South Africa, hobbled by an energy crisis, is finally making tentative progress on boosting electricity supply, which is expected to continue.
“The important point for South Africa is that we’ve probably reached the turning point. The years ahead should deliver faster growth. And that is under-appreciated,” said Khan.
That is despite potential uncertainty before elections this year. The vote, likely to be held in April or May, may cost the ruling African National Congress its absolute parliamentary majority. But it’s expected to remain the largest party in government and the ballot won’t have a major impact on policy, she said.
Still, analysts remain cautious on Africa’s outlook in the immediate future. The pick-up in growth is coming from a low base after the setbacks suffered by the region during the pandemic, straining public finances and leaving many countries struggling with heavy debt burdens.
Those have already triggered defaults in Ghana, Zambia and Ethiopia, with the IMF warning other nations remain at risk, and access to foreign capital markets is effectively closed.
Moody’s Investors Service has a negative outlook on the credit of African sovereigns because of elevated debt-refinancing risks, and because it expects slower growth in China to dampen demand for the region’s commodity exports.
Moody’s Sovereign Risk Group, notes that Africa’s ratio of debt to gross domestic product has risen to 60 per cent on average. That’s back up to the crisis levels of the early 2000s that galvanised debt forgiveness for the poorest nations.
“Many of these countries have been running twin deficits — fiscal deficits and current-account deficits — in the post-Covid period,” he said.
“They need to access external funding at a moment when you have a wall of maturities coming due.”
Moody’s estimates about $5 billion of Eurobonds would come due in 2024 in Sub-Saharan Africa, with more than $6 billion in 2025. That doesn’t count debts coming due to bilateral creditors like China or multilateral lenders including the IMF and the World Bank.
The recently released World Economic Situation and Prospects report for 2024 stated that in Africa, growth was projected to increase from 3.3 per cent in 2023 to 3.5 per cent in 2024, with climate crisis and geopolitical instability impacting the region