Released in January 2024, the World Bank’s latest Global Economic Prospects (GEP) echoes sentiment from the tail-end of 2023 – that global economic growth remains fragile and constrained by coordinated price stability policies put in place by Central Banks around the world post COVID-19.
The question we always ask, however, is if these concerns and gloomy outlook also apply to African countries. To answer this, we analysed the latest GEP, alongside the IMF’s most recent World Economic Outlook (January 2024), as well as the African Development Bank’s latest Africa Macroeconomic Performance and Outlook (February 2024). Here are 4 big takeaways from our analysis.
- Africa’s growth forecasts continue to lead. Despite the three institutions diverging on the projected pace of economic growth, Africa is seen outpacing global economic growth forecasts– a continuation of 2019 – 2021 trends. More specifically, 2024 and 2025 forecasts estimate Africa growing at about 3.8% and 4.1%, respectively – whereas global growth is expected to trail behind at around 2.4% and 2.7%.
- Six of fastest 10 growing economies in 2024 are projected to be African, a trend expected to be replicated in 2025 (according to World Bank data). These are; Niger (12.8%), Senegal (8.8%), Rwanda (7.5%), DRC (6.5%), Cote d’Ivoire (6.5%) and Ethiopia (6.4%).
- Despite having strong growth prospects in 2024 and beyond, African countries continue to be constrained by the current global financial architecture. With 54% of the IMF’ Debt Sustainability Analysis (DSA) list made up of African countries, a further 58% of countries seen as the most at risk of debt default are also African. Consequently, access to much needed development finance comes at a higher cost for African countries and has come in insufficient volumes when compared to the scale of financing needs.
So, what should African leaders focus on in 2024 to fast-track the continent’s growth? We have 4 key suggestions:
- Advocate for IMF quota reform. The current system of quota still largely resembles the original structural inequalities of 1944, structures that skew benefits towards high-income countries at the expense of low- and middle-income countries (LMICs). Consequently, LMICs like African countries have had limited decision-making power when it comes to distribution of emergency funding from the Fund. For example, the USA alone holds 17.4% in IMF quota, whereas the African Union through its 55-member bloc only holds 5.2%: merely 29.9% of USA’s share. It is therefore pivotal that quota system be reformed to more evenly share quota among countries, to more accurately reflect country financial needs for development and external shock vulnerabilities such as high climate change risks.
- Push for IMF/World Bank DSA reform. The DSA is used by the IMF and World Bank to assess a country’s perceived capacity to manage external debt obligations. Notably, DSA relies on a Debt-to-GDP ratio as an economic indicator of this perceived risk. However, this metric is inconsistently applied, with high-income economies holding ratios well over the optimal 60% (often > 100%) not even included on the DSA list. Yet, 40 of the 74 countries on the latest DSA list are African countries- 21 of them assessed as being at “High Risk” or already in “Debt Distress”. Taking a pre-selected list of countries creates an inherent bias.DSA reform must therefore account for unbiased analysis across all countries (not just low, and low-middle-income), and incorporate asset creation facilitated by debt (not just liabilities), which help spur growth forward. DSA must also uniformly factor in growing and urgent climate change risks faced by countries. Without these changes, African countries will continue to face an “African risk premium” and unfairly be charged more when securing credit. Read more about African views for DSA reform here.
- Facilitate borrower coordination. The case and need for African countries to work more closely together has never been more urgent. Learning from a well-documented history of creditor collaboration, borrowers must come together, learn from each other’s engagements with creditors and leverage their bargaining power to access new credit from bilateral and multilateral lenders. As borrowers, working in siloes has been a piecemeal approach to development. Going forward, borrowers must work more closely together and maximise their strength in numbers, in order to drive reform in debt surveillance and to secure future financing under more favourable terms.
- Align with AU’s Agenda 2063 on infrastructure. Similarly, the agenda for infrastructure development across Africa has not thrived. On the one hand, funding constraints have held back project progress, but another key challenge has been misaligned priorities at country and regional level in Africa. African countries must therefore prioritise shared development by focusing on the implementation of the AU’s Programme for Infrastructure Development (PIDA) to reduce the significant infrastructure financing gap which persists across the continent and inhibits further potential growth.
To find out how Development Reimagined can support you, your organisation or Government to review key economic response policies to the COVID19 crisis, the Russia/Ukraine war and other shocks please email the team at clients@developmentreimagined.com.
Special thanks go to Rugare Mukanganga, Trevor Lwere and Dennis Severin for their work on the graphics, collecting/analysing the underlying data and sharing this accompanying article.
The data was collated from a range of sources including: government websites and media reports, IMF and World Bank data and Statista. Our methodology is entirely in-house, based on analysis of economic growth, inflation and other trends.
