Over the past 4 years, the world has endured the economic fallout from the China-US trade war, the COVID-19 pandemic itself plus supply chain disruptions accompanied by inequitable vaccine access, the Russia-Ukraine War and, now, subsequent inflation crisis. Such events have left many countries across the world in a constrained financial position which is likely to continue well into 2023.
The latest IMF World Economic Outlook (WEO) therefore comes at a key point in the trajectory of the global economy. But what does the IMF WEO actually mean, especially as we jump from one economic shock to another? Is the global economy as “gloom and doom” as the IMF’s own press releases suggest, especially for Africa? Well, our infographic takes stock of the IMF’s WEO forecasts from 2019 – 2022 thus far and examines what the 2022 Outlook could mean for the continent. Here are four key takeaways.
First, it’s important to note that, aside from 2021, the IMF’s outlook for Africa as a region has been ahead of global forecasts. Indeed, whilst there was a decline in GDP growth by 1.5% in 2020 – falling by US$165 billion, before the COVID-19 outbreak – the IMF had forecasted that the region out to have a GDP of US$2.59 trillion!
Second, despite having a high growth rate pre-COVID-19, the region has been experiencing significant financial losses due to COVID-19 shocks, ranging from US$27.6 billion to US$47 billion in 2021. Yet, this is not surprising. African governments had to spend a significant proportion of their GDP to fund economic and social protection measures throughout COVID-19. Indeed, in January 2022 we estimated that we estimate that African countries have allocated $63 billion in their national budgets to COVID-19 in the 2020-2021 financial year alone, representing 2.3% of African GDP. Yet despite spending on proactive measures, many countries were hit with economic shocks. Taking Ghana as an example, the country lost an estimated US$1.3 billion following a 3-week urban partial lockdown, a staggering 27.9% GDP loss. That US$1.3 billion could be used to fund vital infrastructure projects.
Third, despite setbacks from vaccine inequity, African countries are once again ranked among the IMF’s fastest-growing economies. But how have African countries fared in IMF economic rankings in the past? Well, in 2019 four African countries were in the IMF’s fastest-growing economies – Rwanda (9.5% GDP growth), Ethiopia (9%), Uganda (7.8%) and Tanzania (7%). By 2020 this had jumped to six African countries forecasted to be in the fastest growing economies – with Ethiopia leading with 6% followed by Guinea (4.9%), Tanzania (4.8%) Benin (3.8%), Niger (3.6%) and Egypt (3.6%). However, with the onset of COVID-19, in 2021 Libya was the only African country forecast to see GDP growth at 28.3%. Indeed, it is a similar picture for 2022, with Seychelles as the only ranking African country with 10.9% GDP growth.
Yet, the 2023 forecast reveals a different story – one which is closer to 2019 and 2020 forecasts. In 2023, it is predicted six African countries will be in the top fast-growing economies, with Libya (17.9%), Senegal (8.1%), Niger (7.3%), DRC (6.7%), Rwanda (6.7%) and Cote d’Ivoire (6.5%). Further, 2023’s latest forecast not only projects a return to six African countries among the top world’s 10 but on average, their growth is seen outpacing pre-COVID-19 levels. As a region, the continent has been forecasted to grow by 3.7% – up by 0.1% from 2022.
Fourth, this does not necessarily mean that the continent’s post-pandemic recovery is well underway – as there are numerous constraints placed on African countries’ growth. Challenges to growth include ongoing inflation rates, increasing trade costs and interest rate hikes. However, most importantly, access to concessional financing to fund continued growth is limited – with the international financial system becoming more constrained whilst domestic resource mobilisation remains limited.
But why is more finance needed for the continent to continue growing? Especially with new “debt crisis” narratives popping up every day? The fact is that African countries still have huge infrastructure gaps to address to meet the SDGs and Agenda 2063 – and cheap, accessible and fair financing is key. However, due to the IMF and World Bank’s Debt Sustainability Analysis and its inherent bias, many countries are locked out of the system, and have to either go without funding or secure costly private sector loans with higher interest rates and shorter terms! Our own forecasting analysis from August 2022 shows that for Nigeria, Ghana, Senegal or Cote d’Ivoire to meet the SDGs, they would need to spend more than 15% of their GDP per annum.
In sum, whilst African countries and the region look to experience growth in 2023, more finance – including from the IMF – will be needed to ensure that growth can continue and accelerate to achieve long-term, sustainable development.
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 firstname.lastname@example.org.
Special thanks go to Rugare Mukanganga, Jade Scarfe, Jiayin Xu and Ivory Kairo 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.
If you spot any gaps, have any feedback or would like to follow-up on this infographic to request some further information or underlying data, please write to us at email@example.com, we will aim to respond ASAP!