Sub-Saharan Africa, home to more than 1 billion people, half of whom will be under 25 years old by 2050, is a diverse continent offering human and natural resources that have the potential to yield inclusive growth and eradicate poverty in the region. With the world’s largest free trade area and a 1.2 billion-person market, the continent is creating an entirely new development path, harnessing the potential of its resources and people.
The region is composed of low, lower-middle, upper-middle, and high-income countries, 22 of which are fragile or conflict-affected. Africa also has 13 small states, characterized by a small population, limited human capital, and a confined land area.
Economic growth in Sub-Saharan Africa (SSA) is estimated at 4 percent in 2021, up from a contraction in economic activity of 2 percent in 2020. However, growth in the region is expected to decelerate in 2022 amid a global environment with multiple (and new) shocks, high volatility, and uncertainty. The economy is set to expand by 3.6 percent in 2022, down from 4 percent in 2021, as it struggles to pick up momentum amid a slowdown in global economic activity, continued supply constraints, outbreaks of new coronavirus variants, high inflation, and rising financial risks due to high and increasingly vulnerable debt levels.
The invasion of Ukraine compounds the factors holding back recovery in the region. Although the direct trade and financial linkages with Russia and Ukraine are small, the war will likely impact Sub-Saharan African economies through higher commodity prices, higher food, fuel and headline inflation, tightening of global financial conditions, and reduced foreign financing flows into the region. The growth effects in the region are expected to be marginal however, the largest impact is on the increasing likelihood of civil strife as a result of food- and energy-fueled inflation amid an environment of heightened political instability.
Prospects for the East and Southern African subregion show a sustained recovery (4.1 percent) from the recession, down to 3.1 percent in 2022, and then settling around 3.8 percent in 2024. The Western and Central Africa subregion is projected to grow 4.2 percent in 2022 and 4.6 percent in 2023. The 2022 forecast is revised up by 0.6 percentage point compared to the October 2021 forecast, largely reflecting upgrades in Nigeria.
Economic activity in Sub-Saharan Africa is projected to grow at 3.9 percent and 4.2 percent in 2023 and 2024, respectively. A recovery in global demand is expected in 2023 as most of the shocks dragging down the global economy are expected to dissipate.
As a result of supply shocks predating the war in Ukraine, emerging signs of stagflation are posing challenges to monetary policymaking. Central banks are facing a trade-off between accommodating the weak economy with the risk of exacerbating inflationary prospects and fighting inflation at the high cost of triggering a recession. Many central banks in the region have chosen the second policy option so far and embarked on a tightening cycle, but others have maintained a more dovish stance.
Since October 2021, countries in the region are either at moderate or high risk of debt distress, with the share of countries in high risk of debt distress growing from 52.6 to 60.5 percent. To address the rising risks of debt sustainability, some countries in the region implemented austerity measures; however, these actions have been insufficient to reduce debt levels.
The looming threat of stagnation worldwide amid a landscape of multiple new and covariate shocks emphasizes the need for African policymakers to implement policies that accelerate structural transformation through productivity-enhancing growth and creating more and better jobs. Boosting agricultural productivity is essential to drive a growth-enhancing structural transformation process. Amid soaring food prices and supply constraints, policy makers need avoid making previous policy mistakes (bans or tariffs/taxes on exports and imports), and ensure international trade flows.
Last Updated: Apr 13, 2022