Africa’s 2023 economic outlook

As Africa navigates through another challenging economic year in 2023, the continent is set to face a myriad of obstacles that have rolled over from previous years. According to Oxford Economics, global inflation is expected to fall back sharply, but the pace of disinflation in Africa will be slower. Jacques Nel, Head of Africa Macro at Oxford Economics Africa, shared insights on the key challenges and opportunities that lie ahead for the continent. Despite emerging from two tough years due to the pandemic, disruptions in global supply chains, inflation, rising interest rates, and geopolitical tensions such as the Russia-Ukraine war, Africa is poised to tackle these head-on. One of the significant challenges that Africa is expected to grapple with is the unfavorable external environment. The United States is projected to experience low growth, while the Eurozone faces economic contraction, impacting trade relations with many African countries. In addition, inflation remains a persistent problem across the continent, with commodity prices taking time to translate into lower price growth. The depreciation of African currencies against the US dollar has also offset the benefits of falling commodity prices in several countries. Amidst these challenges, there are glimmers of hope for certain African economies. Senegal is poised to potentially outpace Rwanda as the fastest-growing economy in 2023. Senegal's commencement of natural gas exports this year could be a game-changer, transforming its fiscal and external balances. The country's strategic position and untapped natural gas reserves position it as a key player in Europe's transition away from Russian hydrocarbons. Senegal stands to benefit from the European demand for alternative gas suppliers, irrespective of the resolution of the Russia-Ukraine conflict. However, dominant economies like Nigeria and South Africa continue to pose risks to the continent's overall growth prospects. South Africa, in particular, faces the possibility of minimal growth or even contraction in its economy. Challenges such as persistent load shedding, reduced demand for exports due to weaker global conditions, and unfavorable commodity prices threaten South Africa's growth trajectory. With a modest growth forecast of around 1% for the year, South Africa must navigate carefully to avoid economic setbacks. In conclusion, Africa's economic landscape in 2023 reflects a mix of challenges and opportunities. While the continent grapples with external headwinds and inflationary pressures, there are pockets of growth potential, as seen in countries like Senegal. It will be crucial for African nations to adopt resilient economic policies, leverage emerging opportunities, and mitigate risks to steer towards sustainable growth and development in the coming year.