Risks to Africa’s economic growth tapering off

With growth in Sub-Saharan Africa expected to mildly slow down in 2023, against the backdrop of a softened global growth forecast, there are concerns and considerations being weighed by experts. Standard Bank Group's Head of Africa Region Economic Research, Jibran Qureishi, sheds light on the implications of these economic dynamics, particularly focusing on East Africa. The latest IMF World Economic Outlook projects a decrease in growth to 3.5 per cent, down from an earlier forecast of 3.9 per cent, indicative of the tapering global growth momentum. The global economic landscape continues to grapple with challenges, with growth expected to hover around 3 per cent for 2023, a decline from the previous year's 3.5 per cent, albeit higher than initially projected. Qureishi underscores the resilience of African economies, emphasizing a reliance on domestic demand as a primary driver of growth, especially in markets where private consumption expenditure constitutes a significant portion of GDP. While external factors like geopolitical tensions and monetary policy changes exert an influence on global growth, the focus on domestic demand offers a glimmer of hope for continued stability in African markets. The economies of Nigeria and South Africa, accounting for half of sub-Saharan Africa's output, remain pivotal in shaping the region's economic trajectory, with a historical dependence on the commodity price cycle. Amidst concerns of a moderating global economy, the narrative of 'revenge spending' post-pandemic remains prevalent, instilling confidence in the sustainability of tourism and service sectors. East Africa, in particular, witnessed favorable GDP numbers in Kenya's first quarter, surpassing market expectations. The 5.3% GDP growth was buttressed by a recovery in the agriculture sector following a severe drought and inflationary pressures. Looking ahead, projections for Kenya's GDP growth in 2023 range between 5.5% to 5.8%, contingent upon factors like government expenditure and private consumption patterns. A key consideration is the forthcoming maturity of Kenya's euro bond and the potential for refinancing it. Qureishi opines that the Kenyan government is well-positioned to handle this obligation, supported by recent financial transactions and IMF disbursements. Notably, the Finance Act plays a crucial role in revenue mobilization and debt sustainability, prompting vigilant scrutiny from institutions like the IMF. The judicial review of the Finance Act's implications underscores Kenya's institutional robustness, though concerns loom over potential cost-of-living escalations. In the face of evolving global and regional economic landscapes, Africa displays a resilient facade, pivoting towards sustained growth through prudent fiscal measures and a focus on domestic demand drivers.