Africa’s trade contracted by 6.3% in 2023

Africa's trade experienced a 6.3 per cent contraction in 2023, driven by the impact of geopolitical crises, according to a report by the Africa Export-Import Bank. Despite this setback, growth on the continent remains the second largest globally, albeit at a slower pace compared to pre-COVID levels. In an interview with CNBC Africa, Yemi Kale, the Chief Economist of Afreximbank, highlighted the challenges faced by the continent in achieving a stronger economy, particularly in the face of a higher interest rate environment. Despite these obstacles, the economic outlook for Africa appears strong, with promising growth expected in various regions. East Africa is set to lead in growth for 2024 and 2025, followed by North Africa, while South and West Africa are experiencing slower growth. While the continent continues to recover from the impact of the COVID-19 pandemic, inflation rates are gradually declining, GDP is strengthening, and debt indicators are showing signs of improvement. However, the high interest rate environment remains a concern, as it hampers economic growth by increasing the cost of borrowing for businesses. Nevertheless, there is optimism that global interest rates will decrease in the future, contributing to a more conducive environment for growth. Geopolitical crises emerge as a significant risk to Africa's economic outlook, particularly disruptions in key shipping routes in the Red Sea region, impacting countries like Egypt. These tensions also lead to trade barriers and protectionist measures, affecting global trade and economic stability. Although intra-African trade has shown improvement, dependency on extra-African markets still poses a risk to the continent. Supply disruptions and reduced demand from major trading partners can negatively impact African economies. Despite these challenges, favorable developments in key markets such as the US, Europe, and China, along with a rise in intra-African trade, offer some reassurance for the continent's economic prospects. As Africa navigates through these uncertainties, the focus remains on fostering sustainable growth, enhancing regional trade partnerships, and mitigating risks posed by external factors.