The World Bank has urged African governments to urgently restore macroeconomic stability and protect the poor in a context of slow growth and high inflation.
The bank warned that economic growth in sub-Saharan Africa (SSA) is set to decelerate from 4.1% in 2021 to 3.3% in 2022, a downward revision of 0.3 percentage points from April’s forecast.
In its bi-annual publication Africa’s Pulse on Tuesday, the bank said this decline in sub-Saharan Africa was mainly as a result of a slowdown in global growth, including flagging demand from China for commodities produced in Africa.
It said global headwinds were slowing Africa’s economic growth as countries continued to contend with rising inflation, hindering progress on poverty reduction.
The risk of stagflation comes at a time when high interest rates and debt are forcing African governments to make difficult choices as they try to protect people’s jobs, purchasing power and development gains, the bank added.
World Bank chief economist for Africa Andrew Dabalen said the war in Ukraine was exacerbating already high inflation and weighing on economic activity by depressing both business investments and household consumption.
As of July 2022, 29 of 33 countries in SSA with available information had inflation rates over 5%, while 17 countries had double-digit inflation.
“These trends compromise poverty reduction efforts that were already set back by the impact of the Covid-19 pandemic,” Dabalen said.
“What is most worrisome is the impact of high food prices on people struggling to feed their families, threatening long-term human development.
“This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience.”
The bank said the escalation of the war had fuelled a rise in commodity prices, particularly food and energy prices.
High pass-through of food and fuel prices to consumer prices had caused headline inflation to spike, it added.
The number of people facing severe food insecurity in sub-Saharan Africa had increased sharply, with more than one in five people facing hunger and more than a quarter billion people being undernourished, the bank said.
It added that about 140 million people were estimated to be acutely food insecure in the region in 2022, up from 120 million in 2021.
Debt in the sub-Saharan Africa region is also projected to stay elevated at 58.6% of gross domestic product in 2022, as African governments spent 16.5% of their revenues servicing external debt in 2021, up from less than 5% in 2010.
BUSINESS REPORT