AfDB forecasts faster recovery for African economies

Addis Ababa January 24, 2023 (FBC) – African Development Bank (AfDB) stated that the continent’s economies are expected to grow faster than global projections this year, but budget and trade deficits will continue to weigh down most of the countries as risks persist.

In its Africa’s Macroeconomic Performance and Outlook report released, the AfDB said the continent’s GDP growth rate decelerated to 3.8 percent in 2022. It is expected to improve to four percent this year, the report said.

AfDB president Akinwumi Adesina said that this recovery and resilience of the continent’s economies, however, come with “cautious optimism” as there are several headwinds still facing the globe’s emerging markets.

“Global financial conditions have tightened and are projected to remain restrictive in the near term, compounded by increased volatility in global financial markets and persistent disruptions in global supply chains,” Dr Adesina said. But high interest rates in the global scope remain the highest risk to African economies in the near term.

Other risks, based on the outlook, include dependence on commodity exports and regional conflicts in some countries.

AfDB has suggested a series of fiscal and monetary policy interventions to stabilize economies and hasten recovery from the turbulence witnessed in the last two years.

“Bold policy actions are needed to address the effects of rising inflation and subdued growth,” the financier said in the report.

Among the policy recommendation it made is “timely and aggressive monetary policy tightening in countries with acute inflation and cautious tightening in countries where inflationary pressures are low,” a move which the International Monetary Fund has also suggested.

Other recommendations include boosting intra-Africa trade, reforming tax administration regimes, reducing budget deficits, cushioning the most vulnerable in societies, and managing foreign exchange reserves to reduce exchange rate volatilities.

“The bank reiterates its call for accelerating implementation of structural reforms to enhance government-enabled private sector industrialization in key sectors,” Dr Adesina added. Source: The EastAfrican