Sub-Saharan Africa's economic growth faces challenges: World Bank Report

WASHINGTON: The World Bank's latest Africa's Pulse report paints a mixed picture of economic growth in Sub-Saharan Africa. While projections indicate an increase in growth in the coming years, per capita growth remains stagnant, raising concerns of a potential lost decade for the region.

World Bank posted on X, "Economic growth in Sub-Saharan #Africa: a mixed outlook. While projections show growth increasing in the coming years, per capita growth remains stagnant, raising concerns for a lost decade. Dive into the #AfricasPulse report for the full picture: http://wrld.bg/fOpI50PTx4B"

The report, which analyses the short-term economic prospects for Africa, highlights several key factors contributing to this mixed outlook.

According to a report by The World Bank, economic growth in Sub-Saharan Africa is expected to decelerate from 3.6 per cent in 2022 to 2.5 per cent in 2023. However, projections suggest a gradual recovery to 3.7 per cent in 2024 and 4.1 per cent in 2025.

Despite these growth figures, per capita income in the region is projected to slightly contract over the decade from 2015 to 2025. The challenges facing Sub-Saharan Africa are multifaceted, including sluggish growth, persistently low per capita income, mounting fiscal pressures due to high debt burdens, and an urgent need for job creation.

The report describes the situation as a "lost decade" for the region, highlighting the importance of comprehensive reforms to promote economic prosperity, reduce poverty, and create sustainable employment opportunities.

Sub-Saharan Africa's economic growth is set to slow down due to various factors, including instability, weak growth in the region's largest economies, climate shocks, and global economic uncertainty.

Current growth patterns generate only three million formal jobs annually, leaving many young people underemployed and engaged in unstable work.

Job creation for youth is crucial for inclusive growth and harnessing the demographic dividend. Rising instability, conflicts, and violence in the region have a negative impact on economic activity.

Climatic shocks exacerbate fragility issues, contributing to economic challenges. Although inflation is receding, it remains above central bank targets in most countries. Inflationary pressures are driven by higher food and fuel prices and weakened domestic currencies, affecting household income and consumption.

Sub-Saharan African economies continue to grapple with debt distress. As of June 2023, 21 countries are at high risk of external debt distress or already in debt distress.

Lack of firm growth hampers the creation of quality jobs. The majority of firms in the region have fewer than five employees. Policies that disproportionately affect larger firms inhibit workforce expansion and resource allocation.

The report outlines policy responses to these challenges, including supporting demand-driven skills development, strengthening political stability and institutions, and achieving inclusive growth through fiscal stabilization and debt reduction.

Addressing these multifaceted challenges will be crucial for Sub-Saharan Africa's economic growth and its ability to reduce poverty and provide better job opportunities for its growing population.

The report underscores the importance of comprehensive reforms and targeted policies to unlock the region's economic potential.