World Bank Expects Africa's Economies to Grow by 3.4% in 2024
Increased private consumption and lower inflation are supporting economic recovery in sub-Saharan Africa, according to the World Bank's Africa Pulse report.
However, the recovery remains fragile due to unstable global economic conditions, increasing debt service obligations, recurring natural disasters, and escalating conflicts and violence, according to the report. Transformative policies are needed to address deep-seated inequalities in order to sustain long-term growth and effectively reduce poverty.
The report expects growth to rebound in 2024, rising from a low of 2.6% in 2023 to 3.4% in 2024, and 3.8% in 2025. However, this recovery remains fragile. While inflation is declining in most economies, falling from an average of 7.1% to 5.1% in 2024, it remains high compared to pre-Covid-19 levels. In addition, while public debt growth is slowing, more than half of African governments are grappling with external liquidity problems and facing unsustainable debt burdens.
Overall, the report confirms that despite the expected increase in growth, the pace of economic expansion in the region remains lower than the growth rate of the previous decade (2000-2014) and is insufficient to make a significant impact on poverty reduction. Moreover, due to multiple factors including structural inequality, economic growth reduces poverty less in Sub-Saharan Africa than in other regions.
“A 1% growth in per capita GDP is associated with a reduction in extreme poverty of only about 1% in the region, compared to an average of 2.5% in the rest of the world,” said World Bank Chief Economist for Sustainable Development, Andrew Dabalin. “In the context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. It must be supported by policies that expand the productive capacity of the private sector to create more and better job opportunities for all segments of society.
The report highlights that external resources to meet the overall financing needs of African governments are shrinking and that available resources are more expensive than before the pandemic. Political instability and geopolitical tensions affect economic activity and may hinder access to food for an estimated 105 million people at risk of food insecurity due to conflict and climate shocks. African governments' finances remain vulnerable to global economic turbulence, necessitating policy action to build buffers to prevent or overcome future shocks.
Moreover, inequality in sub-Saharan Africa remains one of the highest in the world, second only to Latin America and the Caribbean. Access to basic services, such as education or health care, also remains highly unequal despite recent improvements. There are also disparities in access to markets and income-generating activities, regardless of people's skills. Poorly targeted taxes and subsidies may also have a significant impact on the poor.
“Inequality in Africa is largely the result of the circumstances into which a child is born and which are exacerbated later in life by obstacles to participating productively in markets,” said Gabriela Enchaust, co-author of a forthcoming World Bank report on tackling inequality in Africa. and regressive fiscal policies. “Identifying and better addressing these structural constraints across sectors of the economy provides a road map to a more prosperous future.”
The Africa Pulse report calls for several policy actions to promote stronger and more equitable growth. These reforms include restoring macroeconomic stability, encouraging intergenerational mobility, supporting market access, and ensuring that the poor are not unduly burdened by fiscal policies.