The African Export-Import Bank (Afreximbank) has warned that South Africa’s economic shocks could continue dragging growth in the southern African region further following its decline to 1.3% in 2023, down from about 4.5% in 2021.
Afreximbank’s latest annual Africa analysis report titled “A Resilient Africa: Delivering Growth in a Turbulent World” forecasts that African economies will grow on average by 3.8% in 2024 – slightly ahead of predicted global growth of 3.2% – prior to increasing by 4% in 2025.
The report also revealed that African economies face several downside risks, including increasing levels of sovereign debt and associated sustainability risks, excessive exposure to adverse terms-of-trade shocks, escalating geopolitical tensions in some cases, volatile domestic political environments in certain African countries, high commodity prices and inflationary pressures, and potential food insecurity.
Afreximbank yesterday said southern Africa witnessed a decline in growth from 2021 to 2023 due to significant challenges, ranging from structural weaknesses in South Africa, high debt, and adverse weather conditions in countries such as Malawi, Mozambique, Zambia and Zimbabwe.
South Africa is the region’s largest economy and main trading partner to the other countries in the region.
“Growth therefore declined. Higher growth is, however, projected for the region, largely reflecting anticipated recovery and debt burden reliefs in some countries, including Mozambique and Zambia,” it said.
Southern Africa recorded the most impressive growth in trade with other countries around the African region, accounting for 41% of intra-African trade in 2023, slightly down from 43% in 2022.
West Africa emerged as the second-largest contributor to trade within Africa, accounting for 25.6% of its trade within the continent in 2023, slightly up from 24.1% in 2022.
North Africa and West Africa followed with their contributions to intra-African trade within the continent.
The contribution of Central Africa to total intra-African trade is significantly lower than that of other sub-regions.
Afreximbank said the cost of borrowing has increased markedly for African countries in recent years as the spread widened in 2023 and continued to expand in early 2024.
“With the Covid-19 pandemic, the conflict in Ukraine, and the surge in global interest rates having severely dented African economies, most of them lost access to international capital markets in 2022 and 2023, as borrowing in foreign-currency denominated debt became more expensive,” the bank said.
“For instance, Egypt was the hardest hit on account of delays in reforms implementation, even though Nigeria’s Eurobond yields improved year-to-date as reforms initiated under the new administration surprised on the upside.”
Going against the general trend of declining global inflation, Africa’s inflation has increased steadily over the last three years, from 12.7% in 2021 to 14.2% in 2022 and accelerating to 18.2% in 2023.
Inflation in the continent is expected to increase marginally to 18.4% in 2024.
These developments have been driven in part by several large and medium-size economies such as Egypt, Ghana, and Nigeria grappling with double-digit inflation and exchange rate gyrations.
However, the region’s inflation is projected to trend down to 14.4% in 2025, on the back of continuous implementation of combined monetary and fiscal policies and easing supply side constraints reduce food and energy prices
Similar to several central banks around the world, most central banks across Africa have tightened their monetary policy in response to record-high inflation.
Nonetheless, monetary policy is projected to ease across Africa, with the region’s average policy rate falling from 13.3% in 2022 to an average of 9.1% in 2025. However, this trend could be derailed by several factors.
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