By Adedapo Adesanya
According to World Bank forecasts, the Nigerian economy is expected to grow by 3.4% this year in its latest outlook for world economies. This is to be compared to the 3.6% recorded in 2021.
The global lender noted that growth in sub-Saharan Africa (SSA), in which Nigeria is located, has weakened this year as domestic price pressures, partly driven by supply disruptions from the war in Ukraine, reduce food accessibility and real incomes, especially in low-income countries (LICs).
The region generally rebounded 4.2% last year in 2021, but the silver lining is that limited direct trade and financial ties with Europe and Central Asia have helped contain some of the negative effects of the war in Ukraine on SSA.
In the report released on Tuesday, it was revealed that the sharp deceleration in global growth and war-related food and fuel shortages are creating significant headwinds for the region, even more so in countries that rely on wheat imports. from Russia and Ukraine (Democratic Republic of Congo, Ethiopia, Madagascar, Tanzania).
In many sub-Saharan African countries, the rising cost of living has also tempered the benefits of loosening social restrictions and rising commodity export prices.
The global lender noted that growth in sub-Saharan Africa’s three largest economies – Angola, Nigeria and South Africa – was estimated at 3.8% in 2021, buoyed by the 4.9 rebound. % in South Africa.
For this year, growth in SSA is expected to be 3.7% in 2022 and 3.8% in 2023, in line with January projections.
Yet, excluding the three largest economies, growth has been revised down by 0.4 percentage points in both 2022 and 2023.
Although high commodity prices would support recovery in the extractive sectors, in many countries rising inflation would erode real incomes, depress demand and deepen poverty.
Growth momentum continued in Angola and Nigeria, where high oil prices, stabilizing oil production and the recovery of non-resource sectors supported activity in the first half of this year. However, continued high domestic inflation, power cuts, and food and fuel shortages weighed on the recovery.
In South Africa, growth has slowed considerably amid tighter policies, high and rising unemployment, and recurrent power shortages.
The World Bank also explained that damage to infrastructure at the country’s main port following severe flooding has also exacerbated supply chain disruptions related to the war in Ukraine and lockdowns in China.
Elsewhere in the region, the boost from a decline in the pandemic and a gradual rebound in tourism is being mitigated by rapidly rising costs of living and weakening domestic demand.
In some countries, debt overhang, political uncertainty, social unrest and violence are still hampering recovery, especially in fragile and conflict-affected LICs.
For 2022, LIC growth has been revised down by nearly one percentage point this year as food price inflation and food shortages are expected to weigh particularly heavily on vulnerable populations, further exacerbating the food insecurity in these countries.
Slower growth in SSA could also intensify pandemic-induced per capita income losses. The region is now expected to remain the only Emerging Markets and Developing Economies (EMDE) region where per capita incomes will not return to their 2019 levels, even in 2023.
In around 45% of the region’s economies and half of its fragile and conflict-affected countries, per capita incomes are expected to remain below pre-pandemic levels next year.
Rising food and fuel import bills could also reverse recent progress in poverty reduction in the region, particularly in countries with large vulnerable populations (Democratic Republic of Congo and Nigeria). and where dependence on imported food is high (Benin, Comoros, Gambia and Gambia). Mozambique).
On the risk side, the outlook is mostly on the downside with a prolonged disruption to global grain and fertilizer trade due to the war in Ukraine which is expected to significantly worsen the accessibility and availability of staple foods in the region. .
In addition, insecurity and violence threaten prospects, particularly in LICs, while the rapidly rising cost of living threatens to aggravate social unrest.
A faster than expected slowdown in the global economy, which could be triggered by accelerated policy tightening in advanced economies and the global resurgence of COVID-19, would hurt many SSA commodity exporters.
The Washington-based bank warned that lingering domestic inflation could accelerate monetary policy tightening, raising risks of stagflation in the region.