The African Development Bank forecasts that Sub-Saharan Africa is expected to grow at a slower pace of 4 percent in 2022 due to the lingering effects of the Covid-19 pandemic and impacts of the Russia-Ukraine war, which already led to hiked inflation rates in the region.
This is announced in the lender’s Regional Economic Outlook 2022 released Friday, October 29.
As noted, projected strong growth is not homogenous across the region, with four countries including Rwanda, Kenya, Seychelles and South Sudan expected to grow above 5 percent in 2022 and 2023. The projections, the report noted, follow a strong economic recovery in 2021, much as pre-Covid-19 growth levels are yet to be achieved in most of the countries.
The region’s top performers in economic growth in 2021 were Rwanda (10 percent), Seychelles (7.9 percent), Kenya (6.7 percent) and Uganda (6.0 percent).
Growth was driven by industry on the supply side, contributing 2.2 percentage points of the region’s 4.8 percent economic growth in 2021. This was followed by the service sector which contributed 1.6 percentage points while the agriculture sector contributed a 1.0 percentage point.
The industrial sector’s performance was strongly influenced by its strong growth in Ethiopia, Tanzania, and Uganda where construction dominated the industrial sector.
On the demand side, private consumption was the dominant driver of growth, contributing 3.0 percentage points to the 4.8 percent real GDP growth in 2021, supported by a growing private sector, youthful population, and rising per capita incomes and wages.
This was followed by investments which contributed 0.92 percentage points driven by increased spending on public infrastructure projects, as is the case of Rwanda.
The contribution of government consumption stood at 0.8 percentage points, while net exports contributed 0.1 percentage points in 2021 due to weak external demand.
Rwanda with brightest prospects
Rwanda is the only country among the 13 in the region expected to grow above 7 percent in 2023, according to the report. It is also expected that her economy will grow by 5.9 percent this year.
Robert Mugabe, an economist based in Kigali, thinks the projected growth rate is within range based on the trend at which recovery efforts are growing.
According to him, with the aviation sector recovering to attain almost all its pre-Covid-19 routes and current investments in public infrastructure, the forecast is feasible.
"The government needs to extend support towards key sectors like aviation, tourism and agriculture, if this number is at all going to be realized.”
Mugabe said that support in the form of loans from financial institutions towards innovation is also important to boost the economy.
Increased inflation
According to the findings, inflation rates are estimated at 36.8 percent in 2022, compared to an earlier projection of 36 percent.
However, inflation is projected to decrease to 27.8 percent in 2023, as global value and supply chains stabilize gradually.
Also to worsen, the report said, is the fiscal and current account balances partly attributed to reduced public revenues and financial inflows amidst high public spending needed to support economic recovery efforts.