19-Jan-2023, Africa's economic growth to outpace global forecast in 2023-2024 – African Development Bank biannual report
African Development Bank's new report calls for bold policy actions to help African economies mitigate compounding risks
Why Africa is central to BRICS global mission?
Yaroslav Lissovolik RIAC MemberIn 2023 South Africa is chairing the BRICS grouping and has declared that it intends to work towards closer BRICS-Africa partnership. As a member of the BRICS core South Africa has been among the most active proponents of advancing BRICS as an open platform that reaches out to Africa and the rest of the developing world via the BRICS+ format. Today it is impossible to imagine a BRICS grouping on the international arena without South Africa and Africa being one of its key regional agendas. In fact, Africa is much more than just a regional track in BRICS development strategy – Africa holds the key to BRICS pursuing its true global mission.
The question of what the true mission of BRICS is today is still an open one – is it about creating a “club of heavy-weights” or rather a wide platform that can include not just the giants of the developing world, but also the mid-sized and small economies of the Global South? In other words, is BRICS to evolve in the direction of an exclusive and introvert club or an open inclusive platform that offers a range of modalities of economic cooperation? Many experts view the BRICS future evolution through the prism of size – hence the discussions about further expansion in the block including the largest developing countries from the G20. But the inclusion of South Africa as a member BRICS marks a departure from this prioritization of weight and size (there are a number of developing economies that are larger than South Africa in terms of GDP) towards inclusiveness and representation of all of the main regions of the Global South. It is precisely the integration of South Africa into BRICS that makes it possible to transform this platform from an elitist club of heavy-weights into a block that prioritizes diversity and outreach to the wider development community.This development towards greater inclusiveness and the integration of an African economy into the platform is what sets the BRICS apart from the G7 – a grouping that brings together the largest developed economies. While the G7 has also embarked on outreach formats with the participation of developing economies, it remains in essence an elitist club whose core is limited only to advanced economies with the largest GDP size, with no clear prospect of including developing countries into the core. In the case of BRICS, not only has the core already expanded to include South Africa, there are also active discussions on the possibility of the BRICS core to incorporate more African economies. The inclusion of South Africa marked a departure (in some ways an innovation) from the track charted by the developed world in building alliances that are meant to serve as a basis for global governance.
Perhaps then it is not by chance that it was precisely during South Africa’s chairmanship in BRICS that the outreach format received crucial impulses – first during the outreach meetings at the 2013 BRICS summit in Durban and then during the 2018 summit, when South Africa successfully hosted the BRICS+ meetings that for the first time ushered in the participation of countries representing the regional blocks and groupings from the developing world. I would venture to make the claim in this respect that of all the BRICS economies, South Africa is perhaps one of the least Realpolitik (narrowly focused on national interests) and the most committed to advancing the broader “beyond its borders” agenda of Africa’s regional development, the development of the Global South and a more balanced development for the global community. After the contributions delivered by South Africa to the outreach formats during its chairmanship in the BRICS, this year’s summit may present yet another legacy for the evolution of the BRICS block in the direction of greater openness and inclusiveness – either via discussions on the inclusion of new members into the core or the formation of a platform that brings together the regional arrangements in which BRICS countries are members.
What all this means is that South Africa and Africa more broadly are the key gateways for BRICS to scale up its outreach to the rest of the developing world. Building a platform for regional arrangements that brings together regional blocks of the developing world may be an innovation and a lasting contribution not only to BRICS development per se, but also to the creation of a new, regional layer of global governance. Africa is in a strong position to spearhead such efforts as it already leads the Global South in building a pan-continental free trade area – the African Continental Free Trade Area (AfCFTA), while the African Union is arguably one of the most active and effective pan-continental/regional blocks that is likely to receive full-fledged membership in the G20.
The formation of a platform for regional arrangements could revitalize BRICS development in a number of ways. The creation of a platform for regional organizations in which BRICS countries are members – including the likes of the AU, ASEAN, SCO and CELAC – could broaden the outreach of BRICS+ to cover the vast majority of the Global South. A regional platform that brings together the regional financing arrangements of BRICS+ countries (including the EFSD, FLAR and BRICS CRA) could become the basis for a more effective BRICS Contingency Reserve Arrangement (CRA) – until now as pointed out by Marco Fernandes, “the lack of strong leadership since its inauguration in 2015 and the absence of a solid strategy from the five member countries has prevented the CRA from taking off1”. Most importantly, a platform for regional trading arrangements – such as the AfCFTA as well as MERCOSUR and the Eurasian Economic Union – could serve as the basis for bolstering trade integration within the BRICS+ format. As has been the case with BRICS CRA, trade integration stayed on the back-burner of BRICS agenda, but with the greater advances made by BRICS members in their respective regional trade blocks it may be possible now to pursue the “integration of integrations” route.
All of the above contributions coming from South Africa may serve not only the purposes of adding scale and forging solidarity within the wider circle of BRICS-plus – in economic terms it may provide BRICS with the much needed boost to mutual trade and a strong growth impulse coming from some of the fastest growing regions in the world such as Africa. As stated by Jeffrey Sachs, United Nations Secretary-General Antonio Guterres’ Advocate for Sustainable Development Goals: “Africa can and will rise to growth of 7 percent or more per year consistently in the coming decades. What we’ll see … is a real acceleration of Africa’s sustainable development so that Africa will be the fast-growing part of the world economy. Africa is the place to invest.2”
In the end, within BRICS it is the South African “S” that gives it the sense of plurality. BRICS needs Africa in order for the block to follow the route of greater openness, inclusiveness and growth. For its part Africa via BRICS+ can deliver a tangible contribution to building a more equitable and fair global governance. This is after all, precisely the “win-win” scenario that could serve not only BRICS and Africa, but also the Global South and the whole international economy.
References:
1 https://asiatimes.com/2023/04/brics-gains-new-chance-to-improve-global-development/
Africa's economic growth to outpace global forecast in 2023-2024 – African Development Bank biannual report
https://www.afdb.org/en/news-and-events/press-releases/africas-economic-growth-outpace-global-forecast-2023-2024-african-development-bank-biannual-report-58293
African Development Bank’s new report calls for bold policy actions to help African economies mitigate compounding risks
19-Jan-2023
Africa is set to outperform the rest of the world in economic growth over the next two years, with real gross domestic product (GDP) averaging around 4% in 2023 and 2024.
This is higher than projected global averages of 2.7% and 3.2%, the African Development Bank Group said in Africa’s Macroeconomic Performance and Outlook report for the region, released in Abidjan on Thursday.
With a comprehensive regional growth analysis, the report shows that all the continent’s five regions remain resilient with a steady outlook for the medium-term, despite facing significant headwinds due to global socio-economic shocks. It also identified potential risks and called for robust monetary and fiscal measures, backed by structural policies, to address them.
The Macroeconomic Performance and Outlook report will be released in the first and third quarters of each year. It complements the bank’s existing annual African Economic Outlook report, which focuses on key emerging policy themes relevant to the continent’s development.
The report shows that estimated average growth of real GDP in Africa slowed to 3.8% in 2022, from 4.8% in 2021 amid significant challenges following the Covid-19 shock and Russia’s invasion of Ukraine. Despite the economic slowdown, 53 of Africa’s 54 countries posted positive growth. All the five regions of the continent remain resilient with a steady outlook for the medium-term.
However, the report sends a cautionary note on the outlook following current global and regional risks. These risks including soaring food and energy prices, tightening global financial conditions, and the associated increase in domestic debt service costs. Climate change—with its damaging impact on domestic food supply and the potential risk of policy reversal in countries holding elections in 2023—pose equally challenging threats.
The report advocates bold policy actions at national, regional, and global scales to help African economies mitigate the compounding risks.
In remarks during the launch, African Development Bank Group President Dr. Akinwumi Adesina said the release of the new report came at a time when African economies, faced with significant headwinds, were proving their resilience.
“With 54 countries at different stages of growth, different economic structures, and diverse resource endowments, the pass-through effects of global shocks always differ by region and by country. Slowing global demand, tighter financial conditions, and disrupted supply chains therefore had differentiated impacts on African economies,” he said. “Despite the confluence of multiple shocks, growth across all five African regions was positive in 2022—and the outlook for 2023–24 is projected to be stable.”
Niale Kaba, Minister of Planning and Development of Côte d'Ivoire, said: “The release of this report by our bank, the African Development Bank Group, at this time of the year is an excellent opportunity for Africa and its global partners. We need these regular updates to assess our countries’ macroeconomic performance and prospects. This reliable information will help decision-making and risk management for potential investors in Africa.”
Africa’s pre-Covid-19 top five performing economies are projected to grow by more than 5.5% on average in 2023-2024 and to reclaim their position among the world’s 10 fastest-growing economies. These countries are Rwanda (7.9%), Côte d'Ivoire (7.1%), Benin (6.4%), Ethiopia (6.0%), and Tanzania (5.6%).
Other African countries are projected to grow by more than 5.5% in the 2023-24 period. They are the Democratic Republic of Congo (6.8%), The Gambia (6.4%), Mozambique (6.5%), Niger (9.6%), Senegal (9.4%), and Togo (6.3%).
At the launch, economist Jeffrey Sachs, Director of the Center for Sustainable Development at Columbia University commended the report which he said showed that African economies are growing and growing consistently.
Sachs, who is also United Nations Secretary-General Antonio Guterres’ Advocate for Sustainable Development Goals, said: “Africa can and will rise to growth of 7 percent or more per year consistently in the coming decades. What we’ll see, building on the resiliency we see in this report, is a real acceleration of Africa’s sustainable development so that Africa will be the fast-growing part of the world economy. Africa is the place to invest.”
Bold policy actions to help African economies mitigate the compounding risks
The report advocates robust measures to address the risk. These include a mix of monetary, fiscal, and structural policies including:
- Timely and aggressive monetary policy tightening in countries with acute inflation, and cautious policy tightening in countries where inflationary pressures are low. Coordination with fiscal policy will further strengthen the levers to ease inflationary pressures.
- Enhancing resilience by boosting intra-Africa trade, especially in manufacturing products to cushion economies from volatile commodity prices.
- Accelerating structural reforms to build tax administration capacity and investments in digitalization and e-governance to enhance transparency, reduce illicit financial flows, and scale up domestic resource mobilization.
- Improving institutional governance and enacting policies that can leverage the private sector financing especially in climate-proof and pandemic-proof greenfield projects—and mobilizing Africa’s resources for inclusive and sustainable development.
- Taking decisive action to reduce structural budget deficits and the accumulation of public debt in countries facing a high risk of debt distress or already in debt distress.
Overview of economic outlook across regions
Despite the confluence of multiple shocks, growth across all five African regions was positive in 2022—and the outlook for 2023–24 is projected to be stable.
- Central Africa –Bolstered by favorable commodity prices, growth is estimated to have been the continent’s fastest at 4.7%, up from 3.6% in 2021.
- Southern Africa –Growth decelerated the most, to about 2.5% in 2022 from 4.3% in 2021. This slowdown reflects subdued growth in South Africa, as higher interest rates, weak domestic demand, and persistent power outages weighed on the economy.
- West Africa –Growth is estimated to have slowed to 3.6% in 2022 from 4.4% in 2021. This reflects decelerations in Côte d’Ivoire and Nigeria, the region’s two largest economies. Nigeria’s growth in 2023—though hit by Covid-19, insecurity, and weak oil production despite higher international oil prices—could benefit from ongoing efforts to restore security in the restive oil-producing region.
- North Africa –Growth is estimated to have declined by 1.1 percentage points to 4.3% in 2022 from 5.4% in 2021 because of sharp contraction in Libya and the drought in Morocco. Growth is projected to stabilize at 4.3% in 2023, supported by an expected strong rebound in the two countries and sustained growth elsewhere in the region.
- East Africa –Growth is estimated to have moderated to 4.2% in 2022 from 5.1% in 2021. However, it is projected to recover to the pre-pandemic average above 5.0% in 2023 and 2024. While the production structure in East Africa is relatively diversified, countries in the region are largely net importers of commodities. They thus bear the brunt of high international prices in addition to recurrent climate shocks and insecurity, particularly in the Horn of Africa.
In his presentation, African Development Bank Acting Chief Economist and Vice President Kevin Urama observed that Africa is still a favorable destination for investments in human capital, infrastructure, private sector development, and natural capital.
Urama said: “Africa has a significant role to play in driving inclusive growth and sustainable development globally. There are many smart investment opportunities in key sectors: agriculture, energy markets, minerals, health infrastructure and pharmaceutical industries, light manufacturing, transport and logistics, digital economy and more. The continent remains a treasure trove for smart investors globally.”
For more information and to download the report, click here.
