African Economies: The Outlook for 2023

Bucking global trends of an economic slowdown, several African countries are set for a period of robust growth in 2023. But in their discussion of the report, “African Economies in 2023,” published in French earlier this month, experts gathered at AFD’s headquarters on 19 January warned against premature celebration. 

The continent is expected to reach an average growth rate of about 4%, but those rates fall to between 2 and 2.5% in real terms, once high demographic growth rates are taken into account. Though still double the 1.2% estimated worldwide, most African countries have yet to return to pre-pandemic levels. 

“We will have to wait to see the same levels of GPD per capita growth,” Matthieu Morando, Macroeconomist with AFD’s Africa Department, told the conference. “On the continent today, we still have at least ten countries whose level of GDP per capita is more than 5% lower than it was before the crisis.”

Read the introduction and chapter 1 of "African Economies in 2023" in English

Diversity is strength 

Whereas extractive and oil-dependent economies have been hard hit by the pandemic and volatile commodity prices, economies fueled by a wider variety of activities and sectors have proved more resilient. “Diversified countries have rebounded much better after the Covid crisis,” said Morando. “They maintained a degree of growth in 2022, which is somewhat of an exception [to world averages], and they are bouncing back now with growth rates of around 5%.”

While oil exporter Nigeria saw its GDP grow by 3% last year, its West African neighbors Côte d’Ivoire, Benin and Togo, which Morando described as being “very diversified,” all hovered around 6%. 

Further reading: "In Africa, the most diversified African economies have weathered the crisis best"

Economic development in Côte d’Ivoire has diversified not only within the agricultural and industrial sectors, boosting food processing and vehicle production; it is also seeing a surge in service industries, with a boom in telecommunications. 

Fragile growth

The IMF predicts similar growth rates for several countries across the Sahel, despite ongoing security concerns. Of the 29 countries classified by the Fragile States Index as being in a state of alert, 21 are African. 

“Many fragile states on the continent with intra-community conflicts [are seeing that] legitimacy among governing bodies has deteriorated,” said Françoise Rivière, head of the Economy and Strategy Division at AFD’s Africa Department. “States like Mali, Burkina Faso and Guinea in particular have been weakened by coups d’état and very tense political situations.”

More generally, several factors will determine whether African economies return to the high growth rates of a decade ago. One such is the Chinese economy’s five-point fall in growth last year, to 3% from 8% the year before. This has led to a concomitant drop in demand, particularly for raw materials from Africa, as well as in financing and direct investment. 

So how will this play out in 2023? 

A continuing recovery from the recent slowdown “will depend on the mobilization of international financing and the capacity of public development banks or donors more generally to be able to [provide] support,” Rivière said. Added to which “are climate, security and political risks that are not necessarily predictable.” 

Across the continent, the panelists agreed, growing indebtedness may complicate recovery efforts. After ebbing for close to a decade, public debt is again on the rise. Close to half the African continent – 22 low-income countries – are either already in debt distress or at high risk of debt distress, according to the IMF. 

Some 18 African governments spend 20% or more of their annual revenues to service public sector external debt. Zambia and Sudan spend more than 40% of annual government expenditure on debt servicing, leaving governments little to invest in infrastructure or in measures aimed at improving food security, an issue that will be increasingly urgent in the coming months. 

Further reading: Summit on the financing of African economies: "The needs are enormous"

Food insecurity

Increasingly costly imports of vital grains and fertilizers from Ukraine and Russia are putting some foods out of reach for millions, forcing African governments to rethink their food production policies. “It is clear that food self-sufficiency contributes to food security,” said Ousseynou Nakoulima, head of Portfolio Management at the International Finance Corporation, a branch of the World Bank. Speaking to the conference via live link from Washington, he described rising inflation and food insecurity as creating a kind of paradox. 

“The recent crises – both Ukraine and the Covid crisis – have paradoxically paved the way for African companies, forcing them to produce locally or to use local suppliers,” he said. “It’s interesting to see, even in manufacturing sectors, how certain private actors can emerge and substitute imports, notably from China, with local production.”

Signs of developmental decline

Still, the global health, economic and geopolitical crises have posed serious problems for development in Africa, with the UN recording the biggest drop in Human Development Index (HDI) figures in three decades. Measures for health, education and living standards have fallen for 90% of countries assessed, according to the latest figures.  

"It's a brutal hit," said Morando. “We had never seen anything like it since the creation of these indicators in the 1990s. And as the authors [of the UN report] estimate, we have lost about five years of human development…with the same order of magnitude for the African continent.”While a few countries like Togo, Congo and Ghana saw modest improvements in their HDI scores, those for 40 countries have fallen for two years in a row, particularly in terms of education. 

Schools closed for long periods during the pandemic, classes were cancelled, and online learning has often proved inferior to in-class instruction. The health crisis has also caused more young people, especially girls, to leave school altogether. A study of rural Kenya found that dropout rates among high school girls tripled from 3.2 percent in pre-pandemic years to 9.4 percent, and the risk of getting pregnant prior to completing secondary school doubled.