World Bank laments Africa’s lost decade as economic growth slows

Africa’s economic growth is being held back by regional powerhouses South Africa and Nigeria, adding to challenges alongside crippling debt costs and a recent spate of coups.

Economic growth in sub-Saharan Africa is forecast to slow to 2.5% this year from 3.6% in 2022, the World Bank said on Wednesday in its Africa Pulse report, a semi-annual outlook for the region. On per capita terms, the outlook is even worse.

“The region is projected to contract at an annual average rate per capita of 0.1% over 2015-2025, thus marking a lost decade of growth,” the World Bank warned in the report, offering a gloomy assessment of the task facing policymakers to create jobs and improve livelihoods.

A key problem was the underperformance of the region’s two largest economies, according to the Washington-based lender, which together with the International Monetary Fund will next week hold its first annual meeting in Africa for 50 years in Marrakech, Morocco.

Heavy drag

South African growth is expected to slip to 0.5% in 2023, held back by rolling power cuts and infrastructure bottlenecks that dent exports. Nigeria’s economy is seen expanding by 2.9%.

“The region’s poorest and most vulnerable people continue to bear the economic brunt of this slowdown, as weak growth translates into slow poverty reduction and poor job growth,” Andrew Dabalen, World Bank chief economist for Africa, said in a statement.

The bank said efforts to overthrow governments have become more commonplace, following a series of coups in West Africa, and that violent extremism in the Sahel “carries the seeds of contagion.”

Africa also faces a debt overhang that is weighing on public finances amid rising global interest rates.

‘Staggering’ debt

That’s boosting the number of countries in the region at risk of or already in debt distress, while lifting the debt-service ratio to a “staggering” 31% of revenue in the region in 2022.

“Tightening global financial conditions are increasing sovereign spreads and weakening currencies, thus increasing debt burdens and curtailing access to global capital markets,” the bank said.

Disappointing growth has also meant poor job creation in a region which has the world’s fastest growing population.

To address these challenges, “African policymakers need to design an inclusive growth strategy to provide steady and productive jobs for the more than 10 million youth that join the workforce each year,” it said.

Current growth is only enough to generate 3 million new formal jobs a year, leaving many unemployed in a region where only one in six workers has a wage job, the bank said.

The lack of quantity also contributes to poor job quality, which is being further hindered by a shortage of capital, it said. The bank estimates that sub-Saharan Africa owns only 2% of the global capital stock, while being home to 12% of the world’s working-age population.

“The expected growth of the working-age population underscores the urgency of creating good jobs,” the bank said. “Between 2030 and 2050, sub-Saharan Africa is expected to account for 90% of the growth in the working age population.”