The report covers topics such as economic growth, fiscal balances, debt service obligations, conflict and violence, and policy responses to address these issues.
After bottoming out at 2.6 percent in 2023, economic growth in Sub-Saharan Africa is expected to reach 3.4 percent in 2024 and 3.8 percent in 2025. The recovery is primarily driven by greater private consumption growth as declining inflation boosts the purchasing power of household incomes. Investment growth will be subdued as interest rates are likely to remain high while fiscal consolidation constrains government consumption growth.
Inflation is cooling in most Sub-Saharan African economies but remains high. The median inflation in the region is projected to fall from 7.1 percent in 2023 to 5.1 percent in 2024 and 5 percent in 2025-26. The normalization of global supply chains, steady decline of commodity prices, and impacts of monetary tightening and fiscal consolidation are contributing to a lower rate of inflation in the region.
The global engine of growth is slowly reactivating. Greater labor force participation, the normalization of supply chains, and falling energy and commodity prices contributed to global economic activity amid uncertainties arising from geopolitical tensions and geoeconomic fragmentation. Still, headwinds to growth in advanced economies lie ahead this year. Global policy rates remain elevated, leading to tight credit markets—which could dampen private investment.
Fiscal balances continue to improve, thanks to the fiscal consolidation measures underway in several Sub-Saharan African countries. Debt restructuring negotiations provide an additional incentive for prudent fiscal management in Ghana and Zambia. The median fiscal deficit in the region is projected to decline modestly from 3.8 percent of gross domestic product (GDP) in 2023 to 3.5 percent of GDP in 2024.
Public debt in Sub-Saharan Africa is expected to decline from 61 percent of GDP in 2023 to 57 percent of GDP in 2024. However, the risk of debt distress remains high. More than half of the African governments grapple with external liquidity problems, face unsustainable debt burdens, or are actively seeking to restructure or reprofile their debts. Public debt service obligations have surged as governments in the region are exposed to market financing and non–Paris Club government loans.
Increased conflict and violence in the region will continue to weigh on economic activity. Although confined to small economies so far, military coups and the risk of coup contagion significantly impact international investor sentiment and the perception of risk toward the entire region. Tensions in West Africa have escalated with the decisions of Burkina Faso, Mali, and Niger to leave the Economic Community of West African States and Senegal’s decision to delay elections.
Domestic resource mobilization and support from the international community can play a role in alleviating the region’s funding squeeze. Amid high levels of external debt repayments, as a result of high debt levels and elevated borrowing costs, some countries in the region may face temporary external liquidity pressures in 2024 and 2025. Increased domestic resource mobilization is critical to win back the country’s policy space, channeling resources toward pro-growth public spending and addressing debt rollover risks.
Structural inequalities in Sub-Saharan Africa require multisectoral actions—particularly policies to create a level playing field and enhance the productive capacity of the disadvantaged. Investments in human capital (foundational learning and nutrition) and strengthened local capacity for service delivery to underserved populations and regions can build people’s capacity to seize market opportunities. Removing size-dependent distortions, improving justice service delivery, and boosting market access can support fairer and more thriving marketplaces. Domestic revenue mobilization efforts can also be designed to protect the poor—through taxation of high-net-worth individuals via income and property taxes.
[Text generated by GPT@JRC using Generative AI technology]
