The International Monetary Fund (IMF) has kept its economic growth forecasts for sub-Saharan Africa unchanged.
However, the global lender has warned that an inflation rate of over 12% is set to weigh heavily on households in the world’s poorest continent.
“Higher food prices will hurt consumer purchasing power, especially among low-income households, and weigh on domestic demand. Social and political unrest, particularly in West Africa, is also weighing on the outlook,” the IMF noted in its World Economic Outlook (WEO) released on Tuesday.
“Rising oil prices, however, have improved growth prospects for oil exporters in the region, such as Nigeria.”
The IMF expects Nigeria, the largest economy in sub-Saharan Africa, to register a growth rate of 3.4% in 2022, 0.7 percentage points higher than previous forecasts.
As the Russian-Ukrainian war continues to weigh on the global economy, the WEO report released revised projections, pointing to a slowdown in the global economic recovery.
The 178-page document notes that global growth is expected to slow from 6.1% in 2021 to 3.6% in 2022 and 2023. This is 0.8 and 0.2 percentage points lower for 2022 and 2023 than in the January IMF outlook.
“The upward revision of the WEO forecast for Africa’s output is an artefact of the upward revision of energy price forecasts and does not mean that the outlook for real economic activity is better,” noted a comment published Wednesday by Oxford Economics.
“Inflation will have a serious impact on household consumption, which will affect demand in all sectors, and ultimately employment.”
The IMF outlook does not provide any projection on unemployment in sub-Saharan Africa, but projects an inflation rate of 12.2% for 2022 and 9.6% for 2023. Ethiopia stands out as the most affected country, with an inflation rate of 34.5%, followed by Angola, where inflation is expected to reach 23.9% this year.
Meanwhile, the IMF has raised its growth forecast for North Africa and the Middle East to 5%, 0.6 percentage points higher than forecast earlier this year.
“The fallout from tighter global financial conditions, reduced tourism and secondary demand (eg from Europe) will also dampen growth, especially for oil importers. For oil exporters, higher fossil fuel prices can provide offsetting gains,” the WEO noted.
The inflation rate is expected to reach 13.4% in 2022 and 10.8% in 2023. For Oxford Economics, these figures could eventually lead to political instability in some countries.
“While this regional average is driven by very high numbers in Sudan and Iran, forecasts of over 7% in Algeria, Tunisia and Egypt are notable and concerning,” Oxford Economics said.
“Inflation is already having disruptive effects on the social fabric in North Africa, which is consistent with our view that political risk in this region is trending negatively.”
(Reporting by Noha El-Hennawy; editing by Cleofe Maceda)