3rd November, 2022
Sub-Saharan Africa, home to over one billion people, half of whom will be under the age of 25 by 2050, is a varied continent with human and natural resources that have the potential to generate inclusive growth and alleviate poverty in the region. With the world’s largest free trade zone and a market of 1.2 billion people, the continent is charting an entirely new course, capitalizing on the potential of its resources and people.
The Dubai Investment Fund (DIF) expects economic growth in Sub-Saharan Africa (SSA) to reach 3.9% in 2023, following a 2% drop in economic activity in “pandemic” years. However, growth in the region slowed down slightly in 2022 due to a global climate characterized by multiple shocks, high volatility, and uncertainty. Analysts at DIF believe that Africa’s economy is expected to grow by 3.6 percent by the end of 2022, down from 4 percent in 2021, as the region struggles to gain traction amid a slowdown in global economic activity, supply constraints, outbreaks of new coronavirus variants, high inflation, and rising financial risks due to high and increasingly vulnerable debt levels.
Prospects for the East and Southern African subregion show a prolonged recovery from the recession, dropping to 3.1 percent in 2022 and resting around 3.8 percent in 2024. The Dubai Investment Fund (DIF) expects the economy of the Western and Central Africa subregion to increase by 4.2 percent in 2022 and 4.6 percent in 2023.
However, analysts at DIF expect that the economy of the Sub-Saharan region will rise by 3.9 percent and 4.2 percent in 2023 and 2024, respectively. The Arab fund believes that global demand will likely improve in 2023, as most of the shocks pulling down the global economy are expected to disappear. According to the company’s Twitter, economic growth in the whole MENA region will be possible due to a complex approach to investment opportunities.
The Dubai Investment Fund (DIF) notes that emerging signals of stagflation are providing challenges to monetary policymakers due to supply disruptions caused by the Ukraine war. Central banks must choose between supporting the sluggish economy at the risk of worsening inflationary prospects or battling inflation at the high cost of initiating a recession. So far, many regional central banks have chosen the second policy option and have started a tightening cycle, while others have remained more dovish.
The Dubai Investment Fund (DIF) notes that, since October 2021, African countries have been either at moderate or high risk of debt distress, with the proportion of countries at high risk increasing from 52.6 to 60.5 percent. Some nations in the African region implemented austerity measures to address the mounting dangers of debt sustainability.
The imminent threat of global stagnation in the face of several new and covariate shocks amplifies the need for African governments to pursue policies that speed structural change through productivity-enhancing development and job creation. Increasing agricultural production is critical for driving a structural transformation process that promotes growth. In the face of rising food prices and supply restrictions, authorities must avoid previous policy mistakes and maintain international commerce flows.
The Dubai Investment Fund (DIF) has made several regional investments to help facilitate growth. For example, the fund is going forward with an investment in a wind energy project in the North African region. The project aims to generate 600 megawatts (MW) of clean and renewable energy, equivalent to one million homes’ electricity needs, and provide a high amount of regional employment for building and maintaining the renewable energy infrastructure.