Africa’s economic growth is slowing as countries continue to contend with rising inflation, hindering the progress on poverty reduction
The risk of stagflation comes at a time of high interest rates and debt that are forcing African governments to make difficult decisions as they try to protect people’s jobs, purchasing power and development gains.
According to the World Bank’s latest ‘Africa’s Pulse’, economic growth is sub-Saharan Africa (SSA) is set to decelerate from 4.1% in 2021 to 3.3% in 2022, mainly as a result of a slowdown in global growth, including flagging demand from China for African commodities. The war in Ukraine has exacerbated an already high inflation rate, with 29 of 33 countries in SSA with available information have inflation rates of more than 5%, while 17 countries had double-digit figures.
“These trends compromise poverty reduction efforts that were already set back by the impact of the Covid-19 pandemic,” said Andrew Dabalen, World Bank chief economist for Africa.
“What is more worrisome is the impact of high food prices on people struggling to feed their families, threatening long-term human development. This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience.”
In light of the challenging environment across SSA, it is essential to improve the efficiency of existing resources and optimise taxes. In the agriculture sector, governments have the opportunity to protect human capital and climate-proof food production by re-orientating their public spending away from poorly targeted subsidies, and instead toward nutrition-sensitive social protection programmes, irrigation works, and research and redevelopment known to have high returns.
Such reprioritisation maintains the level of spending in a critical sector, while raising productivity, building reliance to climate change and achieving food security for all. Creating a better environment for agribusiness and facilitating intra-regional food trade could also increase long-term food security in a region that is highly dependent on food imports.