THE World Bank sees Zimbabwe’s economy expanding by 2.9% this year after making a 0.9 percentage point downgrade on January forecasts as the multilateral lender warns of economic headwinds in sub-Saharan Africa.
The southern African nation is battling rising inflation and a weakening domestic currency. Authorities have over the past few weeks introduced a cocktail of fiscal and monetary measures to save the local unit from collapse.
According to the World Bank Group flagship report titled June 2023 Global Economic Prospects, the three largest economies in Sub-Saharan Africa — Nigeria, South Africa, and Angola — which are projected to grow by about 2.1% annually over 2023-24, a rate more than 2 percentage points per year below the 2000-19 average, are expected to continue to inhibit the overall growth of the region.
“Elsewhere, growth projections for SSA resource-rich countries — excluding the three largest economies and two biggest copper producers, the Democratic Republic of Congo and Zambia — have been downgraded,” the report reads.
“In several metal and oil producers, headwinds from the weaker external environment have been amplified by capacity constraints in extractive sectors (Cameroon, Equatorial Guinea, Gabon).
“Recovery prospects are also less favourable for many small agricultural commodity producers coping with food insecurity, increased prices and shortages of farming inputs, the lingering effects of past weather shocks, and violence (Burkina Faso, Malawi, Mali). More broadly, elevated financing needs, high levels of debt, and limited fiscal space are expected to weigh on activity and exacerbate unfavorable debt dynamics in several countries.”
The report shows that per capita income in sub-Saharan Africa is projected to grow by less than 1% a year on average in 2023-24 — a 0.3 percentage point downgrade from the January forecast.
“In over a fifth of the region’s economies, home to over 450 million people, average per capita income growth in 2023-24 is not expected to exceed 0.5%, while in over a tenth, including Angola and South Africa, it will be negative,” the World Bank says.
“Thus, prospects for poverty reduction in the region remain bleak, with almost 40% of SSA’s population living in countries (including the three largest economies) with lower per capita incomes next year than at the start of the pandemic.
“If global and domestic inflationary pressures were to persist for longer than currently anticipated and inflation expectations become de-anchored, policy makers could be forced to raise interest rates by more than expected or keep borrowing costs elevated for longer.
“Additional policy tightening in advanced economies could be accompanied by renewed banking stress. As a result, SSA financial conditions could tighten much more than projected in the baseline, triggering even greater deterioration in access to markets and elevating risks of financial distress and government debt defaults.”
The International Monetary Fund (IMF), on the other hand, sees Zimbabwe’s economy growing by a modest 2.5% against a new government estimate of 6% as the multilateral lender warns of funding constraints in the sub-Saharan Africa region.