By Vuyani Ndaba
JOHANNESBURG (Reuters) – Key Sub-Saharan African economies will grow tepidly into next year, restrained by stubborn inflation as the dollar’s strength drives up import costs, undermining hawkish local monetary policy, a Reuters poll found.
Economists and analysts watching the continent have nudged some forecasts lower in anticipation of a tighter global environment that threatens to sap export volumes and pile more pressure on the region’s economies.
A poll conducted in the past week showed growth for the sub-Saharan Africa region was expected to slow to 3.4% this year from last year’s estimate of 4.7% but then edge up to 3.7% in 2023, in line with recent International Monetary Fund forecasts.
However, Virág Fórizs, emerging markets economist at Capital Economics, said clouds over sub-Saharan African economies have darkened further over recent months.
“Elevated inflation, high borrowing costs and a strong U.S.
dollar are here to stay for a couple more quarters, weighing on activity in the region and exacerbating fragile debt dynamics in many parts of sub-Saharan Africa,” she added.
“As the global economy slows, weakening external demand for Africa’s exports will dampen output in much of the region.”
Ghana’s economy saw the biggest forecast cut as it faces acute dollar shortages and has the world’s worst performing currency this year.
It is expected to grow 4.0% this year, a 0.7 percentage point downgrade from a poll three months ago, but was expected to fare better with 4.2% growth next year.
Nigeria – Africa’s biggest economy – was expected to grow 3.1% next year from 3.0% this year, slower than previously thought.
Together with South Africa – the second biggest economy – it contributes more than 50% to the region’s GDP.
Last quarter’s poll suggested inflation in Africa’s oil-rich economies would moderate next year but remain stubbornly in double digits in the west of the continent.
That expectation was unchanged for Nigeria and Ghana, despite 400 and 1,000 basis points of accumulated rate hikes, respectively, this year.
“Even in the face of significant global and domestic economic constraints, SSA (Sub-Saharan Africa) growth will probably accelerate a little bit more in 2023, albeit in large part due to a still relatively low base,” said Rafiq Raji, non-resident senior associate with the Africa program at the Centre for Strategic and International Studies.
Still, South Africa’s economic growth was expected to slow to 1.4% next year from 1.9% this year, little changed from last month’s poll.
African central banks have been tightening aggressively this year to tame double-digit inflation in the face of very weak currencies.
Goldman Sachs has revised Ghana’s peak interest rate forecast for 2022 to from 22.0% to 25.0%.
South Africa’s Reserve Bank was expected to hike rates by 50 basis points to 6.75% in November, the last meeting of this year, and hike again in the first quarter by another 50 basis points before pausing for the rest of 2023.
Kenya’s economy will likely grow 5.5% this year and 5.4% next year.
(For other stories from the Reuters global economic poll:)
(Reporting by Vuyani Ndaba; Editing by Jonathan Cable and Tomasz Janowski)
