EIU analysts forecast grim economic outlook for Africa in 2023

Africa’s economic recovery has been disrupted in 2022 by a range of internal and external shocks—including adverse weather conditions, rapidly rising inflation rates, higher borrowing costs and softer demand in major export markets. Some of these factors will subdue growth prospects in the year ahead, but the region is expected to hold steady rather than suffer a major downturn in economic growth.

Here are a few of the major trends, issues and events that will shape the trade and investment landscape across Africa in 2023, according to EIU analysts.

Heavyweight countries will remain stuck in slow-growth mode

South Africa will grow by just 1.5% in 2023 as higher interest rates, power supply issues and weak demand weigh on domestic and export-oriented business activity. The country could easily enter a technical recession—two consecutive quarters of negative real GDP growth—in 2023.

Deputy President William Ruto held a meeting of the Intergovernmental Budget and Economic Council (IBEC) Pulse Live Kenya

Similar conditions will hamper growth in Nigeria, although the economy will benefit from resilient commodities trade and dynamic consumer goods and services markets in major cities, pushing growth to 3.1% in 2023.

Meanwhile, Kenya is expected to be the fastest-growing major economy in Africa during 2023, posting real GDP growth in the region of 5%.

Exchange rates will remain under pressure

Most African currencies have lost substantial value against the US dollar during 2022, and the report predicts the exchange-rate weakness to continue into 2023, albeit to a lesser degree.

The currencies of the troubled states of Sudan and Zimbabwe will be among the weakest in the world during 2023, while Ghana, Malawi, Sierra Leone, Ethiopia and Egypt—which will all suffer from elevated rates of inflation—will see their currencies depreciate by more than 10% against the US dollar.

READ: 7 of the worst performing currencies in Africa in 2022

African majors of Nigeria, South Africa, Angola, Algeria and Kenya will not be exempt from currency weakness and will experience further depreciation of their currencies against the US dollar in 2023, largely due to tighter global financial markets, weaker external demand and price pressures at home.

Debt servicing will become more problematic

The need to service and roll over large amounts of debt at a time when domestic and international borrowing costs are on the rise will weigh heavily on some countries in 2023, and things could get even more painful in 2024 when more capital repayments fall due.

Ghana, Tunisia, Egypt, Congo-Brazzaville, Zambia, Zimbabwe and Mozambique have enormous amounts of debt (relative to GDP), and their governments will grapple with debt-servicing burdens that eat up a substantial share of their revenue in 2023.

READ: Ghana’s deteriorating economy has spurred another civil protest demanding the immediate removal of the President

Elsewhere, major economies of Algeria, Angola, Ethiopia, Gabon, Kenya, Nigeria, and South Africa have seemingly manageable levels of public debt, but these countries will suffer from high and rising debt-servicing costs—especially Nigeria, where the debt/GDP ratio is low, but debt is hugely expensive to service.

Elections will pose a risk to stability

Election time can be very unstable in Africa, and the 2023-24 cycle will be no different, with a high risk of political protests, mass demonstrations and strikes in a range of countries. Africa will hold head of state (presidential or prime ministerial) or national legislature elections in 17 states during 2023, and upcoming elections in countries like Algeria, Madagascar, Nigeria, South Africa and Zimbabwe could prove to be flashpoints for disruptive civil unrest in 2023.

The three frontline presidential candidates for the 2023 election in Nigeria: Peter Obi, Bola Tinubu and Atiku Abubakar. (Businessday) Pulse Nigeria

Worsening socioeconomic conditions in some of these countries driven by subdued wage growth, the rising cost of living and food security concerns could also prove problematic for incumbent or new government administrations.