CEM REPORT, ECONOMY | The African continent, despite facing a myriad of challenges especially increasing debt profile, has been projected to be the second fastest-growing economy in the world in 2024, following closely behind Asia.
The Economist Intelligence Unit’s (EIU) “Africa Outlook 2024: Strong Growth Amid Heated Elections and Financial Woes” report predicts that Africa’s real GDP will grow by as much as 3.2 per cent in 2024 from the present 2.6 per cent, thanks to its abundant natural resources.
The EIU reports that almost all African states are expected to post a positive growth story with only war-torn Sudan and struggling Equatorial Guinea likely to contract in 2024.
“We forecast that Africa will be the world’s second-fastest-growing major region in 2024, just behind Asia, which will be propelled by China and India. Almost all African states will post a positive growth story, with war-torn Sudan and struggling Equatorial Guinea the only economies that look set to contract in 2024.”
According to EIU analysis, Africa is expected to outpace North America, South America, Antarctica, Europe, and Australia in growth estimates for 2024. However, Asia is predicted to surpass the continent in growth due to China and India’s economic progress.
Notably, twelve out of the world’s twenty fastest-growing economies in 2024 will be found in Africa. The report highlights that East Africa’s services sector will play a significant role in driving these economies forward.
The report calls on foreign investors to focus their attention on East African nations such as Kenya, Ethiopia, Uganda, Rwanda, and Tanzania.
“East Africa, encompassing Ethiopia, Kenya, Uganda, Rwanda, Tanzania, and the DRC, will once again prove to be the most dynamic part of the continent in terms of economic growth.
“The services sector will continue to play a major role in driving the economies of East Africa, including resurgent travel, tourism, and hospitality; resilient transport and logistics; and vibrant financial and telecommunications industries.”
According to EIU analysis, substantial investment will continue to flow into Africa’s energy sector ventures, as well as minerals and metals that are crucial to the global energy transition and digital transformation.
“Resource-intensive economies and major commodity exporters will continue to do well given the intense competition and high prices for Africa’s supplies of hydrocarbons, mining sector output, and agricultural produce.”
However, the project comes under the threat of several debts incurred by African nations. While some countries are seeking debt restructuring solutions, elevated external debts could mount pressure on the continent’s finances.
Moreover, excessive debt burdens could create financial squeezes leading to weaker currencies and higher inflation rates amongst others across some countries in Africa. These challenges have been compounded by external shocks such as the COVID-19 pandemic of 2020-21; Russia’s invasion of Ukraine; and adverse weather conditions linked with global climate change.
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“Softer economic growth, higher inflation, weaker currencies, and more costly international capital have exposed Africa’s debt frailties in 2023, and risks are likely to mount in 2024 in the absence of external debt restructuring.”
However, it is worth noting that EIU analysis believes that despite external shocks coming from the COVID-19 pandemic of 2020–2021, the Russia inversion of Ukraine, the rising debt, and the inflationary situation, Africa will post a positive growth story for the coming year.
Nevertheless, despite these challenges mentioned above by EIU analysis, they believe that Africa will post positive growth stories for the coming year.
