Eswatini economy poised for rebound, 3.4% growth for SubSaharan Africa projected
As the April 2024 edition of World Bank Africa’s Pulse reveals, Eswatini stands to benefit from a positive economic outlook for SubSaharan Africa.
The survey forecasts a rebound in economic activity across the region, driven by increased private consumption and a decline in inflation.
Projections indicate that growth will accelerate from a low of 2.6% in 2023 to 3.4% in 2024, signaling promising prospects for Eswatini’s economy.
The Africa’s Pulse is a bi-annual publication of the Office of the Chief Economist in the World Bank Africa Region. It analyzes the short-term economic prospects for the continent and current development challenges, as well as a special development topic.
The survey expresses that several factors contribute to this anticipated rebound. Receding inflationary pressures, coupled with growth resilience in key global economies such as the United States, are expected to drive this growth. Furthermore, a revival in global trade and increased risk appetite, alongside the gradual easing of global financial conditions, particularly in the latter half of this year, are all contributing factors.
In terms of per capita growth, the region is set to experience acceleration, reaching 0.9 percent in 2024 and 1.3 percent in 2025, up from a modest 0.1 percent in 2023. However, it’s worth noting that despite this positive outlook, projected growth rates still fall below the levels observed during the period of 2000-2014, which averaged 2.4 percent annually. to
Glimmer of hope
These projections offer a glimmer of hope for Sub-Saharan Africa, suggesting a potential recovery from recent economic challenges. It underscores the importance of continued efforts to address underlying structural constraints and promote sustainable growth in the region.Regional forecasts suggest that Sub-Saharan Africa’s real output per capita will fail to grow over 2015–26. This would mark a decade of futility in economic performance. If the region’s growth rate maintained the pace of 2000–14 over 2015–26, real output per capita should be about one-third higher than its level at current growth rates. An Economist suggests that this are appalling news for Eswatini as it maintained a stable economic growth in 2023 and this outlook signals positive news and opportunities for the country.
Post Covid-19
This issue of Africa’s Pulse suggests that the post-Covid-19 growth recovery in Sub-Saharan Africa remains fragile, and there is renewed urgency to revitalize economic growth. While some progress has been made, Africa still needs overcome significant challenges regarding low and unstable growth, high levels of extreme poverty and inequality, and difficulty translating growth into poverty reduction. The outlook asserts that policymakers must find ways to foster inclusive growth that is both longer and stronger while avoiding economic downturns. Structural inequalities are at the root of the weak transmission of growth, making it difficult to reduce poverty and achieve sustained growth in the region.
The survey reports that addressing the drivers of structural inequalities requires policy frameworks that account for interlinkages, complementarities, and trade-offs across three phases of the income generation process building people’s productive capacities, addressing market and institutional distortions that limit people’s ability to use and benefit from those productive capacities, and ensuring fiscal progressivity. Section 3 of this issue provides a series of policy recommendations for tackling these structural inequalities, drawing on a forthcoming regional report.
Growth in 2023
Economic growth in Sub-Saharan Africa bottomed out in 2023. Growth in Sub-Saharan Africa slowed to 2.6 percent in 2023, down from 3.6 percent in 2022. More than half of the countries in the region experienced a decline in their gross domestic product (GDP) growth rate in 2023. The deceleration of growth was partly attributed to slower growth of consumption and investment. Elevated inflation rates, primarily driven by higher food and energy prices as well as weaker currencies, reduced the purchasing power of SubSaharan African households and, therefore, led to a growth slowdown of private consumption in the past year.
Tighter (global and domestic) financial conditions, as a result of contractionary monetary policies aiming to dampen inflation, increased the cost of financing and reduced the availability of credit—thus holding back gross fixed investments. Country-specific challenges in the larger economies in the region also contributed to the slowdown, including energy outages and inadequate transportation logistics in South Africa, as well as lower prices and below quota production of oil in Nigeria and Angola.
Rebound
World Bank analysis highlights that despite the slowdown in 2023, it is set to rebound in 2024 and 2025, but the recovery remains fragile as high-frequency indicators show that aggregate activity has expanded in the largest countries in the region during the early months of 2024. In South Africa, the seasonally adjusted Absa Purchasing Managers’ Index (PMI) increased from 43.6 in January to 51.7 in February thus recording the strongest expansion in factory activity since early 2023. Taking the PMIs of the first two months of the year together signals a subdued start to 2024, with expectations of an uptick in growth over the rest of the year as some of the constraints to economic activity ease. In Nigeria, the PMI fell from 54.5 in January to 51.1 in February, indicating some buoyancy in the private sector. Inflationary pressures pushed input and output costs in the private sector. In turn, output and new orders slowed significantly.
Growth
Growth in Sub-Saharan Africa is expected to accelerate to 3.4 percent in 2024 and further to an average rate of 3.9 percent in 2025–26. Surprising upside growth among large, advanced economies at the start of the year particularly the United States and a recovery in global trade and the gradual easing of financial conditions expected late this year partly explain the recovery in economic activity in Sub-Saharan Africa. Inflation cooling and policy commitment toward restoring macroeconomic stability will help to improve investor sentiment. From the expenditure side, the recovery of private consumption explains the bulk of the rebound in economic activity this year. As inflation recedes and the purchasing power of household incomes climbs back, private consumption growth is expected to accelerate by as many percentage points as overall activity. The contribution of investment remains subdued in 2024 as interest rates remain high. Expectations of a cut in monetary policy rates by the second half of the year in large, advanced economies and by late this year or early next year in African economies might explain an uptick in the contribution of investment to growth in 2025.
Government consumption is expected to make a modest contribution to economic activity this year as fiscal authorities continue their commitment to restoring the sustainability of public finances. From the sectoral output perspective, industry and services account for nearly three-quarters of the rebound of economic activity in 2024. As growth further firms in 2025–26, the service sector will account for more than half of the expansion along the forecast horizon, followed by modest contributions from agriculture and industry.