According to the International Monetary Fund, in 2024 it is expected that 6 out of 10 economies with the best results in the world countries of sub-Saharan Africa.
The proof is that heterogeneous group of 47 countries on the African continent, which stretches south of the Sahara. Two heavyweights of the region, Nigeria AND South Africa, represent two fifths of the entire continent’s economy, which is worth 2000 billion dollars. Together, the 2 countries of this part of Africa are helping to transform a region that continues to be severely affected poverty and from inequality.
In a very uncertain global context, in which even the heavyweights of the world economy are faltering, as USA AND ChinaAttention to the growth dynamics of these young nations remains high. On the other hand, as demographic analyzes suggest, the future of the world’s population lies in Africa. With the aging of the West and China itself growing youth of African countries it will be an economic and social challenge for decades to come.
Global growth, the surprise of 2024 will be Africa. IMF details
“The growth prospects sub-Saharan Africa is improving’Africa economist Yvonne Mhango told Bloomberg. “Eight of the ten largest economies in the region – which together account for a further 40% of regional GDP – will grow on average by strong 5%“he added.
Including Ivory Coast at 6.6% and Tanzania at 6.1%. Both countries have done a good job of diversifying their economies and attracting foreign investment.
As a result, the IMF expects a slight improvement regional growth of 4% in 2024 from 3.3% in 2023. And while the 2 heavyweights are unlikely to deliver faster production in the near future, both Nigeria and South Africa are making reforms that could bring benefits over time.
The International Monetary Fund estimates that growth in Nigeria will reach around 3% this year and next. South Africa to grow by 1.8% and 1.6% over two years, compared to a tepid 0.9% in 2023.
Nigerian President Bola Tinubu has taken aggressive steps to ease the country’s exchange rate regime and remove costly fuel subsidies. Hampered by the energy crisis, South Africa is finally making progress in increasing its electricity supply.
But analysts remain cautious prospects for Africa in the near future. The recovery in growth is starting from a low level after the setbacks the region suffered during the pandemic, which strained public finances and left many countries struggling with heavy debt burdens.
Default risk can stall African development
The defaults in Ghana, Zambia and Ethiopia and warnings from the International Monetary Fund that other countries are at risk of insolvency are real alarm bells for the development of the continent.
Moody’s Investors Service has a negative outlook sovereign credit of African states. There are 2 reasons: high debt refinancing risks and slower growth in China which will slow demand for export of raw materials region.
Aurelien Mali, chief credit officer at Moody’s Sovereign Risk Group, notes that Africa’s debt-to-GDP ratio has risen to an average of 60%. This is a return to the crisis levels of the early 21st century, which prompted the deleveraging of poorer countries.
“Many of these countries have experienced a double deficit – fiscal deficit and current account deficit – in the post-Covid period”he declared. “They need access to external funding at a time when they are facing a wall of deadlines to meet”.
Moody’s estimates that in sub-Saharan Africa there will be about US$5 billion of Eurobonds due in 2024 and more than US$6 billion in 2025. This does not take into account debts owed to bilateral creditors such as China or multilateral creditors including the international IMF and the World Bank.
No African country has tapped the Eurobond market since the US central bank began aggressively raising interest rates in 2022. Analysts also do not expect market access for most African sovereign issuers to reopen this year if the Fed lower interest rates which could help bring funding costs back down to a more affordable level.
Optimism that the Fed will move quickly to lower borrowing costs in 2024 has faded in recent weeks, amid signs that the US economy remains strong.
“Many of these countries are still excluded from the market despite recent growth. When their debt becomes due, they have to find new ways to pay it back and meet their obligations.”said Patrick Curran, chief economist at Tellimer Ltd. States, especially in Africa, but generally in frontier markets, are particularly vulnerable if interest rates remain close to current levels, the expert recalled.