African economies expected to grow by 3.4% in 2024, but not enough to reduce poverty
The World Bank has projected growth in the economies of African countries this year, but the expected growth by 3.4% is not enough to reduce poverty on the continent. About 462 million people in sub-Sahara were still living in extreme poverty by 2023.
A press release from the Bank copied to Ghana Business News indicates that in the Bank’s latest release of the Africa’s Pulse report, a biannual survey of African economies, it says increased private consumption and declining inflation are supporting an economic rebound in sub-Saharan Africa.
Overall, the report titled: “Tackling Inequality is Necessary for Growth and Poverty Reduction” underscores that despite the projected boost in growth, the pace of economic expansion in the region remains below the growth rate of the previous decade (2000-2014) and is insufficient to have a significant effect on poverty reduction.
It notes further that, the recovery remains fragile due to uncertain global economic conditions, growing debt service obligations, frequent natural, disasters, and escalating conflict and violence.
According to the report, transformative policies are needed to address deep-rooted inequality to sustain long-term growth and effectively reduce poverty.
The report projects that growth will rebound in 2024, rising from a low of 2.6 per cent in 2023 to 3.4 per cent in 2024, and 3.8 percent in 2025.
“However, this recovery remains tenuous. While inflation is cooling across most economies, falling from a median of 7.1 to 5.1 per cent in 2024, it remains high compared to pre-COVID-19 pandemic levels. Additionally, while growth of public debt is slowing, more than half of African governments grapple with external liquidity problems, and face unsustainable debt burdens,” it said.
Moreover, it says, due to multiple factors including structural inequality, economic growth reduces poverty in sub-Saharan Africa less than in other regions.
In his remarks, Andrew Dabalen, the World Bank Chief Economist for Africa, says: “Per capita GDP growth of 1 percent is associated with a reduction in the extreme poverty rate of only about 1 percent in the region, compared to 2.5 percent on average in the rest of the world.
In a context of constrained government budgets, faster poverty reduction will not be achieved through fiscal policy alone. It needs to be supported by policies that expand the productive capacity of the private sector to create more and better jobs for all segments of society.”
The report also highlights that external resources to meet gross financing needs of African governments are shrinking and those available are costlier than they were prior to the pandemic.
It states that political instability and geopolitical tensions weigh on economic activity and may constrain access to food for an estimated 105 million people at risk of food insecurity due to conflict and climate shocks. African governments’ fiscal positions remain vulnerable to global economic disruptions, necessitating policy actions to build buffers to prevent or cope with future shocks.
What’s more, inequality in Sub-Saharan Africa remains one of the highest in the world, second only to the Latin America and Caribbean region, as measured by the region’s average Gini coefficient. Access to basic services, such as schooling or healthcare, remains highly unequal despite recent improvements. Disparities also exist in access to markets and income-generating activities, irrespective of people’s skills. Taxes and poorly targeted subsidies may also have an outsized impact on the poor.
“Inequality in Africa is largely due to the circumstances in which a child is born and accentuated later in life by obstacles to participating productively in markets and regressive fiscal policies.
“Identifying and better addressing these structural constraints across the economy offers a road map for a more prosperous future,” says Gabriela Inchauste, co-author of a forthcoming World Bank report on tackling inequality in sub-Saharan Africa.
The Africa’s Pulse calls for several policy actions to foster stronger and more equitable growth. These include restoring macro-economic stability, promoting inter-generational mobility, supporting market access, and ensuring that fiscal policies do not overburden the poor.
By Emmanuel K Dogbevi