African countries lead world’s fastest-growing economies in 2024

• African countries will lead the world’s fastest-growing economies in 2024, with leading forecast growth being Niger, Senegal, Libya, Rwanda and Ivory Coast.
• The IMF projects regional growth to improve moderately to 4 per cent in 2024 from 3.3 per cent in 2023.
• The pick-up economic growth is emanating from a low base considering the region’s recent setbacks from the pandemic.

Africa leads the world’s fastest-growing economies in 2024

Africa will be the second fastest-growing regional economy in 2024. Over 10 African countries will experience substantial GDP growth. In October 2024, the International Monetary Fund emphasized Africa’s pivotal role in global economic development and resilience.

Africa could face economic headwinds this year. However, some of the continent’s brightest spots are lighting up the economic prospects. According to the International Monetary Fund, six of the top 10 performing nations globally are projected to come from Africa in 2024.

The smaller sixes will not be sufficient to compensate for less stellar performances by Nigeria and South Africa, with a combined two-fifths of Africa’s $2 trillion economy. Nevertheless, they are a difference-maker in a region severely ravaged by poverty and inequality.

According to Yvonne Mhango, an economist with Bloomberg Africa, Sub-Saharan Africa’s growth prospects are brightening. Eight of the regions of the region’s top 10 biggest economies, accounting for a combined 40 per cent of regional GDP, will grow by a robust 5 per cent on average.

Africa’s fastest-growing economies in 2024

Leading forecast growth are Niger, Senegal, Libya, Rwanda and Ivory Coast. These countries’s economic expansion is largely anticipated from strategic economic diversification to attract foreign direct investments.

The IMF projects regional growth to improve moderately to 4 per cent in 2024 from 3.3 per cent in 2023. And while the two economic heavyweights are unlikely to deliver quicker outcomes in the short term, South Africa and Nigeria continue pursuing reforms that might yield over time.

The IMF sees Nigeria’s growth peaking at about 3 per cent in 2024 and 2025, with South Africa projected to grow by 1.8 per cent and 1.6 per cent over the two years, up from a tepid 0.9 per cent in 2023.

Economic reforms at the core of growth turnaround

According to Razia Khan, chief economist for Africa and the Middle East at Standard Chartered Bank, Africa’s external environment remains challenging. However, economic reforms matter and will form the crux of the expected growth turnaround in Nigeria and South Africa.

Nigeria’s President Bola Tinubu has adopted aggressive policies to ease the West African nation’s foreign exchange regime and removed costly fuel subsidies.

Ravaged by an energy crisis, South Africa seems to finally be making considerable progress on boosting its power supply, which is expected to continue.

“The important point for South Africa is that we’ve probably reached the turning point,” said Khan. “The years ahead should deliver faster growth. And that is under-appreciated.”

That is despite possible uncertainty before this year’s elections. The vote, likely in April or May, may cost the ruling African National Congress its absolute parliamentary majority. However, the ANC is expected to retain its control in the government, and the ballot might not significantly impact policy.

A cautious approach to Africa’s economic near-term outlook

Still, analysts remain cautious about Africa’s outlook in the near future. The pick-up economic growth emanates from a low base considering the region’s recent setbacks from the pandemic, which are straining public finances and leaving many countries struggling with heavy debt obligations.

These setbacks have already triggered defaults in Ethiopia, Zambia, and Ghana, with the IMF warning that other African economies remain at risk and access to foreign capital markets effectively closed.

Moody’s Investors Service has a negative outlook on the credits of African economies owing to the elevated debt-financing risks, and since it anticipates China’s growth slowdown to dampen demand for Africa’s commodity exports.

Aurelien Mali, senior credit officer at Moody’s Sovereign Risk Group, notes that Africa’s average debt-to-GDP ratio has risen to 60 per cent. That is back up to the crisis levels in the early 2000s that galvanised debt relief for the most vulnerable nations.

“Many of these countries have been running twin deficits — fiscal deficits and current-account deficits — in the post-Covid period,” he said. “They need to access external funding at a moment when you have a wall of maturities coming due.”

Moody’s projects around $5 billion of Sub-Saharan African Eurobonds will fall due in 2024, with more than $6 billion in 2025. That does not account for debts falling due to bilateral creditors, including China or multilateral lenders like the World Bank and the IMF.

Since the US Federal Reserve commenced a vigorous increase in interest rates in 2022, no African country has entered the Eurobond market. Analysts predict limited market access for most African sovereign issuers in the current year unless the Fed significantly reduces interest rates, potentially easing borrowing costs to more manageable levels.

However, optimism for swift action by the Fed to lower borrowing costs in 2024 has diminished in recent weeks, as indications suggest the continued strength of the US economy.

“A lot of these countries, despite the recent rally, are still locked out of the market. They’re having to find new ways, as their debt comes due, to roll that over to make good on their obligations,” said Patrick Curran, senior economist at Tellimer Ltd. “Countries especially in Africa but in frontier markets generally, are going to be particularly vulnerable as long as interest rates stay near current levels.”