East Africa's economic growth to lead the continent in 2024

East Africa’s economic growth is projected to grow at 5.3 and 5.8 per cent in 2024 and 2025-26, respectively.
The World Bank projects African economies to grow by 3.4 per cent in 2024.
However, faster and more equitable growth is needed to reduce poverty.

East Africa’s economic growth to lead the continent

Economies in East Africa are expected to spearhead growth in Sub-Saharan Africa this year amid increased private consumption and declining inflation, which are supporting an economic rebound in the region.

The World Bank’s latest Africa’s Pulse report indicates the East African Community is projected to grow at the fastest pace at 5.3 and 5.8 per cent in 2024 and 2025–2026, respectively, thanks to robust growth in the Democratic Republic of Congo, Kenya, Rwanda, and Uganda.

This is higher than the compounded growth for Sub-Sahara Africa, which, albeit rebounding from a low of 2.6 per cent in 2023, is expected to average 3.4 per cent growth this year and 3.8 per cent in 2025.

The growth is expected to be driven by industry and services, which will account for nearly three-quarters of the rebound in economic activity in 2024, with the agriculture sector and commodity exports remaining key.

Economic activity in the Western and Central Africa (AFW) sub-region is set to increase from 3.2 per cent in 2023 to 3.7 per cent in 2024 and further accelerate to 4.2 per cent in 2025-2025, the World Bank notes in its report.

The sub-region’s performance will be held back by the lower-than-average growth in Nigeria. Excluding this country, the AFW sub-region is projected to grow by 4.4 per cent in 2024 and five per cent in 2025–2026.

Within the sub-region, economic activity in the West African Economic and Monetary Union (WAEMU) is projected to increase by 5.9 per cent in 2024 and 6.2 per cent in 2025, pegged on the solid performances of Benin, Côte d’Ivoire, Niger, and Senegal.

Growth in Nigeria is projected at 3.3 per cent in 2024 and 3.6 per cent in 2025–2026 as the government-led macroeconomic and fiscal reforms gradually start to yield results.

The country is hard hit by inflation, which has, for the first time in two decades, risen to 31.7 per cent as wages and salaries remain stagnant since 2019. The quota for oil production in Nigeria is also below par, similar to Angola.

In the Eastern and Southern Africa (AFE) sub-region, growth of economic activity is expected to accelerate from a trough of 2.2 per cent in 2023 to 3.2 per cent in 2024 and further to 3.6 per cent in 2025–2026.

“The growth performance of the AFE sub-region is dragged down by lower-than-average growth in Angola and South Africa. Excluding these two countries, economic activity in the AFE sub-region is expected to increase by 4.3 per cent in 2024 and five per cent in 2025–2026,” the World Bank said in its report.

Economic activity in South Africa is set to rebound from 0.6 per cent in 2023 to 1.2 per cent in 2024 and slightly accelerate to 1.4 per cent in 2025–2026.

The gradual easing of structural constraints, particularly electricity load shedding and logistics problems in freight rail and ports, as well as the easing of cost-of-living pressures on households, are expected to contribute to this rebound. In Angola, growth is projected to accelerate from 0.8 per cent in 2023 to 2.8 per cent in 2024.

Economic activity will be driven primarily by the non-oil sector, while oil production is set to decline by 2.5 per cent in 2024 due to a lack of investments and maturing fields. Inflationary pressures will remain in 2024, although they are expected to cool by the end of the year.

Geopolitics, debt and natural disasters

While Sub-Sahara Africa is poised for a better economic performance this year, the recovery remains fragile due to uncertain global economic conditions, growing debt service obligations, frequent natural disasters, and escalating conflict and violence.

Experts say transformative policies are needed to address deep-rooted inequality to sustain long-term growth and effectively reduce poverty.

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 the growth of public debt is slowing, more than half of African governments are grappling with external liquidity problems and facing unsustainable debt burdens.

However, public debt in Sub-Saharan Africa is expected to decline from 61 per cent of GDP in 2023 to 57 per cent of GDP in 2024, but the risk of debt distress remains high.

More than half of the African governments grapple with external liquidity problems, face unsustainable debt burdens, or actively seek to restructure or reprofile their debts.

In recent years, public debt service obligations have surged as governments in the region remain exposed to market financing and non–Paris Club government loans.

External borrowing is more expensive than it was before the pandemic despite sovereign spreads gradually declining from their peak in May 2023.

For instance, the coupon for the new Eurobond issued by Kenya this February is 9.75 per cent, compared to the 6.88 per cent of the Eurobond maturing in 2024.

“The pace of the recovery is expected to differ across subregions in 2024. Sub-Saharan Africa’s rebound in 2024 is driven by large countries in the region recording growth rates that are lower than their performance over the first two decades of this century,” the World Bank said.

In 2024, growth is expected to accelerate in nearly 70 per cent of Sub-Saharan African countries (32 countries). However, growth rates are below their average growth in 2000–19 in about half of them (17 countries).

The expansion of economic activity in the 10 largest countries in the region explains about 80 per cent of the regional growth in 2024.

Growth in Côte d’Ivoire, Ethiopia, Kenya, and Nigeria, which comprise about 40 per cent of the region’s GDP, is projected to account for half of the regional growth this year.

Among the 10 largest economies in the region, only three are growing at rates that are higher than their long-term average—namely, Côte d’Ivoire, the Democratic Republic of Congo, and Kenya.

Poverty reduction

Overall, the World Bank report 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 affect poverty reduction significantly.

Moreover, due to multiple factors, including structural inequality, economic growth reduces poverty in Sub-Saharan Africa less than in other regions.

Per capita GDP growth of one per cent is associated with a reduction in the extreme poverty rate of only about one per cent in the region, according to World Bank Chief Economist for Africa Andrew Dabalen, compared to 2.5 per cent 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,” Dabalen said.

The report highlights that external resources to meet the gross financing needs of African governments are shrinking, and those available are costlier than before the pandemic.

Political instability and geopolitical tensions weigh on economic activity. They may constrain access to food, for an estimated 105 million people are at risk of food insecurity due to conflict and climate shocks.

World Bank notes that 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.

Despite recent improvements, access to basic services, such as schooling or healthcare, remains highly unequal.

Disparities also exist in access to markets and income-generating activities, irrespective of people’s skills. According to the global lender, 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,” said Gabriela Inchauste, co-author of a forthcoming World Bank report on tackling inequality in Sub-Saharan Africa.

“Identifying and better addressing these structural constraints across the economy offers a road map for a more prosperous future,” Inchauste added.

Africa’s Pulse calls for several policy actions to foster stronger and more equitable growth.

These include restoring macroeconomic stability, promoting inter-generational mobility, supporting market access, and ensuring fiscal policies do not overburden the poor.

Meanwhile, as economies push for a stronger performance this year, despite wars in Israel and Palestine and the Russia-Ukraine war, which have affected global supply chains, some countries are exposed to hunger.

According to the latest Famine Early Warning Systems Network update, those with greater concerns about hunger include Burkina Faso, the Democratic Republic of Congo, Malawi, Mali, Mozambique, Nigeria, Somalia, South Sudan, and Sudan.