BMI Research predicts slow growth for Sub Saharan Africa

By Phyllis MUCHOKI

BMI Research – a Fitch Solutions affiliate has projected that the economy of Sub-Saharan Africa will slow very slightly by 3.4 percent in 2023, with global headwinds, including tighter financial conditions, lower commodity prices, and the lagged impact of high inflation to weigh on regional growth this year.

“We project that inflation will begin to ease in most SSA markets in 2023, while remaining well above trend,” noted the Sub-Saharan Africa Monthly Outlook, Q223 Macroeconomic Update for the month of April.

1. Ghana, the report forecasts that average annual inflation will rise to 35.1% in 2023, from 31.5% in 2022, as the sharp depreciation of the cedi in H222 continues to feed into import costs.

2. We the survey expects South Africa’s economy to enter a technical recession in Q123, after contracting by 1.3% on a q-o-q basis in Q422. Overall, we project that growth in South Africa will slow to 0.9% in 2023, from 2.1% in 2022, underpinned by electricity supply disruptions, tighter monetary conditions, and slowing global growth.

 

3. Our Oil & Gas team forecasts that Angolan oil output will resume a declining trend in 2023, weighing on overall real GDP growth. This will be driven by a lack of new projects coming online and the maturity of existing oil fields, following prolonged underinvestment after the 2014 oil price crash.

4. Despite some progress in the debt restructuring negotiations, the Zambian kwacha remains vulnerable to bouts of depreciation. In H123, BMI experts expect the lagged impact of exchange rate depreciation to add upside pressure to inflation, which they forecast to average 8.5% in 2023, above the central bank’s 6.0-8.0% target range.

 

5. Nigeria’s economy will expand by 2.3% in 2023, down from an estimated 3.1% in 2022. This slowdown will be concentrated in H123 as high inflation and cash shortages weigh on domestic economic activity. A subdued outlook for oil production will also weigh on growth over the year.

 

The central bank’s decision to demonetize high-value naira notes has prompted acute cash shortages in Nigeria. This has contributed to a sharp slowdown in private-sector activity as disruptions to payments and commercial operations transmit through the wider economy.

 

6. The Kenyan shilling is expected to depreciate by 13.5% against the US dollar in 2023, closing the year at KES140/USD. Coupled with ongoing drought conditions and an increase in the electricity price tariff, we expect inflation to remain elevated in 2023, averaging 7.5%, down marginally from 7.6% in 2023. It foresees that Kenyan real GDP growth will weaken to 4.9% in 2023, from an estimated 5.4% in 2022. The slowdown will be concentrated in H123 as high inflation, cash shortages, and social unrest weighs on economic activity and investor confidence.

 

7. Ethiopian real GDP growth is expected to pick up to 6.0% in 2023, from an estimated 4.4% in 2022. While growth will be supported by the improved security situation following the November 2022 signing of a peace deal, noting that growth will remain below trend as investor concerns persist.

 

8. On the other hand, Tanzania’s real GDP growth will accelerate to 5.7% in 2023, from an estimated 5.3% in 2022, bucking the regional trend. President Hassan’s focus on infrastructure investment will sustain fixed investment growth, which BMI forecasts remain strong at 12.3 percent in 2023, down slightly from 13.0% in 2022.