East Africa to lead continent in GDP growth into 2025 -Report

By Victor MUJIDU

East Africa is poised to be the continent’s fastest-growing region, according to the African Development Bank’s projections, which syas the bloc’s GDP will mount from 1.5 per cent seen last year to 4.9 per cent in 2024 and 5.7 per cent in 2025.

According to the AfDB report, the projected rebound in Africa’s average growth will be led by East Africa (up 3.4 percentage points) and Southern Africa and West Africa (each rising by 0.6 percentage points).

Crucially, 40 countries will post higher growth in 2024 relative to 2023; 17 economies are projected to grow by more than 5 percent in 2024; and the number could rise to 24 the following year as the pace of growth accelerates.

Citing it as a remarkable move, the report describes that the African region will retain its 2023 ranking as the second fastest-growing region after Asia in 2024–25, with projected GDP growth exceeding the global average of 3.2 percent in 2024.

“Africa’s future is bright, but we need to ensure that we use resources for the benefit of this continent’s people.” Resilience cannot happen unless we deal with climate change,” said Akinwumi Adesina, who further acknowledged the positive growth projections while emphasizing the importance of addressing governance, transparency, accountability, and the management of natural resources.

Seventeen African economies are expected to grow by more than five percent in 2024, potentially growing to 24 by 2025. Other regions are expected to experience moderate-to-vigorous growth.

Central Africa’s growth is predicted to slow from 4.3 per cent in 2023 to 4.1 per cent in 2024, before increasing to 4.7 percent in 2025.

West Africa’s growth is expected to accelerate from 3.6 per cent in 2023 to 4.2 per cent in 2024 and 4.4 per cent in 2025.

North Africa’s growth rate is expected to fall slightly from 4.1 per cent in 2023 to 3.6 per cent in 2024, before rising to 4.2 per cent in 2025. Southern Africa is predicted to enjoy moderate growth gains, up from 1.6 per cent

While the regional economy is expected to continue to improve, there are concerns about inflation, macroeconomic volatility, and geopolitical conflicts.

Under pressure from sustained high global interest rates and continued global uncertainty fuelled by geopolitical and trade tensions, most African currencies depreciated further against the stronger US dollar in 2023. For instance, the Kenyan shilling depreciated by almost 20 per cent against the dollar in 2023.

This depreciation largely reflected market corrections following reforms undertaken in the foreign exchange market in June 2023.

On the same note, the AfDB report highlights the glaring inadequacies of the current global financial system in closing Africa’s financing gap for structural transformation, estimated at Ksh52.4 trillion ($402.2 billion) annually between now and 2030.

To rectify these disparities, the report proposes a bold agenda for reforming the global financial architecture. Some key reforms that have been proposed or implemented include:

Strengthening financial regulation and supervision to prevent systemic risks and enhance transparency in financial markets.

Enhancing cross-border cooperation and coordination among different regulatory authorities to address global financial challenges.

The report calls for streamlining the global climate finance architecture to enhance coordination and facilitate access for African countries, which are disproportionately affected by climate change.

Promoting greater financial inclusion will ensure that all individuals and businesses have access to affordable financial services.

The report emphasizes the importance of strengthening domestic revenue mobilization through improved tax policies, enhancing efficiency in government revenue collection and utilization, combating illicit financial flows and tax avoidance, and leveraging Africa’s abundant natural resources.

Improving debt sustainability and resolution mechanisms to prevent and manage financial crises.

Enhancing the resilience of financial institutions and markets to external shocks and disruptions.

According to the AfDB President, these reforms are important for creating a more stable and sustainable global financial system that can support economic development and reduce the likelihood of future financial crises.

Meanwhile, the growth outlook in 2024–25 is heterogeneous across Africa’s regions and economic groupings, reflecting differences in the structure of economies, commodity dependence, and domestic policy responses to mitigate the impact of these shocks.