The United Nations (UN) has predicted that the Nigerian economy will expand by 3% in 2023. High inflation and problems with the electricity supply, according to the UN’s 2023 World Economic Situation and Prospects report, are having an adverse effect on Nigeria’s economic growth. However, the economy will gain from a strong commodities trade and thriving markets for consumer products and services, causing growth to reach 3% in 2023. According to the international organization, Africa’s total output is expected to remain muted as domestic problems are exacerbated by a turbulent and uncertain global environment.
Due to muted investment and declining export volumes, aggregate economic growth is predicted to decline to 3.8% in 2023 from 4.1% in 2022. According to the analysis, growth is anticipated to rise up in East Africa and West Africa in 2023, while it will stabilize in Central Africa. The paper claims that while favorable export prices will help commodities exporters, a decrease in global demand will provide difficulties. The anticipated global economic slowdown would likely result in poorer market conditions for commodity exporters in Africa. But given the tight rivalry for the key commodities on the continent, export prices are likely to stay high. Commodity prices are anticipated to decline in 2023, but they will still be at high levels. Despite the short-term terms-of-trade boost to their external balances, commodity exporters are anticipated to continue to gain from the volatility in energy, metals, and minerals.
Investments are likely to increase in Africa’s top exporters of minerals.
According to the UN, investors are likely to increase in Africa’s top exporters of minerals, including Botswana, the Democratic Republic of the Congo, Namibia, Nigeria, Sierra Leone, South Africa, the United Republic of Tanzania, Zambia, and Zimbabwe, as Europe searches for alternate sources of vital metals, precious stones, and minerals. According to the analysis, as monetary policy tightens across the continent, inflation pressures are anticipated to decrease in 2023. Low and declining income per capita growth, which is predicted to average 1.6% in 2021 and 2022 before dropping to 1.4% in 2023, will keep poverty entrenched and impede nations from making faster progress toward the Sustainable Development Goals (SDG). Prices have increased dramatically in African nations in accordance with the global uptick in inflation, but are expected to level off by 2023.
Stated in the report, the percentage of African nations with double-digit inflation increased to 40% in 2022, primarily due to supply chain disruptions and the effects of the war in Ukraine, which increased the cost of basic supplies like food and electricity. A majority of African nations (approximately two-thirds) increased domestic policy interest rates in 2022 to battle inflation and pressure on the exchange rate. According to the analysis, most nations would likely continue to raise rates in 2023 in line with the anticipated monetary policies of the Federal Reserve in the United States and the European Central Bank.
Budgetary circumstances have gotten worse all over the continent.
As governments try to safeguard citizens’ lives and livelihoods during the pandemic, the report stated that budgetary circumstances have gotten worse across Africa. The average public debt, according to the UN, has risen to more than 60% of GDP and is forecast to stay there in 2023. The last time such a scale occurred, according to the research, was in the early 2000s, right before the Heavily Indebted Poor Countries Initiative was introduced. A number of African nations may find it difficult to service and refinance a sizable amount of debt expected in the years 2024 and 2025, when principal repayment of around $11 billion on Eurobonds is due, expected increased interest rates, weaker currencies against the dollar, and less capital inflows.
The research claims that adverse risks would dominate Africa’s economic outlook for 2023. Consistently rising global inflation might lead to faster and tighter monetary policy by central banks in significant advanced nations, which would reduce global demand, increase borrowing costs both domestically and abroad, and reduce investment in the continent. The ability to sustain debt and efforts to safeguard more vulnerable groups of society could be hampered by a global slowdown, tighter financial conditions, and a fall in official development assistance (ODA). The research warned that unanticipated capital outflows could destabilize economies with significant need for external funding.
Many economies are at risk of falling into recession.
It went on to say that a prolonged interruption of Russian exports and an expansion of the conflict in Ukraine could amplify the inflationary pressures already present on food and energy prices, aggravating concerns about food affordability for vulnerable populations and possibly igniting social unrest. Inflation is rising, the monetary system is aggressively tightening, and there are more uncertainties than usual, all of which point to a broad-based and severe recession of the global economy. In the prologue to the report, UN Secretary-General António Guterres stated that several economies are at risk of entering a recession after only partially recovering from the pandemic’s impact.
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