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HomeEconomyNigeria’s economic growth will slow down in 2023 - World Bank

Nigeria’s economic growth will slow down in 2023 – World Bank

“The Nigerian economy is projected to slow in 2023, down to 3.2 percent (from 3.3 percent) and persist at this level the following year. Growth will be supported mainly by the rebound in private consumption prompted mostly by accommodative monetary policy as inflationary pressures subside. Private consumption expenditure is forecast to decrease this year and grow next year. This performance will likely continue in 2024. On the production side, growth in 2023 will be supported by industry (with growth of 5.1 percent) with the mega-refinery project,” the report said.

The report added that the South African economy will weaken further because of structural constraints.

“Growth will be down to 1.4 percent in 2023, from 1.9 percent, and will rebound to 1.8 percent in 2024. This weak performance is insufficient for the country to address the socioeconomic problems of high unemployment and rising inequality. Private consumption expenditure growth will moderate from the rebound in 2021. While the recovery from the pandemic shock is incomplete, higher inflation, which reduces consumers’ disposable income, lingering effects of aggressive monetary policy, the deteriorated labor market, and weak confidence will weigh on growth in private consumption.

”It is set to decline from growth of 2.6 percent (2022) to 2.2 percent (2023) and further down to 2.0 percent (2024). After rebounding to growth of 4.2 percent in 2022, from a low base, investment growth will increase next year to 4.9 percent. Infrastructure plans, including in the energy sector, augur well for this prospect. Although private investment has improved, public investment continues to disappoint. By contrast, fiscal consolidation is set to reduce government spending next year (-1.9 percent), with a negligible recovery in 2024. On the supply side, the agriculture sector will support growth in 2023, with growth of 2.5 percent, up from 0.9 percent.

”Industry will recover slightly in 2023 from a contraction of 2.5 percent in 2024. The service sector, which has been supporting growth since 2021, is set to moderate in 2023 before recovering in 2024 (2.0 percent),” said the report.

It said global headwinds are slowing Africa’s economic growth with countries contending with rising inflation. It added that high interest rates and debt are forcing African governments to make difficult choices to protect people’s jobs, purchasing power and development gains.

The report, which is a biannual analysis of the near-term regional macroeconomic outlook, economic growth in Sub-Saharan Africa (SSA), shows that the war in Ukraine has worsened inflation and depressed business investments and household consumption.

“As of July 2022, 29 of 33 countries in SSA with available information had inflation rates over 5% while 17 countries had double-digit inflation,” the report said.

World Bank Chief Economist for Africa Andrew Dabalen said: “These trends compromise poverty reduction efforts that were already set back by the impact of the COVID-19 pandemic. What is most worrisome is the impact of high food prices on people struggling to feed their families, threatening long-term human development. This calls for urgent action from policymakers to restore macro-economic stability and support the poorest households while reorienting their food and agriculture spending to achieve future resilience.”

The Bank’s statement on the report said: “Elevated food prices are causing hardships with severe consequences in one of the world’s most food-insecure regions. Hunger has sharply increased in SSA in recent years driven by economic shocks, violence and conflict, and extreme weather. More than one in five people in Africa suffer from hunger and an estimated 140 million people faced acute food insecurity in 2022, up from 120 million people in 2021, according to the Global Report on Food Crises 2022 Mid-Year Update.

“The interconnected crises come at a time when the fiscal space required to mount effective government responses is all but gone. In many countries, public savings have been depleted by earlier programs to counter the economic fallout of the COVID-19 pandemic, though resource-rich countries in some cases have benefited from high commodity prices and managed to improve their balance sheet.”

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