Sub-Saharan Africa (SSA) is an extremely diverse region, composed of low, lower-middle, upper-middle, and high-income countries – 22 of which are fragile or conflict-affected – and 13 small states characterized by a small population, limited human capital, and a confined land area. Boasting rich natural resources and the world’s largest free trade area and a 1.2-billion-person market, the continent has the potential to forge a new development path, harnessing the potential of its resources and people.
However, the region faces several development challenges. According to the region’s most recent economic update, growth in Sub-Saharan Africa is projected to slow to 2.5% in 2023, from 3.6% in 2022. Rising conflict and violence across the region exerts a dampening effect on economic activity, with climate shocks poised to exacerbate this fragility. About 462 million people in the region are still living in extreme poverty in 2023. The recent poly-crisis – climate-related issues, the COVID-19 pandemic, and mounting conflicts – has expedited this debt surge. The region continues to grapple with high debt distress risks, with 21 countries identified as either at high risk of external debt distress or already ensnared in it as of June 2023. Several countries, including Chad, Zambia, and Ghana, have initiated debt restructuring efforts to restore sustainability and rebuild fiscal space.
Growth remains uneven across the continent. While the East Africa is set to record a growth rate of 1.8% in 2023, West Africa is expected to grow at 3.3% this year. Overall, SSA’s economic performance is still being held back by the lower-than-average performance of the largest countries on the continent. Energy and transportation bottlenecks continue to impede economic activities in South Africa, while Nigeria's modest growth can be attributed to challenges in its oil sector. Moreover, conflicts and military coups in countries such as Sudan, Niger, and Gabon are likely to hamper growth in the Economic and Monetary Community of Central Africa and some Sahel nations.
Harnessing the potential of natural resources provides an opportunity to improve the fiscal and debt sustainability of African countries. Natural resources (oil, gas, and minerals) offer a huge economic opportunity for SSA economies during the low-carbon transition.
Africa can also pave the way to inclusive growth by investing in its human potential. Over the next three decades, the region will experience the fastest increase in the working age population of all regions, with a projected net increase of 740 million people by 2050. Up to 12million youth will enter the labor market across the region every year in the coming decades, yet only about 3 million new formal wage jobs are currently created each year. As the economies in the region recover at a faster pace in the years to come, policy should be geared toward sharing the growth benefits more equally across the population by investing in human capital, fostering economic diversification, and fostering jobs-friendly economic growth.
Last Updated:Oct 05, 2023
