Africa’s economic outlook positive amid strong dollar, drought risks
TLDR
- Africa's economic growth is expected to increase gradually to 3.8% this year and 4% in 2025, as per the IMF's regional economic outlook.
- Countries like Ivory Coast, Benin, and Kenya have recently re-entered the capital markets with eurobond offerings, signaling a positive trend.
- More African nations are likely to follow suit in accessing capital markets, indicating a potential shift in investment opportunities on the continent.
Africa's economic prospects have shown signs of improvement but they are not without challenges, ranging from a strengthening dollar to devastating droughts.
Per the International Monetary Fund's latest regional economic outlook, the region's growth is projected to modestly increase by four-tenths of a percentage point to 3.8% this year and to 4% in 2025.
The IMF also highlighted the positive development of renewed access to capital markets, albeit at higher yields than previously seen. This shift was evidenced by eurobond offerings from countries such as Ivory Coast, Benin, and Kenya, marking the end of a two-year hiatus for African credits. Other African nations are expected to follow suit in the coming year.
Key Takeaways
The IMF projects that low-income sub-Saharan African nations will need to borrow $70 billion annually over the next four years to meet their external financing requirements. However, this comes at a time when low-cost concessional financing is becoming scarcer due to pressures on budgets in advanced economies and competing demands for aid, including support for Ukraine and Gaza. As a result, the financing gap is expected to be increasingly filled by more expensive borrowing, exacerbating concerns about debt sustainability. Nevertheless, despite these challenges, the IMF remains optimistic about Africa's long-term prospects. The continent boasts vast resources, including critical minerals essential for advancing the global economy's transition towards sustainability and green technologies. This potential positions Africa as a key player in shaping the future of the global economy.
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