The International Monetary Fund (IMF) has released a report outlining 4 external shocks poised to have dire consequences for Sub-Saharan Africa (SSA) in 2024.
According to IMF, the four factors could have severe repercussions for the economic stability and growth prospects of the region if realized.
One of the primary concerns highlighted by the IMF is the potential downturn in the global economy.
Should major economies such as China and the European Union underperform, the resulting slowdown in global growth would reverberate through SSA via multiple channels.
“A faltering global economy. In a downside scenario where major economies like China and the European Union underperform, global growth would suffer a substantial and lasting slowdown,” noted the IMF report.
This could lead to reduced export demand, currency depreciation, diminished remittances, and lower commodity prices.
As a result, growth in SSA is projected to decline by approximately 1 percentage point in both 2024 and 2025, with oil-exporting nations bearing the brunt of the impact.
Geopolitical Risks
The IMF report also notes the heightened geopolitical risks, particularly regarding conflicts in the Middle East.
An escalation of these conflicts could disrupt supply chains, transportation routes, and commodity production, leading to increased commodity prices and shipping costs.
While the overall negative growth impact on SSA is expected to be relatively muted, countries less reliant on natural resources could experience an economic downturn, with growth projected to be lower by about 1.3 percentage points in 2024.
Additionally, inflation is anticipated to remain elevated, further complicating the economic outlook.
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Security Risks
Thirdly, the IMF highlights the region-specific risks facing SSA, particularly concerning security.
With one of the highest rates of terrorist attacks globally, SSA is grappling with ongoing conflicts in countries such as Ethiopia, Burkina Faso, Chad, the Democratic Republic of Congo, Mali, Mozambique, and Nigeria.
The conflict in Sudan further compounds the situation, with nearly 1.3 million refugees, asylum-seekers, and returnees seeking refuge in neighboring countries.
Beyond the human toll, violence and conflict strain already tight budgets, hindering economic activity and necessitating increased security spending.
Climate Risks
Consequently, climate-related challenges pose another threat to SSA’s economic stability.
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Prolonged droughts in southern Africa threaten to prolong food insecurity, posing humanitarian challenges and impacting productivity.
The negative impact on the economic outlook for 2024 could be severe in some countries, putting pressure on external balances and public spending.
“Addressing these climate risks is crucial to mitigating their adverse effects on SSA’s economic prospects,” stated IMF report.
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