Sub-Saharan Africa Macro Poverty Outlook Country-by-country Analysis and Projections for the Developing World Annual Meetings 2023 © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclu- sions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org. Sub-Saharan Africa Annual Meetings 2023 Angola Côte d'Ivoire Liberia Seychelles Benin Equatorial Guinea Madagascar Sierra Leone Botswana Eritrea Malawi Somalia Burkina Faso Eswatini Mali South Africa Burundi Ethiopia Mauritania South Sudan Cabo Verde Gabon Mauritius Sudan Cameroon Gambia, The Mozambique Tanzania Central African Rep. Ghana Namibia Togo Chad Guinea Nigeria Uganda Comoros Guinea-Bissau Rwanda Zambia Congo, Dem. Rep. Kenya São Tomé and Príncipe Zimbabwe Congo, Rep. Lesotho Senegal MPO 1 Oct 23 and education services reduces the poten- tial productivity of an Angolan child to a ANGOLA Key conditions and third, as investments in human capital for- mation remain modest. While Angola has challenges a social protection registry and a cash transfer program (Kwenda) with nearly Table 1 2022 Angola, a lower middle-income country 750,000 rural beneficiaries receiving pay- Population, million 35.0 with 34 million people and the second ments as of August 2023 (65 percent are GDP, current US$ billion 121.9 largest oil producer in Sub-Saharan Africa, women), a broader safety net with urban GDP per capita, current US$ 3481.2 is overly dependent on oil. In 2022, oil ac- coverage and adaptable income support a 31.1 International poverty rate ($2.15) counted for 26 percent of GDP, 62 percent would reduce poverty in the near-term a 52.9 of tax revenues, and 95 percent of exports. and protect households against shocks. Lower middle-income poverty rate ($3.65) a 78.0 This has made growth and macroeconomic Upper middle-income poverty rate ($6.85) Gini index a 51.3 management highly vulnerable to external School enrollment, primary (% gross) b 85.0 shocks, stunted the non-oil economy, and Life expectancy at birth, years b 61.6 constrained the creation of jobs. In addi- Recent developments tion, governance weaknesses and a chal- Total GHG emissions (mtCO2e) 111.0 lenging business environment have limit- The economy expanded 0.3 percent year- Source: WDI, Macro Poverty Outlook, and official data. ed private sector development. Conse- on-year in the first quarter of 2023, as a/ Most recent value (2018), 2017 PPPs. b/ WDI for School enrollment (2018); Life expectancy quently, 80 percent of workers are informal, growth in services (4.1 percent) was offset (2021). as self-employment (with no employees) ac- by a decline in oil production (-8.0 per- counts for a third of all jobs. Informality is cent). Maintenance shutdown in a major particularly high for women (88 percent oil field brought production below 1 mil- compared to 72 percent for men). Urban and lion barrels per day for the first time in The economy stagnated in the first quar- youth unemployment remain high, reach- years. However, production is already re- ing 38 percent and 52 percent, respectively. covering, exceeding 1.1 million barrels per ter of 2023 due to a decline in oil produc- Macroeconomic stability has been en- day by mid-2023. Growth for 2023 is esti- tion. In addition, the partial removal of hanced in the past few years through a mated at 1.3 percent, as both the oil and gasoline subsidies and currency deprecia- more flexible exchange rate regime, central the non-oil sectors are expected to under- tion have negatively affected non-oil sec- bank autonomy, sound monetary policy, perform. Despite the recent recovery in oil and fiscal consolidation. However, eco- production, the average in 2023 will very tors. As a result, growth is expected to nomic diversification remains a challenge likely stand close to the 2022 level. Non- fall in 2023, while inflation is estimated due to limited human and physical capital. oil sectors will be affected by cut in public to accelerate. Hence, poverty is expected The reform agenda to boost economic di- investments and the recent sharp currency to marginally rise to 32.8 percent. The ex- versification is complex, requires effective depreciation, which is harming private cessive dependency on oil revenue re- coordination, solid institutions, and high- consumption and production in sectors level political commitment to succeed. that rely on imported inputs. mains an elevated risk. Inflation continued falling rapidly from a Building human capital is a key priority for reducing poverty and boosting eco- peak of 27.7 percent in January 2022 to 10.6 nomic growth. Limited access to health percent in April 2023. However, the partial FIGURE 1 Angola / Real GDP growth and contributions to FIGURE 2 Angola / Actual and projected poverty rates and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 6 90 30000 4 80 25000 70 2 60 20000 0 50 15000 -2 40 -4 30 10000 -6 20 5000 10 -8 2020 2021 2022 2023e 2024f 2025f 0 0 2008 2010 2012 2014 2016 2018 2020 2022 2024 Agriculture Oil industry Non-oil industry International poverty rate Lower middle-income pov. rate Services Total Upper middle-income pov. rate Real priv. cons. pc Sources: Angola National Institute of Statistics and World Bank. Source: World Bank. Notes: see Table 2. MPO 2 Oct 23 removal of gasoline subsidies and the 2023, with a total of 11.8 million Angolans consumers. The monetary policy is expect- weakening of the kwanza have reversed living in poverty. ed to be effective in containing second the inflation’s declining trend. The reform round effects and anchoring inflation ex- raised gasoline prices from 160 to 300 pectations. As a result, inflationary pres- kwanzas per liter and mitigation measures sures are expected to ease in 2024 and, un- were insufficient to shield poorer con- Outlook der a baseline scenario, decline gradually sumers. The kwanza depreciated around toward the Central Bank’s target of 7 per- 40 percent against the US dollar between Although new oil projects will slightly in- cent. However, the phasing out of fuel sub- mid-May and end-June, due to lower gov- crease production in coming years, it will sidies planned for 2024-2025 will likely de- ernment’s supply of foreign currency re- be difficult for the sector to avoid long- lay this convergence. sulting from lower oil revenues and larger term production decline. Oil GDP is esti- With private consumption growth project- external debt service as debt relief deals ex- mated to grow only 1 percent in the com- ed to exceed population growth in 2025, pired. The combination of higher gasoline ing years due to field depletion and lack of poverty is expected to increase marginally prices and more expensive imported prod- investment. Non-oil sectors are projected in 2024 but fall to 32.1 percent in 2025. The ucts has increased inflation from 10.6 in to drive overall growth, which is expect- number of people living in poverty is pro- April to 12.1 in July, with food and trans- ed to return to 3 percent in the medium jected to reach 12.2 million in 2024. Reducing portation prices also growing faster. term. Achieving higher growth rates will poverty in the near-term will require target- Slowing growth and rising food prices is depend on the country’s effort to diversify ed interventions, such as substantial expan- expected to result in negative per capita its economy. sion of cash transfers, investments to in- private consumption growth and a mar- Inflation is projected to continue increas- crease agricultural incomes, and increased ginal increase in poverty at $2.15 per day ing in the coming months as higher employment opportunities for youth and (2017 PPP) from 32.4 to 32.8 percent in prices of imported products pass on to low-skilled workers in urban areas. TABLE 2 Angola / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -5.6 1.2 3.0 1.3 2.3 3.0 Private consumption -9.3 4.7 7.0 1.0 3.0 4.0 Government consumption -14.0 -6.4 3.6 1.0 2.5 2.6 Gross fixed capital investment -2.0 5.3 5.9 1.5 3.0 4.0 Exports, goods and services -7.3 -8.6 2.9 0.1 0.9 0.9 Imports, goods and services -21.7 -3.8 15.5 -2.0 3.0 3.0 Real GDP growth, at constant factor prices -6.8 -0.1 3.1 1.2 2.2 3.0 Agriculture 2.8 17.2 3.9 1.0 3.0 5.0 Industry -10.5 -8.3 1.8 1.2 1.8 2.2 Services -3.9 6.2 4.2 1.3 2.5 3.3 Inflation (consumer price index) 22.3 25.8 21.4 12.6 18.4 14.1 Current account balance (% of GDP) 1.5 11.1 9.6 6.7 2.7 1.0 Net foreign direct investment inflow (% of GDP) 3.4 4.4 5.4 3.1 2.0 0.8 Fiscal balance (% of GDP) -1.6 2.3 1.0 0.9 1.9 -0.1 Revenues (% of GDP) 21.7 21.8 23.8 25.6 26.2 23.9 Debt (% of GDP) 133.8 82.9 64.6 88.3 75.0 67.0 Primary balance (% of GDP) 5.4 7.4 5.0 6.7 7.5 5.1 a,b International poverty rate ($2.15 in 2017 PPP) 33.6 33.1 32.4 32.8 32.8 32.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 54.8 54.4 53.9 54.2 54.2 53.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 80.8 80.2 79.5 79.9 79.9 79.2 GHG emissions growth (mtCO2e) -3.6 -1.9 -0.8 -0.4 -0.2 0.0 Energy related GHG emissions (% of total) 13.3 12.6 12.2 12.0 11.8 11.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013- and 2018-IDREA. Projection using point to point elasticity at regional level with pass-through = 0.7 based on private consumption per capita in constant LCU. b/ Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. MPO 3 Oct 23 BENIN Key conditions and Recent developments challenges Real GDP growth is expected to moderate to 5.8 percent in 2023 (2.9 percent in per Table 1 2022 The countercyclical, expansionary fiscal capita term) from 6.3 percent in 2022, due Population, million 13.4 policy response to the overlapping crises to the global economic slowdown, slug- GDP, current US$ billion 17.5 over 2020-22 were enabled by the fiscal gish growth in Nigeria and the impact of GDP per capita, current US$ 1310.1 consolidation efforts in 2016-19. This, com- ECOWAS sanctions against neighboring a 20.1 International poverty rate ($2.15) bined with significant infrastructure in- Niger. The primary sector should remain a 53.2 vestment under the second Government resilient thanks to proactive management Lower middle-income poverty rate ($3.65) a 83.6 Action Plan (PAG, 2021-26) and a resilient of fertilizer distribution. The services sec- Upper middle-income poverty rate ($6.85) Gini index a 37.9 agriculture sector, maintained above-re- tor – the main contributor to growth – is School enrollment, primary (% gross) b 116.7 gional average growth over the past years. expected to grow at a slower pace in 2023 b 59.8 Nonetheless, poverty and vulnerability re- as the political instability in Sahel coun- Life expectancy at birth, years main high, with large spatial disparities. tries affects reexport activities from the Total GHG emissions (mtCO2e) 28.5 With rising political instability in the Port of Cotonou and sluggish growth in Source: WDI, Macro Poverty Outlook, and official data. sub-region and security threats in the Nigeria. Public investment is expected to a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). North, sustaining economic growth ne- scale back as fiscal space narrows. Private cessitates structural reforms to alleviate consumption growth is set to pick up pro- critical constraints. First, rebuilding fiscal gressively as inflationary pressures abate space requires improved revenue collec- in the second half of 2023. At end-July, tion and streamlining tax expenditures, year-on-year inflation reached 3.9 percent, Real growth is projected to moderate to while enhancing the efficiency of public remaining below peers due to good har- 5.8 percent in 2023 as sanctions against spending. Second, the recent crises and vest supporting local food supply and neighboring Niger and reforms in Nigeria recurrent climate shocks highlight the measures to combat inflation, such as affect reexport activities and import need for reforms to strengthen shock re- temporary tax exemptions on import and silience, including through an adaptive export restrictions to neighboring coun- prices. Poverty reduction should slow in social protection system. tries. Growth in agriculture combined 2023, settling at 15.6 percent. The re- Risks include political instability in with relatively low inflation is expected sponse to overlapping crises has signifi- neighboring Sahel countries, increased in- to reduce the international poverty rate cantly reduced fiscal space, while debt security and social tensions in the North ($2.15 a day, 2017 PPP) from 16.1 percent levels increased. Food and energy price together with sustained food, energy, and in 2022 to 15.6 percent in 2023. fertilizer price volatility. These would The current account deficit (CAD) is ex- volatility, regional tensions, increased se- disproportionally impact poor and vul- pected to decline to 5.9 percent in 2023 curity risks in the North, and extreme nerable households, slowing poverty re- (6.3 percent in 2022) as international weather events cloud the outlook. duction while increasing fragility. Ex- crude oil price decline, but remain ele- treme climate events could also severely vated due to lower international cotton damage agricultural output. prices and security spending. The CAD FIGURE 1 Benin / Fiscal balance and change in public and FIGURE 2 Benin / Actual and projected poverty rates and publicly guaranteed debt real private consumption per capita Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 10 100 500000 8 90 490000 6 80 480000 70 4 60 470000 2 50 460000 0 40 450000 -2 30 440000 -4 20 10 430000 -6 0 420000 -8 2011 2013 2015 2017 2019 2021 2023 2025 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate Change in debt Fiscal balance Upper middle-income pov. rate Real priv. cons. pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 4 Oct 23 will be primarily financed by an SDG Eu- and 5.25 percent for the marginal lending improve progressively, averaging 4.7 per- robond issuance, regional bonds and con- facility. However, the monetary policy cent of GDP over 2024-25, as the prices of cessional financing. stance remains broadly accommodative, oil products decline. The fiscal deficit is set to decline to 4.3 per- inflation is still above target and foreign Poverty reduction is expected to continue cent of GDP in 2023, having been above exchange reserves have been on a down- its downward trend as economic growth, 5 percent over the last 2 years, driven by ward trend. particularly in agriculture, remains robust, lower public spending (primarily due to with the headcount rate ($2.15 a day, 2017 the expiration of measures to cushion PPP) declining from 15.6 percent in 2023 to spillovers from Russia’s invasion of 14 percent in 2024 and further to 12.8 per- Ukraine), improvements in tax administra- Outlook cent by 2025. tion and risk management systems in cus- The planned revenue-based fiscal con- toms. Public debt is expected to decline In the medium term, real growth is ex- solidation – complemented by the re- to 53.8 percent of GDP in 2023 – 0.4 pected to hover around potential, at 6 moval of exceptional subsidies and ppt lower compared to 2022 – and re- percent (3.1 percent per capita) driven by more efficient spending - should rebuild mains on a declining path in the medium private consumption as inflationary pres- fiscal space with an expected deficit of term, thanks to fiscal consolidation ef- sures abate, and total investment, which around 3 percent by 2025, in line with forts. Benin remains at moderate risk of is expected to gradually shift from public the WAEMU convergence criterion, as external and overall debt distress, but to private. The dynamism of agriculture public debt declines to 52.4 percent of with limited space to absorb shocks. production, the construction sector, as GDP. However, delaying fiscal adjust- To counter inflation across WAEMU coun- well as agro-transformation industries ment could exacerbate debt sustainabil- tries, the Central Bank of West African with the expansion of the special eco- ity risks, while a deterioration of the States (BCEAO) raised policy interest rates nomic zone, will support growth. Infla- regional security situation and domes- by a cumulative 125 basis points since tion is projected to reach the WAEMU tar- tic spillovers, or extreme weather events mid-2022 to 3.25 percent for liquidity calls get of 2 percent in 2024. The CAD should could delay consolidation. TABLE 2 Benin / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 3.8 7.2 6.3 5.8 6.0 6.0 Private consumption 3.0 4.2 3.7 3.8 4.0 4.1 Government consumption 19.6 2.0 4.2 14.5 5.6 4.9 Gross fixed capital investment -6.2 26.5 11.7 2.9 10.5 8.7 Exports, goods and services -6.7 14.5 17.5 4.3 7.1 7.5 Imports, goods and services -11.3 22.5 13.7 0.0 6.6 5.4 Real GDP growth, at constant factor prices 3.8 7.2 6.3 5.8 6.0 6.0 Agriculture 1.8 4.7 4.9 5.1 5.3 4.9 Industry 5.2 10.5 7.0 8.2 6.5 6.2 Services 4.2 7.0 6.7 5.0 6.1 6.4 Inflation (consumer price index) 3.0 1.7 1.4 3.5 2.0 2.0 Current account balance (% of GDP) -1.7 -4.2 -6.3 -5.9 -5.6 -5.1 Net foreign direct investment inflow (% of GDP) 0.5 0.9 1.0 1.3 1.6 1.6 Fiscal balance (% of GDP) -4.7 -5.7 -5.5 -4.3 -3.7 -2.9 Revenues (% of GDP) 14.4 14.1 14.3 14.7 15.2 15.6 Debt (% of GDP) 46.1 50.3 54.1 53.8 53.5 52.4 Primary balance (% of GDP) -2.7 -3.5 -3.9 -2.6 -2.1 -1.3 a,b International poverty rate ($2.15 in 2017 PPP) 18.3 17.7 16.1 15.6 14.0 12.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 50.5 49.5 47.2 46.6 45.1 43.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 82.1 81.4 79.9 79.9 79.0 78.2 GHG emissions growth (mtCO2e) 2.0 7.1 1.1 1.2 4.9 4.3 Energy related GHG emissions (% of total) 31.7 35.7 35.7 35.7 37.9 39.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 5 Oct 23 its performance, new investments in physical and human capital, and fur- BOTSWANA Key conditions and ther actions to enhance trade facilita- tion and integration. Removing regu- challenges latory barriers to facilitate market entry, improving sectoral governance and ac- Table 1 2022 Over the past decades, Botswana de- celerating planned SOE reforms would Population, million 2.6 livered robust economic growth thanks improve the business environment. GDP, current US$ billion 20.3 to steady and significant revenue from The increase in the frequency and mag- GDP per capita, current US$ 7718.2 diamonds channeled to public services, nitude of climate change events, espe- a 15.4 International poverty rate ($2.15) solid institutions, and sound macroeco- cially higher temperatures and changes a 38.0 nomic policies, lifting many out of in precipitation, have increasingly dis- Lower middle-income poverty rate ($3.65) a 63.5 poverty. Public debt levels remain low, rupted output and threatened liveli- Upper middle-income poverty rate ($6.85) Gini index a 53.3 in tandem with sizable fiscal and for- hoods, underscoring the need to School enrollment, primary (% gross) b 99.0 eign exchange savings. However, strengthen the country's resilience and b 61.1 growth has lost steam in recent years, implement investments in adaptation. Life expectancy at birth, years a symptom of the exhaustion of the Total GHG emissions (mtCO2e) 52.1 diamond and public sector-led growth Source: WDI, Macro Poverty Outlook, and official data. model and external shocks. a/ Most recent value (2015), 2017 PPPs. b/ Most recent WDI value (2021). The large public sector crowds out pri- Recent developments vate investments while infrastructure and skills gaps persist. The public sector After a relatively strong recovery in accounts for 27 percent of total em- 2022, economic growth slowed in 2023 ployment, while unemployment remains due to the slowdown in global demand Growth is projected to slow to 3.8 percent high, at 25.4 percent, mainly affecting for diamonds and falling prices. On in 2023 from 5.8 percent in 2022, reflect- the youth. Poverty, estimated at 14.3 June 30, 2023, Botswana and De-Beers ing lower global demand for diamonds, percent under the USD 2.15 per day In- agreed in principle a new partnership and recover during 2024-25 driven by ternational Poverty Line (IPL) remains that includes a 10-year extension of their high for Botswana's income level and in- diamond sales agreement and a 25-year new diamond agreements and licenses equality (Gini index of 53.3) is among extension of the Debswana mining li- signed in 2023 and improved global de- the world's highest. censes, which calmed market jitters over mand. However, the mining sector will The objective to make the economy the partnerships future. The new agree- not deliver significant job creation so more inclusive requires accelerating ment, once signed, will increase the unemployment is projected to remain el- job creation and diversification, partic- share of diamond supply sold via gov- ularly given the projected decline in ernment-owned Okavango Diamond evated, constraining reductions in diamond production by 2030. Compre- Company from 25 to 30 percent, and poverty and inequality. Inflation is ex- hensive reforms are needed to im- increase progressively to 50 percent in pected to remain within the central prove the country's competitiveness, ten years. A Diamonds for Development bank's 3-6 percent target. including a reduction of the over- Fund has been agreed with a projected sized public sector and improving $75 million yearly over ten years. The FIGURE 1 Botswana / Direct contribution of diamonds to FIGURE 2 Botswana / Actual and projected poverty rates exports and real GDP per capita Millions of Pula Percent Poverty rate (%) Real GDP per capita (constant LCU) 120000 100 70 90000 80000 100000 60 80 70000 50 80000 60000 60 40 50000 60000 40 30 40000 40000 30000 20 20 20000 20000 10 10000 0 0 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2009 2011 2013 2015 2017 2019 2021 2023 2025 Total exports (lhs) Diamonds (lhs) International poverty rate Lower middle-income pov. rate Contribution of diamonds (rhs) Upper middle-income pov. rate Real GDP pc Sources: International Merchandise Trade Statistics and Statistics Botswana. Source: World Bank. Notes: see Table 2. MPO 6 Oct 23 immediate fiscal and economic impact credible implementation of the consolida- may be limited, and its medium-term tion plan, the fiscal balance is projected impact is subject to its implementation. Outlook to gradually improve, putting debt on a Inflation receded more quickly than ex- declining path. pected, averaging 7.8 percent in 2023H1 Real GDP growth is projected to slow to Inflation is projected to remain within compared to 10.9 percent in 2022H1, 3.8 percent in 2023, reflecting a decline in the Central Bank’s target range over the falling into the Central Bank's 3-6 per- diamond production and prices due to medium-term. At 13 percent, food infla- cent target in May. The pace of disin- weaker global demand. Growth will tion is expected to remain above historic flation is attributed to falling oil prices slightly increase over the medium-term, levels. The current account is expected to which resulted in a steep decline in driven by the pickup in the global demand weaken but remain in surplus because of transport inflation. Food inflation re- for diamonds and efforts to diversify the weaker terms of trade, lower global de- mains historically high, disproportion- economy. The projected moderate real mand for diamonds and increase in in- ately affecting the poor. At 2.65 percent, GDP per capita growth (to 2.1 percent) will vestment-led imports from a low base. It the Central Bank’s policy interest rate result in negligible projected changes in is then expected to strengthen in 2024/5 has remained unchanged since August poverty (14.1 percent under the IPL over driven by the projected rebound in global 2022, while credit growth declined to the medium-term). demand for diamonds. 4.8 percent in 2023Q1 from 5.4 percent Following a balanced budget in 2022, the The outlook remains uncertain and de- in 2022Q1. government is expected to record a fiscal pends heavily on the path of global de- Higher revenue from diamonds and deficit of 2.8 percent of GDP in 2023, de- mand for diamonds. Supply disruptions SACU has allowed fiscal policy to cush- spite an increase in SACU revenues. Such and demand fluctuations at the global lev- ion subdued domestic demand. The deterioration is projected to be driven by el could intensify commodity price volatil- government has increased subsidies and increased spending in subsidies and cap- ity which would threaten fiscal sustain- allowances of social welfare programs ital expenditures. In the medium-term, ability and possibly lead to tightening of to cushion against the FY22/23 poor the government plans to implement ex- the monetary policy. Delays in planned fis- crop and grazing yields caused by the penditure-driven fiscal consolidation by cal consolidation and structural reforms drought and accelerated the implemen- restructuring and privatizing parastatals, could further erode fiscal and external tation of growth-enhancing energy and reducing the public sector wage bill and buffers, increasing Botswana’s vulnerabili- water infrastructure. re-prioritizing public investments. With a ty to external shocks. TABLE 2 Botswana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -8.7 11.8 5.8 3.8 4.1 4.3 Private consumption 2.6 2.4 4.5 2.0 3.4 3.6 Government consumption 5.3 4.0 3.0 40.6 1.5 -0.6 Gross fixed capital investment -9.2 -0.3 0.0 9.8 1.2 0.9 Exports, goods and services -18.6 31.7 -5.6 2.6 6.7 7.9 Imports, goods and services 5.0 2.3 -11.8 18.1 2.3 1.4 Real GDP growth, at constant factor prices -9.1 11.9 5.8 3.8 4.1 4.3 Agriculture -2.7 -1.0 2.4 2.6 2.3 2.2 Industry -20.5 19.3 7.6 4.0 4.2 4.4 Services -1.3 8.1 4.8 3.7 4.0 4.3 Inflation (consumer price index) 1.9 6.7 12.2 5.8 5.0 4.5 Current account balance (% of GDP) -8.6 -0.5 2.9 1.0 1.1 1.5 Net foreign direct investment inflow (% of GDP) 0.7 0.6 0.2 0.7 0.7 0.6 a Fiscal Balance (% of GDP) -9.5 0.0 0.0 -2.8 -1.7 -0.3 Revenues (% of GDP) 28.6 31.9 28.5 29.3 29.5 29.7 b Debt (% of GDP) 24.6 22.4 20.6 21.9 20.8 19.3 a Primary Balance (% of GDP) -8.9 0.5 0.6 -1.9 -0.9 0.4 c,d International poverty rate ($2.15 in 2017 PPP) 16.0 14.8 14.3 14.1 13.9 13.6 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 38.6 37.5 37.0 36.8 36.5 36.3 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 64.5 62.6 61.8 61.5 61.1 60.6 GHG emissions growth (mtCO2e) -1.6 1.1 0.0 0.3 -2.6 -1.3 Energy related GHG emissions (% of total) 12.6 12.8 12.7 12.4 12.6 12.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal balances are reported in fiscal years (April 1st -March 31st). b/ Refers to Public and Publicly Guaranteed debt. c/ Calculations based on 2009-CWIS and 2015-BMTHS. Actual data: 2015. Nowcast: 2016-2022. Forecasts are from 2023 to 2025. d/ Projection using annualized elasticity (2009-2015) with pass-through = 0.87 based on GDP per capita in constant LCU; $3.65 and $6.85 poverty use regional elasticity. MPO 7 Oct 23 The primary sector is expected to return to trend growth (+4.1 percent), with BURKINA FASO Key conditions and the secondary sector recovering to 3 percent growth due to improved se- challenges curity around key mines, and services continuing to be robust (+5.1 percent). Table 1 2022 Insecurity and political instability remain the Consumption (an elevated public wage Population, million 22.7 most critical growth constraints in the short bill and private sector activity benefit- GDP, current US$ billion 21.7 term. The mining sector, which represents ting from the stabilizing security sit- GDP per capita, current US$ 955.3 around 17 percent of GDP and 20 percent of uation), and net exports are driving a 31.2 International poverty rate ($2.15) government revenue, has been impacted by growth. Capital formation is not pro- a 63.1 insecuritywithseveralminessuspendingop- jected to contribute to growth due to Lower middle-income poverty rate ($3.65) a 87.2 erations and new mining investments post- crowding out by government current Upper middle-income poverty rate ($6.85) Gini index a 43.0 poned in 2022. Continued violent incidents spending on security. The current ac- School enrollment, primary (% gross) b 92.2 could further reduce mining, including gold count deficit (CAD) is expected to im- b 59.3 that accounts for more than 70 percent of ex- prove to 4.4 percent of GDP in 2023, Life expectancy at birth, years ports. As local populations are displaced due due to increased mining exports and Total GHG emissions (mtCO2e) 64.4 to insecurity, agricultural output is negative- improved terms of trade, notably higher Source: WDI, Macro Poverty Outlook, and official data. ly impacted. The two coups in 2022 trig- gold prices and lower oil prices. a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). gered a sharp reduction in the internation- In 2022, food prices caused inflation to al community’s financing while negatively reach a region-wide high of 14.1 per- affecting private investment and foreign cent. Inflation is forecast to sharply de- direct investment. crease to 1.9 percent in 2023, due to The primarily rain-fed agriculture and live- strong agricultural yields, which have GDP growth is projected to increase to stock sectors, which account for around 20 moderated food prices. Since May 2023, 4.3 percent in 2023 (1.7 percent per percentofGDPandemployover90percentof year-on-year headline CPI inflation has capita), following weak growth in 2022, thecountry’s poor, arealso highlyvulnerable been negative. with broad-based growth, including a to climate shocks and natural disasters. Do- In 2022, the rise in the cost of living mesticsupplysideshocksonfoodproduction far exceeded increases in incomes for recovery in mining. Inflation is expect- and markets (including security blockages) households, resulting in a 4.5 percentage ed to fall sharply to 1.9 percent as have been compounded by high global food point increase in the international pover- poverty resumes a gradual decline after pricesduetotheRussianinvasionofUkraine, ty rate to 32.3 percent, reversing gains rising sharply in 2022. Downside risks aggravatingchronicfoodinsecurity. since 2018. The poverty rate is expected to the outlook relate to the political to resume a gradual downward trend in 2023, to 31 percent, as inflation drops. transition, insecurity, regional instabili- However, the humanitarian situation re- ty, and high borrowing costs that could Recent developments mains dire, with over 2 million internally delay fiscal consolidation. displaced persons, in addition to an esti- GDP growth is expected to increase to 4.3 mated 3.35 million people severely food percent in 2023 (1.7 percent per capita). insecure during the 2023 lean season. FIGURE 1 Burkina Faso / Real GDP growth and FIGURE 2 Burkina Faso / Actual and projected poverty contributions to real GDP growth rates and real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 15 100 350000 90 10 300000 80 70 250000 5 60 200000 0 50 40 150000 -5 30 100000 20 50000 -10 10 2020 2021 2022 2023 2024 2025 0 0 Gov. cons. Exports GFCF 2009 2011 2013 2015 2017 2019 2021 2023 2025 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real priv. cons. pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 8 Oct 23 To counter inflation across WAEMU Improving domestic tax collection and low- countries, the Central Bank of West er military expenditures and social transfers African States (BCEAO) raised policy Outlook would support fiscal consolidation. Howev- interest rates by a cumulative 125 er, the fiscal deficit is projected to remain basis points since the start of 2022 Assuming improvements in security and above WAEMU’s 3 percent target over the to 3.25 percent for liquidity calls the implementation of key private sector- medium term. Financing the deficit will re- and 5.25 percent for the marginal enabling reforms (energy, mining, busi- main costly, but greater access to conces- lending facility. However, the mon- ness climate), growth is expected to be sional funding could ease the burden, al- etary policy stance remains broadly broad-based and reach 5.1 percent (2.5 though public debt will continue to increase accommodative, inflation in the re- percent per capita) by 2025. Investment mainly due to domestic debt. gion is still above target and foreign is expected to recover with stability and The outlook faces significant downside risks exchange reserves have been on a higher investor confidence. Inflation is from persistent insecurity, climatic shocks, downward trend. projected to remain within BCEAO’s tar- and instability from the political transition. The 2023 fiscal deficit is projected at get range of 1-3 percent in 2024 and 2025, The coup in neighboring Niger on 26 July 6.7 percent of GDP due to high mil- also reflecting lower global oil prices. 2023 and the response from ECOWAS and itary and humanitarian expenditures With low inflation and moderate WAEMU(economicandfinancialsanctions) caused by ongoing security and food growth, poverty incidence is projected have increased regional instability with insecurity crises. External concessional to decrease by about one percentage risksofnegativespillovereffectsonsecurity, financing has decreased, so the deficit point annually until 2025, but the num- economic, and humanitarian fronts, includ- will be primarily financed through ex- ber of people living in extreme poverty ing further increasing the cost of financing pensive domestic borrowing on the will remain over 7 million. Climate on the regional market. The withdrawal of regional market, where interest rates shocks and security issues will continue MINUMSA peacekeeping force from Mali have risen to over 7.5 percent for 3- to affect poor households, while the bytheendof2023could also increase region- and 5-year bonds. Public debt is pro- continued closure of up to a quarter of al security risks. Additionally, the price of jected to exceed 61 percent of GDP by schools limits human capital accumula- goldcouldweaken,weakeningtheCADand the end of 2023. tion and poverty reduction. domesticrevenuemobilization. TABLE 2 Burkina Faso / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.9 6.9 1.5 4.3 4.8 5.1 Private consumption 8.6 3.4 4.3 3.1 4.3 4.1 Government consumption 7.1 6.6 5.2 6.2 4.8 4.1 Gross fixed capital investment -4.6 34.8 5.4 -0.2 6.1 7.4 Exports, goods and services -7.1 6.5 -2.8 2.7 3.4 4.1 Imports, goods and services 5.3 15.5 8.2 -2.0 4.0 3.9 Real GDP growth, at constant factor prices 1.9 6.9 1.5 4.3 4.8 5.1 Agriculture 5.2 -4.1 8.1 4.1 4.5 4.3 Industry 12.8 11.0 -8.8 3.0 2.8 4.1 Services -4.9 10.3 4.6 5.1 5.9 6.0 Inflation (consumer price index) 1.9 3.9 14.1 1.9 2.0 2.1 Current account balance (% of GDP) -0.1 0.4 -6.2 -4.4 -4.1 -3.8 Net foreign direct investment inflow (% of GDP) -0.6 0.5 0.3 0.3 0.4 0.5 Fiscal balance (% of GDP) -5.0 -7.5 -10.6 -6.7 -6.1 -5.5 Revenues (% of GDP) 18.7 20.2 21.7 20.9 20.8 21.3 Debt (% of GDP) 44.9 55.4 58.3 61.2 62.4 63.8 Primary balance (% of GDP) -3.6 -6.0 -8.5 -4.9 -4.0 -3.4 a,b International poverty rate ($2.15 in 2017 PPP) 27.7 27.6 32.3 31.0 30.0 28.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.4 59.3 64.1 63.0 61.7 60.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 85.4 84.4 87.3 86.7 86.2 85.8 GHG emissions growth (mtCO2e) 3.2 6.0 4.6 5.0 5.1 5.1 Energy related GHG emissions (% of total) 10.5 11.1 11.4 11.8 12.3 12.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 9 Oct 23 Gradual reengagement with the interna- tional community including the recent IMF BURUNDI Key conditions and program under the ECF arrangement cre- ates an opportunity for reforms to stabilize challenges the country’s economy and scale up invest- ments in human capital and infrastructure Table 1 2022 Burundi’s economic development has as a part of a process to change Burundi's Population, million 12.9 been hampered by structural challenges growth trajectory. GDP, current US$ billion 3.9 that reinforced a cycle of fragility and GDP per capita, current US$ 303.9 poverty. Burundi faces a multidimensional a 65.1 International poverty rate ($2.15) fragility trap characterized by recurring Lower middle-income poverty rate ($3.65) a 86.7 political instability, low economic diversi- Recent developments a 38.6 fication, high population growth, environ- Gini index School enrollment, primary (% gross) b 115.1 mental degradation, and volatile growth. Growth in 2023 is projected at 2.9 percent up Life expectancy at birth, years b 61.7 The cessation of aid between 2015-2019 from1.8percentin2022,drivenbyagriculture Total GHG emissions (mtCO2e) 8.9 constrained the government's ability to en- and services. Industrial growth was subdued sure access to services. The macroeconom- due to the ongoing suspension of mining ac- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2013), 2017 PPPs. ic policy reaction prevented larger cuts to tivities as contracts were renegotiated while b/ WDI for School enrollment (2020); Life expectancy current expenditures but led to foreign ex- fuel shortage has worsened in recent months. (2021). change restrictions, exchange rate overval- Private consumption and investment sup- uation, fiscal dominance of monetary poli- ported growth on the demand side. cy, and high public sector indebtedness. The fiscal deficit is expected to decrease The sustained lack of economic growth to 6.7 percent of GDP in 2023 from 12.1 Growth is projected at 2.9 percent in has resulted in high poverty rates and percent in 2022 as result of cuts in current low human development outcomes. In expenditures and modest increase of rev- 2023, a moderate improvement over 2022, 2021, only 53 percent of children complet- enues. It merits mentioning that the fiscal driven by agriculture and services. Indus- ed primary school and transition to sec- deterioration in 2022 was driven by the trial growth was subdued due to mining ondary school remains low (48 percent). sharp increase in subsidies specifically the disputes and fuel shortages. While recov- Burundi has one of the highest rates of large fertilizer subsidy prepayment. ery is expected to accelerate over the chronic undernutrition worldwide, with Public debt is projected at 72.7 percent of over half of the children under five stunt- GDP in 2023 up from 68.4 percent of GDP medium term, the country faces downside ed. The share of stunted children among in 2022 as ECF-supported program dis- risks, including from incomplete imple- those under the age of five increased to bursements will increase external conces- mentation of IMF program reforms. With 55.8 percent in 2021 from 52.6 percent in sional debt in the medium term. rapid population growth, per capita GDP 2020 and could deteriorate further in light Driven by the ongoing foreign exchange re- of high inflationary pressures. Against forms spillovers on the imports prices, the is stagnating or growing very slowly, re- this backdrop, monetary poverty was es- current account deficit (CAD) would remain sulting in persistently high poverty. timated at 71 percent (based on the in- high at 17.6 percent of GDP in 2023 as mining ternational poverty line of $2.15/day) in contract negotiations affected export perfor- 2022, up from 65 percent in 2013. mance while imports of both capital and FIGURE 1 Burundi / Real GDP growth and sectoral FIGURE 2 Burundi / Actual and projected poverty rates and contributions to real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 5 100 160000 90 155000 4 80 150000 3 70 60 145000 2 50 140000 40 135000 1 30 130000 0 20 10 125000 -1 0 120000 2018 2019 2020 2021 2022 2023 2024 2025 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 Agriculture Industry Services International poverty rate Lower middle-income pov. rate Taxes GDP growth Real priv. cons. pc Sources: Official statistics and World Bank calculations. Source: World Bank. Notes: see Table 2. MPO 10 Oct 23 consumption goods increased. The CAD is continue to recover while agricultural 2017 PPP) is expected to modestly de- primarily financed by trade credits. The for- growth will likely pick up assuming fa- crease to 69 percent by 2025. The number eign exchange parallel market premium av- vorable rainfall and good distribution of of poor will continue to increase against eraged 39 percent in July 2023, compared to fertilizers. Industry is projected to accel- the backdrop of Burundi’s population set 65 percent a year before, due to the ongoing erate due to a loosening of forex con- to double by as early as 2050 - further forex market liberalization. International re- straints, resolution in mining disputes, exacerbating existing pressures on lim- serves have decreased, covering 0.4 month and increased power generation. Private ited land resources. Significantly higher of imports at end-June 2023 from 1.9 months consumption and public investment are economic growth rates will be necessary a year before. projected to remain high given economic to substantially bring down poverty and Drivenbyhigherfood(+25percent),headline recovery and resumption of partner-fi- break out of the fragility-poverty cycle. inflationisexpectedat23.8percentin2023. nanced public infrastructure programs. Downside risks are high, particularly on Lackluster economic growth in the past The fiscal deficit is expected to narrow to the fiscal front. Weak domestic revenue years, combined with high population 3.2 percent of GDP by 2025 as revenues mobilization efforts could lead to rev- growth, has resulted in a further decline in increase, aligned with fiscal consolidation enue shortfalls and incomplete imple- GDP per capita from an already low base. efforts under the IMF program. Public mentation of the reforms under the ECF Sharply rising food prices have further erod- debt is expected to decrease, reaching 61 program would undermine fiscal and ed households’ purchasing power, leading percent of GDP by 2025. External pres- external sustainability. Weather shocks to steadily increasing poverty rates. sures would remain high over 2024-25 as may constrain agricultural growth and import prices would stay high due the poverty reduction. On the upside, for- spillovers of the exchange rate unification eign aid could accelerate reflecting the despite the exports pick up, therefore the reengagement with the international Outlook CAD will remain high at 18 percent of community and exports could strength- GDP in 2025. en as a result of broad structural re- Growth is projected to increase to 4.2-4.5 With the projected uptick in economic forms, which would strengthen the percent over 2024-25. Services should growth, poverty (based on $2.15/day, BOP, growth, and revenue collection. TABLE 2 Burundi / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 0.3 3.1 1.8 2.9 4.2 4.5 Private consumption 0.3 3.0 2.4 2.9 3.3 3.4 Government consumption 19.2 2.9 5.9 5.7 5.2 4.8 Gross fixed capital investment -16.6 3.9 4.0 8.2 11.8 13.8 Exports, goods and services -14.9 3.4 5.8 7.8 13.8 14.1 Imports, goods and services 3.4 3.2 7.0 7.3 7.4 7.5 Real GDP growth, at constant factor prices 0.3 3.1 1.8 2.9 4.2 4.5 Agriculture 2.8 3.4 -0.8 3.0 4.1 4.4 Industry 1.8 3.0 3.2 2.7 4.4 4.8 Services -1.7 2.9 3.1 2.9 4.1 4.3 Inflation (consumer price index) 7.5 8.3 18.8 23.8 17.5 12.0 Current account balance (% of GDP) -10.1 -12.5 -15.6 -17.6 -18.6 -18.3 Net foreign direct investment inflow (% of GDP) 0.2 0.3 0.3 -0.1 -0.1 -0.1 Fiscal balance (% of GDP) -6.3 -5.2 -12.1 -6.7 -3.9 -3.2 Revenues (% of GDP) 23.1 25.1 26.7 26.9 28.2 28.6 Debt (% of GDP) 66.0 66.6 68.4 72.7 65.9 61.3 Primary balance (% of GDP) -3.4 -2.3 -9.5 -3.2 -1.0 -0.5 a,b International poverty rate ($2.15 in 2017 PPP) 70.6 70.4 70.6 70.4 70.1 69.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 88.9 88.8 88.9 88.8 88.7 88.5 GHG emissions growth (mtCO2e) 2.6 4.1 3.5 3.6 3.7 3.8 Energy related GHG emissions (% of total) 8.7 8.7 8.7 8.7 8.7 8.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013-ECVMB. Actual data: 2013. Nowcast: 2014-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2013) with pass-through = 0.87 (Med (0.87)) based on private consumption per capita in constant LCU. MPO 11 Oct 23 consumption. Economic growth slowed in the first quarter of 2023, with a real GDP CABO VERDE Key conditions and growth of 6.7 percent. Headline inflation reached 7.9 percent (y/ challenges y) in 2022, fueled by high international oil and commodity prices triggered by Rus- Table 1 2022 Cabo Verde is a young, small, and vibrant sia’s invasion to Ukraine. Food inflation Population, million 0.6 island nation with an open economy. Its peaked at 15.7 percent while energy infla- GDP, current US$ billion 2.3 robust – albeit volatile – economic growth tion increased to 23.8 percent. Inflationary GDP per capita, current US$ 3927.5 has been driven by tourism, remittances, pressures eased in the first half of 2023. a 4.6 International poverty rate ($2.15) and foreign direct investment enabled by Headline inflation in July reached 6.3 per- a 19.3 structural reforms and social and political cent, with food and energy inflation re- Lower middle-income poverty rate ($3.65) a 50.9 stability. The development model has spectively at 13.4 percent and 5.5 percent. Upper middle-income poverty rate ($6.85) Gini index a 42.4 shown signs of fatigue since the 2008 glob- The poverty rate ($3.65 per day PPP 2017) School enrollment, primary (% gross) b 100.9 al financial crisis, as growth fell from an fell to 16.9 percent in 2022, down from 19.8 b 74.1 average annual rate of 7.5 percent in the percent in 2021, but remained above pre- Life expectancy at birth, years 2000s to 2.8 percent in the last decade (ex- pandemic levels (15.5 percent in 2019). Total GHG emissions (mtCO2e) 0.7 cluding 2020) and is highly volatile. The Economic growth is fundamental for Source: WDI, Macro Poverty Outlook, and official data. impact of the pandemic underscored key poverty reduction, with the service sectors a/ Most recent value (2015), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy vulnerabilities, including the dominance (which account for a large share of em- (2021). of the tourism sector, absence of buffers to ployment, including for the poor) growing shocks, and poor performing State-Owned 20.8 percent in 2022. This led to new jobs, Enterprises (SOE). especially in tourism, although poverty al- Achieving higher and more sustained leviation was dampened by inflation, par- After rebounding to 17.7 percent in growth requires reforms to: reduce the econ- ticularly high food prices. omy’s vulnerabilities to external economic The fiscal deficit narrowed to 4 percent of 2022, driven by the recovery of tourism, and climate-related shocks; increase private GDP in 2022, supported by increased fiscal growth is expected to moderate to 5.6 sector productivity to benefit from the thriv- revenues while the debt-to-GDP ratio de- percent in 2023 as exports slow. Growth ing tourism sector; and reduce internal clined from 144 percent in 2021, to 120.9 per- friendly fiscal consolidation should cre- transport costs and market fragmentation. cent in 2022, driven by GDP growth. In the first half of 2023, total revenue increased by ate conditions for growth of 5.7 percent 22.8 percent, driven by personal income tax over the medium term. The outlook re- and VAT, while total expenditure increased mains subject to downside risks from Recent developments by 3.4 percent, reflecting higher acquisition lingering inflation, debt pressures, cli- of goods and services, interest payments, so- mate shocks and the impact of the rising The economic recovery from the cial benefits, and subsidies. COVID-19 pandemic resulted in growth The current account deficit (CAD) de- global cost-of-living on tourism. reaching 17.7 percent in 2022, driven clined from 11.8 percent of GDP in 2021 mainly by tourism (accommodation, com- to 3 percent in 2022, driven by the strong merce, and transport) and related private recovery in net service exports and robust FIGURE 1 Cabo Verde / Real GDP growth and inflation FIGURE 2 Cabo Verde / Actual and projected poverty rates and real private consumption per capita Percentage Percentage Poverty rate (%) Real private consumption per capita (constant LCU) 40 40 70 350000 30 30 60 300000 20 20 10 50 250000 10 0 40 200000 0 -10 -10 30 150000 -20 -30 -20 20 100000 -40 -30 10 50000 2019Q1 2019Q4 2020Q3 2021Q2 2022Q1 2022Q4 Real GDP growth (lhs) 0 0 Food and beverages inflation (rhs) 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Headline inflation (rhs) International poverty rate Lower middle-income pov. rate Energy inflation (rhs) Upper middle-income pov. rate Real priv. cons. pc Source: Government of Cabo Verde. Source: World Bank. Notes: see Table 2. MPO 12 Oct 23 remittances. The CAD was financed pri- nominal anchor provided by the peg with public debt-to-GDP ratio is expected to im- marily by FDI and concessional loans. In- the Euro and the return to fiscal consol- prove from 114.5 percent in 2023 to 104.1 ternational reserves reached 7.2 months of idation should contain inflation, converg- percent by 2025 but requires continued imports and helped support the accom- ing to 2 percent by end-2024. management of the fiscal risks related to modative monetary policy in place since Poverty (using US$3.65 per-day-2017 PPP) SOEs arising from loan guarantees. the COVID-19 crisis. is projected to decline to 16.5 percent in 2023 The CAD is projected to increase to 4.1 per- driven by growth in services and industry, cent of GDP in 2023, reflecting the impact and a moderation of inflation (expected to of moderate tourism growth and high food slow down to 4.5 percent in 2023). The and fuel prices. The CAD is projected to Outlook poverty rate in 2024 is expected to continue decline to 3.3 percent of GDP in 2025 sup- falling to 16 percent and then to 15.5 percent ported by tourism and remittances, which, Real GDP growth is projected at 5.6 per- by 2025, reaching the pre-pandemic poverty together with higher FDI inflows, will help cent in 2023 (4.6 percent in per capita level (15.49 percent in 2019). maintain international reserves at about 6 terms) and over the medium-term, growth The overall fiscal balance is projected to im- months of prospective imports. will be supported by the implementation prove to -3.1 percent of GDP in 2023 and to a The outlook is subject to substantial down- of structural reforms aimed at improving small surplus in 2025. In order to reduce debt side risks stemming from the lingering in- public sector efficiency and the business levels and create space to manage volatility, flationary impact of the war in Ukraine environment. Inflation is expected to de- the authorities are committed to gradual and weaker external demand in tourism cline from the 2022 peak, as the effects of revenue-driven fiscal consolidation, which markets, which could undermine the fiscal high international oil and food prices eas- includes enhanced management of fiscal consolidation and weaken growth. Cli- es. Headline inflation is projected at 4.5 risks, improved domestic revenue mobiliza- mate-related shocks will remain a concern, percent. Over the medium-term, the strong tion and current expenditure restraint. The given the country's high vulnerability. TABLE 2 Cabo Verde / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -19.3 6.8 17.7 5.6 5.7 5.8 Private consumption -22.7 6.6 28.3 7.8 8.2 9.0 Government consumption 3.0 5.4 -7.0 14.8 5.3 4.0 Gross fixed capital investment 46.3 12.0 -27.0 -6.8 2.1 3.1 Exports, goods and services -58.9 3.1 100.7 10.7 9.9 10.3 Imports, goods and services -17.3 8.6 13.1 7.5 9.5 10.5 Real GDP growth, at constant factor prices -19.3 6.8 17.7 5.6 5.7 5.8 Agriculture 9.9 3.9 -13.7 -4.4 -2.2 1.0 Industry -12.9 11.2 3.2 4.7 4.9 5.2 Services -21.1 6.7 20.8 6.1 6.1 6.0 Inflation (consumer price index) 0.6 1.9 7.9 4.5 2.0 2.0 Current account balance (% of GDP) -15.0 -11.8 -3.0 -4.1 -3.5 -3.3 Net foreign direct investment inflow (% of GDP) 3.4 4.4 4.5 4.5 4.6 4.7 Fiscal balance (% of GDP) -9.0 -7.5 -4.0 -3.1 -1.9 0.2 Revenues (% of GDP) 24.6 22.8 21.7 24.4 24.8 25.5 Debt (% of GDP) 141.2 144.0 120.9 114.5 109.6 104.1 Primary balance (% of GDP) -6.3 -5.3 -1.8 -0.9 0.3 2.2 a,b International poverty rate ($2.15 in 2017 PPP) 6.5 5.7 5.4 5.2 5.1 5.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 22.0 19.8 16.9 16.5 16.0 15.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 52.4 50.3 44.5 43.5 42.5 41.3 GHG emissions growth (mtCO2e) 2.9 -2.1 -1.2 2.0 2.0 2.2 Energy related GHG emissions (% of total) 87.0 86.3 86.4 86.7 87.0 87.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-IDRF. Actual data: 2015. Nowcast: 2016-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 13 Oct 23 Six out of Cameroon's ten regions are af- fected by conflict, including spillovers CAMEROON Key conditions and from conflicts in neighboring countries. Furthermore, climate change poses a sig- challenges nificant threat to the country's reliance on natural resources and the livelihoods of Table 1 2022 Cameroon is the largest economy in the over 70 percent of the workforce engaged Population, million 27.9 Economic and Monetary Community of in agriculture. GDP, current US$ billion 42.1 Central Africa (CEMAC), accounting for GDP per capita, current US$ 1506.7 over 40 percent of the region’s GDP and a 25.7 International poverty rate ($2.15) over 60 percent of regional foreign ex- Lower middle-income poverty rate ($3.65) a 47.0 change reserves. The Cameroonian econo- Recent developments a 74.8 my is also more diversified than the rest of Upper middle-income poverty rate ($6.85) Gini index a 46.6 CEMAC, with the oil sector accounting for Cameroon’s economic recovery continued School enrollment, primary (% gross) b 105.7 only 4 percent of the country’s GDP and in 2022, despite heightened fragility and b 60.3 15 percent of its fiscal revenues in 2022. strong external headwinds. GDP growth Life expectancy at birth, years Cameroon’s debt pressures have intensi- was estimated at 3.8 percent, supported by Total GHG emissions (mtCO2e) 127.2 fied, calling for cautious fiscal policies and agroindustry and service sectors. Inflation Source: WDI, Macro Poverty Outlook, and official data. improved debt management. The current stood at 6.3 percent at end-2022 year-over- a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy development model appears to have run year, up from 3.5 percent at end-2021. Dri- (2021). out of steam and is not able to deliver on ven by food prices, which rose by 13.7 per- Cameroon’s ambition of becoming an up- cent, inflation averaged 7.5 percent annu- per middle-income country by 2030, as ally at the end of May 2023. The current ac- governance indicators have deteriorated, count deficit narrowed from 3.7 percent of Cameroon’s economy is at the onset of a human capital remains weak, the business GDP in 2021 to 3.2 percent in 2022, reflect- environment is unfavorable, and climate ing higher prices for oil exports. modest economic recovery. Progress on change represents a growing threat. The Bank of Central African States (BEAC) poverty reduction, however, has remained Poverty reduction remains weak due to continued to tighten its monetary policy to weak due to low per capita economic slow economic growth. 1 in 4 Camerooni- contain inflationary pressures and support growth, with 1 out of 4 Cameroonians ans lives below the international poverty the external viability of the exchange rate line of $2.15 PPP a day, with the poverty arrangement. The BEAC increased the policy living below the international poverty headcount rate declining by just 0.6 per- rateinMarch2023by50basispointsto5.0per- line ($2.15 PPP a day). The economic centage points between 2020 and 2023. cent, a cumulative 175 basis points increase outlook for Cameroon is expected to re- Combined with rapid population growth, since November 2021. Moreover, the BEAC main moderately favorable over the this implies that the absolute number of ended its weekly liquidity injections after medium term, but with risks tilted sig- poor Cameroonians is rising. Inequality al- steadilyscalingthembacksinceJune2021. so remains high, with the consumption Gi- Cameroon's fiscal situation has improved nificantly to the downside. due to lower fuel subsidies, increased oil ni at 46.6 and large differences in living standards between regions and between revenues, and spending reductions. Non- urban and rural areas. oil tax revenues grew slightly in the first FIGURE 1 Cameroon / Real GDP growth and contributions FIGURE 2 Cameroon / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant FDJ) 10 90 800000 8 80 700000 6 70 600000 4 60 500000 2 50 400000 0 40 300000 -2 30 20 200000 -4 10 100000 -6 2000 2003 2006 2009 2012 2015 2018 2021 2024 0 0 Gov. cons. Exports GFCF 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 14 Oct 23 half of 2023, driven by corporate income shouldsupportrevenuemobilizationin2023. tax and VAT collections. However, unpaid The public debt-to-GDP ratio is expected to fuel subsidy expenses from 2022 of CFAF Outlook declinetoaround40percentby2025. 330 billion (1.1 percent of GDP) carried Risks to this outlook include (i) a further over to the 2023 budget, making the total Cameroon's economic outlook is moderate- tightening of global and regional financial fuel subsidy spending 1.5 percent of GDP, lyfavorableforthemediumtermbuthassig- conditions, (ii) adverse impacts of the war down from 3 percent in 2022. Cameroon nificant downside risks. Cameroon’s real in Ukraine on commodity and financial still faces a high risk of debt distress, ac- GDPgrowthisprojectedtoreach4.3percent, markets, and (iii) a persistent security cri- cording to the latest WB-IMF analysis. on average, over 2024-26, supported by sus- sis in the North-West, South-West, and Far Cameroon’s financial sector remains weak tained activity in the secondary and tertiary North regions. Tightening global and re- due to persistent Non-Performing Loans (13 sectors. The secondary sector's growth will gional financial conditions could increase percent of portfolio) and high exposure to be fueled by agri-food industries, construc- debt pressures and impact the country's the sovereign (35 percent). Nevertheless, fi- tion and reconstruction in the North-West growth prospects. Rising inflationary pres- nancial soundness indicators improved and South-West regions, and additional sure would also negatively affect household marginally in 2022. Domestic credit to the power generation from new Hydro power consumption and further slow or even re- private sector increased by 13.6 percent in plants. The tertiary sector will see growth in verse poverty reduction; and further reduc- 2022, up from 9.7 percent in 2021. telecommunications, financial services, and tions in fuel subsidies could have added Recent reforms create fiscal space and en- hospitality. Average inflation could moder- poverty impact unless appropriate mea- hance inclusive growth prospects but may ate from 5.9 percent at end-2023 to 4 percent sures are put in place to mitigate those im- lead to inflationary pressures. Simulations at end-2024 and should decline to below 3 pactsonthevulnerable.Inaddition,thetake- show that the reduction in fuel subsidies and percent in the medium term in line with the or-pay agreement following the completion resulting increase in fuel prices could tem- CEMACconvergencecriterion. of Nachtigal could potentially cost the bud- porarily raise poverty incidence by 1 per- The current account deficit is expected to im- get approximately CFAF150 billion to the centagepointintheshortrun.Tocushionthe prove and stabilize around 3 percent of GDP budget. If these risks materialize, it may re- effect of these reforms, certain groups, such inthemediumtermsupportedbyongoingef- sult in slower GDP growth, affecting fiscal as farmers, have received tax exemptions forts to boost export competitiveness. Ex- and external balances and the pace of pover- and rebates. Minimum wages and public ports of processed goods are expected to in- ty reduction. While the percentage of people sector wages increased, but this may not sig- crease gradually, particularly in the regional living below the international poverty line is nificantly impact poverty, as most poor market. The fiscal position is expected to im- expected to slightly decrease from 24.2 per- workers are in informal jobs. To reduce prove slightly thanks to the gradual, reduc- cent in 2023 to 23.6 percent in 2025. The ab- poverty, budgetary savings should be chan- tion of fuel subsidies and other cuts to current solute number of Cameroonians living be- neledintopro-poorprogramstargetedtothe expenditure. Continued economic recovery low the international poverty line is project- poorandvulnerable. and revenue administration measures edtoriseduetopopulationgrowth. TABLE 2 Cameroon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 0.5 3.6 3.8 4.0 4.2 4.5 Private consumption 3.3 3.9 3.6 3.6 3.7 3.8 Government consumption 2.3 3.4 7.6 4.1 3.1 2.5 Gross fixed capital investment 2.4 8.2 2.6 6.4 7.6 8.9 Exports, goods and services -21.0 3.2 10.1 9.1 9.3 9.3 Imports, goods and services -5.4 9.0 7.3 8.6 8.8 9.4 Real GDP growth, at constant factor prices 0.5 3.6 3.7 4.0 4.2 4.5 Agriculture 0.1 4.1 4.3 4.7 5.0 5.6 Industry 1.3 4.1 4.2 4.5 4.8 5.4 Services 0.3 3.2 3.4 3.5 3.7 3.6 Inflation (consumer price index) 2.5 2.5 6.3 5.9 4.0 3.0 Current account balance (% of GDP) -3.6 -3.7 -3.2 -3.0 -2.8 -2.6 Fiscal balance (% of GDP) -3.2 -3.1 -1.8 -0.8 -1.0 -1.0 Revenues (% of GDP) 12.6 13.7 15.5 15.4 15.3 15.6 Debt (% of GDP) 45.8 47.1 46.3 45.9 44.1 42.9 Primary balance (% of GDP) -2.3 -2.1 -0.8 0.2 0.0 -0.1 a,b International poverty rate ($2.15 in 2017 PPP) 24.8 24.6 24.4 24.2 23.9 23.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 46.3 46.1 46.0 45.7 45.5 45.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 73.6 73.4 73.1 72.8 72.4 72.0 GHG emissions growth (mtCO2e) 0.4 0.6 1.0 1.1 1.2 1.3 Energy related GHG emissions (% of total) 7.0 7.3 7.6 7.9 8.2 8.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2009- and 2014-ECAM-IV. Actual data: 2014. Nowcast: 2015-2022. Forecasts are from 2023 to 2025. b/ Projection using point to point elasticity at regional level with pass-through = 1 based on GDP per capita in constant LCU. MPO 15 Oct 23 GDP is estimated to have grown by only 0.5 percent in 2022. Forestry, mining, hos- CENTRAL Key conditions and pitality, and telecommunications drove economic activity. Timber production, ac- challenges AFRICAN REP. counting for over half of exports, rose sig- nificantly from 551.1 thousand cubic me- The Covid-19 crisis in 2020, intensification ters in 2021 to 639.0 thousand cubic meters of the internal armed conflict in early 2021, in 2022 due to new forestry licenses. The Table 1 2022 and Russia’s invasion of Ukraine in 2022 mining sector, particularly gold and dia- Population, million 5.6 compounded fragility for the Central monds, thrived due to higher global prices. GDP, current US$ billion 2.5 African Republic (CAR), jeopardized its Improved security conditions boosted the GDP per capita, current US$ 440.8 macroeconomic stability, and worsened an services sector. Net exports fueled growth, International poverty rate ($2.15) a 65.7 already alarming humanitarian situation. but private consumption suffered due to a 85.8 Poverty remains widespread, with the inflation. Continued suspension of budget Lower middle-income poverty rate ($3.65) a bulk of the poor living in extreme poverty. support and revenue shortfalls led to a Upper middle-income poverty rate ($6.85) 96.2 a With limited fiscal space, the country con- 17.7 percent decrease in public invest- Gini index 43.0 tinues to depend heavily on international ment in 2022, impacting gross fixed in- b 128.1 School enrollment, primary (% gross) support to achieve stabilization on several vestment. In 2023H1, economic activity b 53.9 Life expectancy at birth, years fronts, including security, humanitarian continued to suffer from persistent fuel Total GHG emissions (mtCO2e) 49.5 and macroeconomic. shortages, which disrupted trade and Source: WDI, Macro Poverty Outlook, and official data. In April 2023, the IMF approved a three-year food supply chains. a/ Most recent value (2021), 2017 PPPs. Extended Credit Facility (ECF) program for The National Plan for Recovery and Con- b/ WDI for School enrollment (2017); Life expectancy (2021). the CAR. Budget support by other develop- solidation of Peace in CAR and the Mutual ment partners is currently suspended, inter Engagement Framework (RCPCA-CEM) alia, due to concerns about budget trans- are not sufficient to address the key prob- parency, especially around security spend- lems of poverty reduction in CAR. As the With only 0.5 percent growth, 2022 was ing. The CAR faces significant macro and RCPCA is ending in December 2023, a new the third year of economic stagnation and political uncertainties, including risks asso- plan covering 2024-26 is under prepara- declining per capita incomes. Notwith- ciated with the newly enacted tokenization tion, however the microsimulation projec- standing spending moderation, the over- law for natural resources, and the removal of tions that combine sectoral GDP growth all fiscal balance remained in a significant presidential term limit through a constitu- forecasts with the EHCVM data suggest tional referendum, which erode its credibili- this situation is unlikely to change much deficit in 2022, while weak economic fun- ty with international partners and donors. in the next five years, with more than 65.5 damentals and commodity price shocks percent of the population living in extreme continued to weigh on the external posi- poverty in 2022. tion. Poverty remains elevated, com- The Bank of Central African States (BEAC) pounded by food price pressures and low Recent developments continued to tighten its monetary policy to contain inflationary pressures and sup- growth. The medium-term outlook re- Continuing the weak economic perfor- port the external viability of the exchange mains highly uncertain. mance of the past two years, CAR's real rate arrangement. The BEAC increased the FIGURE 1 Central African Republic / Real GDP growth FIGURE 2 Central African Republic / Actual and projected and contributions to real GDP growth poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant FDJ) 8 120 300000 6 100 250000 4 80 200000 2 0 60 150000 -2 40 100000 -4 20 50000 -6 2017 2018 2019 2020 2021 2022 2023 2024 2025 0 0 Private Consumption Government Consumption 2008 2010 2012 2014 2016 2018 2020 2022 2024 Gross Fixed Investment Net Exports International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 16 Oct 23 policy rate in March 2023 by another 50 The current account deficit widened to 13.2 The current account balance is projected to basis points to 5.0 percent, a cumulative percent of GDP in 2022, the third consecu- improve but remain in deficit. The balance 175 basis points increase since November tive annual increase, primarily due to a 9.4 of payment is projected to exhibit a financ- 2021. Moreover, the BEAC ended its week- percent drop in the terms-of-trade. ing gap of roughly 3.5-4.5 percent of GDP ly liquidity injections after steadily scaling per year over the medium-term. This fi- them back since June 2021. Although ag- nancing gap is expected to be covered by gregate financial soundness indicators re- bridge financing from the regional mar- mained broadly adequate in 2022, liquidity Outlook ket, possible disbursements of donor’s indicators have deteriorated since budget support, and disbursement under end-2021, while non-performing loans The medium-term outlook is highly un- the ECF program. (NPLs) remained high. certain. Real GDP growth is projected to Risks to the outlook remain skewed to While the overall fiscal balance improved rebound to 1.3 percent in 2023, before av- the downside. Pressures points include: in 2022, it remained structurally in deficit. eraging 2.4 percent between 2024-25, dri- (i) Failure to repeal or mitigate the newly Economic slowdown and fuel shortages ven partly by the base effect and contin- adopted tokenization law, which is likely reduced domestic revenue collection from gent on the resumption of budget support to pose several systemic risks including 8.8 percent of GDP in 2021 to 7.8 percent and the implementation of policy adjust- macroeconomic and financial stability, in 2022. Authorities implemented a CFAF ments to pave the way for improved fu- money laundering, and derail prospect 9.5 billion (0.6 percent of GDP) partial ad- el supply. Inflation is expected to remain for economic recovery; (ii) failure to im- justment to non-priority domestic spend- above the regional ceiling in 2023, before plement bold policy to move gradually ing to address the revenue gap. By year- converging to 3 percent over the medi- toward a sustainable price adjustment end, the treasury nearly depleted its cash um term in line with the CEMAC conver- mechanism to address fuel supply short- balance, using the SDR allocation (CFAF gence criterion. Poverty is projected to re- ages and to realize domestic revenue mo- 50.5 billion) and raising domestic financing main elevated as a result of stagnant per bilization objectives, is expected to weigh (CFAF 46.1 billion, equivalent to US$74.9 capita incomes, a relative high food prices on economic growth and widen the over- million or 3.0 percent of GDP). Public debt and weak economic recovery. all fiscal deficit; (iii) inability to mobilize rose to 51.8 percent of GDP in 2022, mainly The overall fiscal balance is projected to concessional donor support; (iv) a rever- due to the use of the last SDR allocation remain in deficit over the medium-term, sal in security gains; and (v) stronger- tranche, issuance of net domestic bonds, and due to an envisaged increase in public in- than-expected tightening of regional and CFAF depreciation against the U.S. dollar. In vestment to meet pressing social needs. global financial conditions. Should these 2023H1, the government has further tight- CAR is expected to remain at high risk risks materialize, CAR could dip into a ened its fiscal stance to reduce the domestic of external debt distress and overall debt yet deeper crisis, with the government primary fiscal deficit by 0.9 percent of GDP, distress, although public debt is projected unable to pay wages, both domestic and consistent with limited financing options. to be sustainable. external arrears reemerging. TABLE 2 Central African Republic / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.0 1.0 0.5 1.3 1.6 3.1 Private consumption -3.7 2.8 5.4 -2.0 1.4 3.0 Government consumption 20.6 -3.8 -8.4 -2.7 1.4 3.2 Gross fixed capital investment 30.0 -15.9 -4.6 -0.5 2.2 3.1 Exports, goods and services -10.5 -4.3 -6.5 6.9 3.6 3.6 Imports, goods and services -0.3 -7.2 7.0 -8.1 2.2 2.9 Real GDP growth, at constant factor prices 1.0 1.0 0.5 1.3 1.6 3.1 Agriculture 5.0 2.9 1.8 3.0 2.4 2.4 Industry 0.6 -0.4 -1.5 -0.2 0.1 0.3 Services -1.9 0.1 0.4 0.6 1.7 5.1 Inflation (consumer price index) 0.9 4.3 5.8 6.5 3.2 2.8 Current account balance (% of GDP) -8.5 -10.6 -13.2 -8.4 -7.3 -7.5 Fiscal balance (% of GDP) -3.4 -6.0 -5.5 -6.4 -6.6 -6.5 Revenues (% of GDP) 21.8 13.7 12.2 11.4 11.4 11.6 Debt (% of GDP) 43.4 47.6 51.8 50.0 50.7 50.9 Primary balance (% of GDP) -3.1 -5.7 -5.1 -5.9 -5.9 -5.7 a,b International poverty rate ($2.15 in 2017 PPP) .. 65.1 65.5 66.1 66.4 66.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) .. 85.5 85.7 86.1 86.3 86.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) .. 96.1 96.2 96.4 96.4 96.4 GHG emissions growth (mtCO2e) 4.0 2.5 -0.3 1.9 1.7 1.6 Energy related GHG emissions (% of total) 0.5 0.5 0.5 0.4 0.5 0.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2021-EHCVM. Actual data: 2021. Nowcast: 2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 17 Oct 23 CHAD Key conditions and Recent developments challenges In 2023, Chad’s economy is expected to grow by 3 percent (-0.2 percent per capi- Table 1 2022 Chad’s economic growth has been ta), following subdued growth impaired Population, million 17.7 volatile and weak, reflecting the lack of by floods and insecurity in 2022. Non- GDP, current US$ billion 12.7 economic diversification and dependen- oil GDP growth is estimated at 2.2 per- GDP per capita, current US$ 716.8 cy on the oil sector, which constitutes cent, up from 1.3 percent in 2022, driven a 30.9 International poverty rate ($2.15) around 85 percent of exports, and 56 by increased public investment. Industry, a 64.6 percent of fiscal revenues. Chad is al- driven by the oil sector, is projected to Lower middle-income poverty rate ($3.65) a 89.4 so among the world’s most vulnerable contribute 1.3 percentage points (ppts) to Upper middle-income poverty rate ($6.85) Gini index a 37.5 countries to climate change. Insufficient growth, followed by services (0.9 ppts) School enrollment, primary (% gross) b 93.7 rains as well as frequent flooding have and agriculture (0.8 ppts). Gross fixed b 52.5 often had adverse impacts on the agri- capital investment, primarily govern- Life expectancy at birth, years cultural sector, the main sector of em- ment-driven, is projected to be the main Total GHG emissions (mtCO2e) 115.3 ployment, which together with conflict driver, contributing 1.4 ppts to growth. Source: WDI, Macro Poverty Outlook, and official data. and displacement have led to chron- Despite the Sudan border closure, the a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). ic food insecurity. In 2022, Chad ex- value of exports is expected to increase perienced its worst floods in 30 years, by 0.6 percent, thanks to high oil prices dampening growth and leading to dec- and an increase in oil production (6.6 laration of a national food emergency in percent), resulting in a current account June 2022. surplus of 2.1 percent of GDP in 2023. Significant adverse impacts of the war According to UNHCR, Chad was hosting Inflation is projected to surge from 5.8 in Sudan include a large influx of nearly one million forcibly displaced per- percent in 2022 to 13.2 percent in 2023, refugees, trade disruptions, and insecu- sons at the end of 2022, including 593,000 with food inflation expected to reach 13.9 rity. GDP growth is expected to be 3 refugees and nearly 400,000 IDPs. Since percent, mainly due to the Sudan war April 2023, the war in Sudan has caused as trade disruptions reduce supply and percent (-0.2 percent per capita) due to a mass influx of new refugees, border cause shortages, while demand for goods increased oil production and high prices, closures and major disruptions in trade. from refugees has increased. This will ex- but inflation could rise to 13.2 percent, As of end-August 2023, 382,000 new acerbate food insecurity with an estimat- exacerbating food insecurity and in- refugees have crossed into Chad, includ- ed 1.9 million people (10.4 percent of the creasing the poverty rate to 35.4 per- ing 48,000 returnees. The Government population) in severe food insecurity as expects that by end-2023, new refugees of June 2023. The extreme poverty rate cent. Medium-term downside risks in- from Sudan could reach 600,000. In addi- (US$2.15/ day per capita, 2017 PPP) is clude political and regional instability, tion to the humanitarian challenges, ex- expected to increase by 0.2 percentage insecurity, and climatic shocks. pected economic impacts are higher ex- points in 2023, reaching 35.4 percent, an penditures (mostly military), reduced/ increase of 228,000 people to a total of 6.4 shortages of goods, and higher inflation. million in extreme poverty. FIGURE 1 Chad / GDP growth, current account and fiscal FIGURE 2 Chad / Actual and projected poverty rates and balance real GDP per capita Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 6 100 450000 4 90 400000 80 350000 2 70 300000 0 60 250000 50 -2 200000 40 -4 150000 30 20 100000 -6 10 50000 -8 0 0 2020 2021 2022 2023 2024 2025 2011 2013 2015 2017 2019 2021 2023 2025 Fiscal balance Current account balance International poverty rate Lower middle-income pov. rate Real GDP growth Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 18 Oct 23 Monetary and exchange rate policies of poverty reduction. Extreme poverty is are managed by the regional Central expected to increase by a further 0.1 ppt Bank (BEAC), which has maintained Outlook between 2023-24 with an additional tightening monetary conditions to 214,000 projected to fall into extreme curb inflation and support the ex- During 2024-2025, growth is projected to poverty (totaling 6.7 million). change rate. In March 2023, the average 2.8 percent (-0.3 percent per capi- Reflecting lower oil prices, the fiscal surplus BEAC raised its policy rate from 4.5 ta), driven by moderating oil prices and is projected to narrow to 2.2 percent of GDP to 5 percent and ceased weekly in- persistent impacts of the Sudan crisis. during 2024-2025, while the current account jections after scaling back since June Non-oil GDP is projected to grow 2.9 per- is expected to deteriorate, averaging -2.1 2021, with the marginal lending rate cent during the same period. Inflation is percent of GDP. Public debt is projected to rising from 6.25 to 6.75 percent in projected to remain elevated at 10.1 and 7 decline to 37.7 percent of GDP by end-2025. March 2023. percent in 2024 and 2025 respectively, as- This outlook is subject to multiple down- The fiscal surplus, including grants, suming borders with Sudan remain closed side risks, including lower oil prices, polit- is projected at 3.9 percent of GDP for security reasons and agriculture pro- ical instability during upcoming elections, in 2023 (a non-oil fiscal deficit of 7.8 duction is subdued due to already ob- heightened insecurity, and climatic shocks. percent). The surplus reflects a one- served effects of climate change. A prolonged Sudan war beyond 2023 year lag in the primary component Oil-sector driven growth is not expected to would worsen the humanitarian crisis, of oil-revenue tax collection, while the lead to poverty reduction without signif- strain public finances, and increase infla- downgrade in the projection, from 6.1 icant structural reforms, as there are few tionary pressures. The coup in neighboring percent before the Sudan war, reflects linkages between the extractive sector and Niger on 26 July 2023 and the response increased security (additional 9.2 per- the livelihoods of poor and vulnerable from ECOWAS and WAEMU (economic cent of the initial budget) and human- groups. Moreover, the continued security and financial sanctions) have increased re- itarian expenditures. Total public debt restrictions, the low coverage of social pro- gional instability with risks of negative is projected to decline to 44.4 percent tection programs, and now the crisis in Su- spillover effects on security, economic, and of GDP by end-2023. dan increasing inflation, will limit the pace humanitarian fronts. TABLE 2 Chad / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.6 -1.2 2.2 3.0 2.8 2.7 Private consumption 0.5 1.6 2.1 0.2 1.4 2.0 Government consumption 11.1 3.7 -1.8 2.2 -2.9 -4.2 Gross fixed capital investment -14.5 -4.5 -7.0 12.7 5.5 1.1 Exports, goods and services 1.1 -0.4 5.0 3.6 3.6 4.1 Imports, goods and services 1.8 5.1 2.0 1.0 1.5 2.1 Real GDP growth, at constant factor prices -1.6 -1.2 2.2 3.0 2.8 2.7 Agriculture 3.9 6.2 2.0 2.4 1.6 1.7 Industry -0.1 -4.6 4.1 4.2 2.1 2.0 Services -7.0 -4.4 0.7 2.5 4.5 4.2 Inflation (consumer price index) 3.5 1.0 5.8 13.2 10.1 7.0 Current account balance (% of GDP) -7.8 -6.0 2.3 2.2 -1.5 -2.7 Fiscal balance (% of GDP) 1.7 -2.2 4.5 3.9 2.3 2.1 Revenues (% of GDP) 20.7 16.3 19.9 19.7 16.0 15.4 Debt (% of GDP) 49.9 52.1 49.6 44.4 40.7 37.7 Primary balance (% of GDP) 3.4 -0.6 5.9 5.4 3.3 3.3 a,b International poverty rate ($2.15 in 2017 PPP) 33.1 34.9 35.2 35.4 35.5 35.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 66.5 68.1 68.4 68.5 68.5 68.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.3 91.0 91.1 91.1 91.1 91.2 GHG emissions growth (mtCO2e) 2.8 2.9 3.2 3.2 3.2 3.2 Energy related GHG emissions (% of total) 2.2 2.1 2.1 2.0 2.0 2.0 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2018) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 19 Oct 23 in private investment is thus critical. An improved business environment and a COMOROS Key conditions and strong financial sector could help attract foreign direct investment and spur domes- challenges tic private investment. Table 1 2022 Economic growth, which has been low for Population, million 0.8 decades (averaging 2.7 percent over GDP, current US$ billion 1.2 2001-20), slowed further to 1.6 percent over Recent developments GDP per capita, current US$ 1408.8 2019-22, due to multiple shocks, including a 18.6 International poverty rate ($2.15) Cyclone Kenneth in 2019, the COVID-19 The economy expanded by 2.6 percent in a 39.5 pandemic, and the 2022 price shock. As a 2022, driven by an increase in exports as Lower middle-income poverty rate ($3.65) a 68.6 result, poverty remains high at 38.5 per- numerous members of the diaspora com- Upper middle-income poverty rate ($6.85) Gini index a 45.3 cent in 2022. This weak economic perfor- munity came to celebrate “grand mar- School enrollment, primary (% gross) b 99.5 mance reflects a growth model driven by riages,” a cultural tradition in Comoros. In b 63.4 private consumption fueled by remit- 2023Q1, growth is estimated to have been Life expectancy at birth, years tances, negative productivity growth, lim- bolstered by accelerated implementation Total GHG emissions (mtCO2e) 0.7 ited investment, and underperforming of public investment projects, increased Source: WDI, Macro Poverty Outlook, and official data. state-owned enterprises (SOEs). The Co- private consumption supported by sub- a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2018); Life expectancy moros is at high risk of public debt dis- stantial remittances, and a surge in exports (2021). tress, largely reflecting the issuance of non- of cloves driven by a strong harvest. How- concessional loans, though public debt is ever, rising import bills widened the cur- assessed as sustainable. rent account deficit to 2.4 percent of GDP Job creation is constrained by limited pri- in 2022 (from 0.5 percent in 2021). This The Comoros’ economy continues to re- vate sector, with the growth model re- trend continued in 2023Q1, but the exter- lying heavily on private consumption. nal position remained broadly sound, with cover on the back of the resumption of pri- Low human and physical capital and net foreign assets estimated at €228.5 mil- vate consumption and investments in misallocation of resources have hindered lion in 2023Q1. Due to higher imported in- tourism and transport infrastructure, and growth in the tourism and fisheries sec- flation and base effects, headline inflation growth is expected to average 3.5 percent tors, which could be major sources of job remained at 19.6 percent in April 2023 opportunities. Labor force participation is (yoy). As a result, the Central Bank of the in 2023-25. The poverty rate has re- also constrained by job market failures Comoros continued to tighten the mone- mained stable around 38 percent. Policy and persistent forms of wage discrimina- tary stance, including by increasing its liq- priorities include fiscal consolidation and tion against women. uidity absorbing operations ceiling from reforms to promote economic transforma- Recent shocks have highlighted the Co- KMF 2.5 billion in June 2022 to KMF 10 tion. Risks to the outlook include slow moros’ vulnerabilities and the need to im- billion in 2023Q1. plement reforms that increase productivity Slow progress on tax reforms, the underper- pace of reforms in a context of elevated formance of SOEs, and measures adopted to and private investment to promote prices and upcoming elections. growth. Creating the needed fiscal space to shield households from rising prices in- ramp up public investment that will crowd creased the fiscal deficit from 2.8 percent FIGURE 1 Comoros / Selected macroeconomic imbalance FIGURE 2 Comoros / Actual and projected poverty rates indicators, 2018-2025 and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 50 0 80 560000 -1 70 550000 40 -2 60 540000 30 50 530000 -3 40 520000 20 -4 30 510000 -5 10 20 500000 -6 10 490000 0 -7 0 480000 2018 2019 2020 2021 2022e 2023f 2024f 2025f 2014 2016 2018 2020 2022 2024 Debt (lhs) Current account balance (rhs) International poverty rate Lower middle-income pov. rate Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Sources: National authorities and World Bank estimates and forecasts. Source: World Bank. Notes: see Table 2. MPO 20 Oct 23 of GDP in 2021 to 3.9 percent in 2022. The fall to 2.6 percent in 2024-25 if global com- deterioration in the fiscal position contin- modity prices decline and the central bank ued in 2023Q1 with higher public invest- Outlook improves its monetary policy framework. ment (114.6 percent, yoy), an increase in Driven by the completion of major invest- goods and services expenditures (16.1 per- The recovery is expected to continue, with ment projects and low domestic resource cent, yoy), and a higher public wage bill growth reaching 3 percent in 2023 and 3.8 mobilization, the fiscal deficit is projected (9.9 percent, yoy), while domestic rev- percent over 2024-25, primarily driven by to widen to 6.3 percent of GDP in 2023 be- enues increased by 11.6 percent. Despite private consumption and public invest- fore narrowing to 3.1 percent in 2025 on the increase in the wage bill (due to gov- ment. The construction of the El Maarouf the back of a fiscal consolidation program, ernment measures to increase salaries) and hospital and the Galawa hotel, as well as enhanced SOE performance monitoring, investment, these expenditures remain the construction or restoration of roads and increased expenditure efficiency within the budget at around the quarter and ports, should significantly contribute through the use of an e-procurement sys- of the budget in 2023Q1. However, goods to the recovery. In the medium term, pro- tem. Due to the disbursement of existing and services expenditures already ac- ductivity growth could be boosted as the loans, public debt is projected to reach 45.2 counted for 38.9 percent of the budget in 2023 energy law promotes the production percent of GDP in 2025 and the implemen- the first quarter. Due to the continuous dis- of electricity from renewable sources. The tation of the 2023 debt management law bursement of existing loans and SOEs’ fi- creation of a credit registry, a partial credit will help to contain it. nancial difficulties, the public debt stock guarantee scheme, and the operationaliza- Driven by high commodity prices and reached 33.7 percent of GDP at end-2022, tion of the leasing law in 2023-24 could strong domestic demand, the current ac- compared to 18.1 percent at end-2018. Fis- support the recovery in 2023-25. The count deficit is projected to reach 5.2 per- cal outturns and the public debt level are poverty rate is expected to decrease slowly cent of GDP in 2023, before slightly im- expected to be monitored by a four-year to 37 percent in 2025. Driven by imported proving in 2024-25 on the back of higher IMF Extended Credit Facility that was ap- inflation, headline inflation is projected to tourism service exports and lower com- proved in June 2023. average 10.3 percent in 2023, but it could modity prices. TABLE 2 Comoros / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -0.2 2.1 2.6 3.0 3.5 4.0 Private consumption 3.8 1.0 0.2 1.9 3.2 3.6 Government consumption 4.1 5.0 5.4 11.0 -2.4 4.8 Gross fixed capital investment -14.4 9.6 2.0 8.0 7.3 6.6 Exports, goods and services -46.3 48.2 22.6 -4.2 5.1 6.5 Imports, goods and services -9.3 7.7 4.2 3.0 3.4 5.6 Real GDP growth, at constant factor prices -0.7 2.0 2.4 3.0 3.5 4.0 Agriculture 4.4 3.4 3.3 4.7 4.3 4.5 Industry -5.6 -0.2 0.4 2.3 1.0 1.5 Services -2.1 1.8 2.4 2.3 3.5 4.3 Inflation (consumer price index) 0.8 0.0 12.4 10.3 3.0 2.1 Current account balance (% of GDP) -1.9 -0.5 -2.4 -5.2 -5.1 -4.5 Fiscal balance (% of GDP) -0.5 -2.8 -3.9 -6.3 -4.6 -3.1 Revenues (% of GDP) 18.3 17.0 14.2 15.5 14.8 15.1 Debt (% of GDP) 26.1 29.8 33.7 40.7 43.8 45.2 Primary balance (% of GDP) -0.3 -2.5 -3.7 -6.0 -4.2 -2.7 a,b International poverty rate ($2.15 in 2017 PPP) 18.4 18.2 18.1 18.1 17.9 17.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 39.0 39.0 38.5 38.2 37.9 37.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 68.2 68.2 67.9 67.2 66.5 65.7 GHG emissions growth (mtCO2e) 1.6 2.1 2.4 2.8 3.4 4.0 Energy related GHG emissions (% of total) 45.2 44.7 44.4 44.3 44.5 44.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-EESIC. Actual data: 2014. Nowcast: 2015-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 21 Oct 23 2023), while the conflict in the East of the country persists. DEMOCRATIC Key conditions and Building resilience and sustaining high growth in order to significantly reduce challenges REP. OF CONGO poverty will require unlocking invest- ments in infrastructure and human capital Despite its considerable economic poten- and overcoming institutional and structur- tial, including its rich endowment of nat- al weaknesses, including the lack of hu- Table 1 2022 ural resources, the Democratic Republic man and financial resources. Reaching po- Population, million 99.0 of the Congo (DRC)’s economy remains litical consensus and increasing the pres- GDP, current US$ billion 63.3 concentrated in a few sectors, particularly ence and credibility of the state and of the GDP per capita, current US$ 639.7 mining, and relies on exports of raw min- budget, including through improved gov- International poverty rate ($2.15) a 69.9 erals (mainly copper and cobalt). In ad- ernance, are key to attract investments and a 87.8 dition to its mineral wealth, the DRC is create jobs. Lower middle-income poverty rate ($3.65) a also blessed with huge agricultural po- Upper middle-income poverty rate ($6.85) 97.4 a tential but remains a net food importer, Gini index 42.1 which exacerbates vulnerabilities to exter- School enrollment, primary (% gross) b b 123.9 nal shocks due to a lack of diversifica- Recent developments Life expectancy at birth, years 59.2 tion of its economy. Despite an impres- Total GHG emissions (mtCO2e) 682.8 sive growth over the past two decades After peaking at 8.9 percent in 2022, real Source: WDI, Macro Poverty Outlook, and official data. (averaging 5.6 percent a year) and a sig- GDP growth in DRC is expected at 6.8 a/ Most recent value (2012), 2017 PPPs. nificant return to macroeconomic stabili- percent in 2023. The mining sector re- b/ WDI for School enrollment (2020); Life expectancy (2021). ty, DRC has failed to live up to the full mains the main driver of growth. How- potential of its resources due to multiple ever, given downwards trends for cobalt constraints the country faces. prices and production, mining output Poverty remains widespread in the coun- growth is projected to slow to 11.7 per- Growth in DRC is expected to slow down in try despite some improvements in the past cent in 2023 (from 22.6 percent in 2022). 2023 as terms-of-trade continue to deterio- decades, with the bulk of the poor living Growth in non-mining sectors (particular- rate. Macroeconomic stability could be un- in extreme poverty. While there are sig- ly services) is expected at 4.2 percent in dermined by the increase in the twin-deficit nificant geographical disparities between 2023 (2022: 2.7 percent). On the demand (fiscal and external). Amidst elevated cost provinces, with most of the poor living side, expansion in exports is estimated along two densely populated corridors to slightly outweigh increase in imports of imports and a depreciating currency, in- running from West to East, and North to while private consumption is to weaken flation is surging and eroding households’ South, poverty exceeds 50 percent even in as rising inflation weighs on real house- purchasing power, especially among the the wealthier provinces. hold incomes. poor. Medium-term growth prospects re- In addition, the fragile political context, fu- Despite a prudent fiscal policy, the contin- eled by complex dynamics of political ued exceptional spending for security and main favorable, although vulnerabilities re- coalitions, will again be put to test by ten- election purposes causes the fiscal deficit lated to commodity price shocks and supply sions preceding the legislative and presi- to widen in 2023 (-1.3 percent of GDP) chain disruptions persist. dential elections (scheduled for December amid softening in revenue performance FIGURE 1 Democratic Republic of Congo / Real GDP FIGURE 2 Democratic Republic of Congo / Actual and growth and contributions to real GDP growth projected poverty rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 10 100 180000 90 160000 8 80 140000 6 70 120000 60 4 100000 50 80000 2 40 60000 30 0 20 40000 -2 10 20000 0 0 -4 2012 2014 2016 2018 2020 2022 2024 2019 2020 2021 2022 2023 2024 2025 International poverty rate Lower middle-income pov. rate Non-Mining Mining sector SSA growth GDP Upper middle-income pov. rate Real GDP pc Sources: Democratic Republic of Congo Statistical Authorities and World Bank. Source: World Bank. Notes: see Table 2. MPO 22 Oct 23 (about 0.3 percentage points lower than Amid limited buffers in terms of interna- 2022). The current account deficit should tional reserves and revenue mobilization, remain large, at 4.7 percent of GDP in Outlook the risks to the outlook are associated to the 2023, in response to higher import prices country’s vulnerability to external shocks, and persistent deterioration in the terms- Growth is projected to moderate at 6.4 per- mainly from volatile commodity prices and of-trade. Inflows from external financing cent on average in 2024-25, as mining growth performance of major trading part- are expected to lead to the accumula- growth slows down while the non-mining ners which might be disturbed by geopoliti- tion of international reserves, estimated sector catches up. cal conflicts. The economic consequences of to reach 10 weeks of imports in 2023 With fiscal consolidation efforts, the fiscal a prolonged war in Ukraine, through rising (2022: 7.9 weeks). deficit will be contained around 0.5 per- global food costs and higher oil prices, could Excess liquidity fueled by significant pub- cent of GDP in 2024-25, as election-re- exert stronger pressure on fiscal deficit, on lic spending put pressure on the currency lated spending subsides. The current ac- inflation and on households’ consumption which could depreciate by 16.6 percent. count deficit is expected to gradually nar- thus exacerbating poverty and inequality. Exchange rate pass-through coupled with row, reflecting lower growth in imports Domestically, the escalating conflict in the rising cost of imports led to inflation rising of capital goods and improved terms of East of the country and pre- and post-elec- at a faster pace by July 2023, and expected trade. Further FDI inflows would con- tion tensions may weaken the reform agen- to average about 20.7 percent in 2023. In re- tribute to building-up reserves and main- da and reduce the country’s capacity to sponse, the Central bank has tightened its taining exchange rate stability while in- maintain macroeconomic stability and to di- policy rate from 8.25 percent in late 2022 to flation rate is brought back down to its 7 versify the economy. 25.0 percent in August 2023. percent medium-term target. Climate related risks, already being felt The latest World Bank estimations put ex- Extreme poverty is projected to decrease through floods and their consequence on treme poverty at 61.9 percent in 2022, a by 1.8 percentage points by 2025 given losses of livelihoods and infrastructure, 2.2 percentage points decrease compared continued though lower economic could exacerbate fiscal pressure. DRC, a to 2021, and further down to 60.7 in 2023. growth. The pace of poverty reduction low GHG emitter, is positioning as a so- This decrease is due to strong economic will however remain too slow to reduce lution country, and could benefit from de- growth, despite the negative effects of the the number of people in poverty given veloping its carbon market to generate rev- rising inflation. high population growth. enue from its vast forests. TABLE 2 Democratic Republic of Congo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.7 6.2 8.9 6.8 6.5 6.2 Private consumption -8.0 1.6 0.8 -5.3 6.0 7.2 Government consumption 9.5 11.8 25.1 10.9 9.1 0.5 Gross fixed capital investment 37.8 9.3 22.8 17.8 4.9 5.1 Exports, goods and services 4.0 11.7 23.8 11.1 6.0 5.6 Imports, goods and services 15.1 6.8 21.6 7.7 4.6 4.4 Real GDP growth, at constant factor prices 2.3 6.2 8.9 6.8 6.5 6.2 Agriculture 2.5 2.4 2.4 2.5 2.5 2.5 Industry 4.2 7.8 16.1 10.1 7.6 6.7 Services 0.1 5.8 2.7 4.0 6.3 6.8 Inflation (consumer price index) 11.4 9.0 9.3 20.7 12.2 6.8 Current account balance (% of GDP) -2.3 -1.0 -5.3 -4.7 -4.0 -3.3 Fiscal balance (% of GDP) -1.2 -1.6 -0.6 -1.3 -0.8 -0.3 Revenues (% of GDP) 9.2 13.6 16.5 16.2 16.3 16.5 Debt (% of GDP) 22.9 23.9 25.0 23.3 24.9 24.9 Primary balance (% of GDP) -1.0 -1.2 -0.3 -1.0 -0.5 0.1 a,b International poverty rate ($2.15 in 2017 PPP) 65.1 64.1 61.9 60.7 59.8 58.9 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 85.1 84.6 83.5 82.8 82.2 81.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.4 96.2 95.8 95.5 95.3 95.1 GHG emissions growth (mtCO2e) 0.1 0.2 0.2 0.1 0.1 0.2 Energy related GHG emissions (% of total) 1.2 1.3 1.4 1.3 1.3 1.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2012-E123. Actual data: 2012. Nowcast: 2013-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2012) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 23 Oct 23 prospects. Attaining sustainable develop- ment in Congo urgently requires efforts to REPUBLIC OF Key conditions and diversify national assets, focusing on stronger institutions, development of hu- challenges CONGO man and physical capital, and a more bal- anced exploitation of natural capital. Between 2015 and 2021, Congo’s real GDP declined by 19 percent and GDP per capita Table 1 2022 by 31 percent. The 2014-16 collapse in oil Population, million 6.0 prices plunged the economy into a pro- Recent developments GDP, current US$ billion 15.8 longed recession as a result of a massive GDP per capita, current US$ 2649.0 cut in public spending and investment and After growing by an estimated 1.5 per- International poverty rate ($2.15) a 35.4 the accumulation of domestic arrears to cent in 2022, the Congolese economy is a 59.1 private sector firms, which impacted pri- continuing to recover in 2023, driven by Lower middle-income poverty rate ($3.65) a vate investment. The COVID-19 crisis fur- both the oil and non-oil sectors. Due Upper middle-income poverty rate ($6.85) 83.5 a ther exacerbated the economic recession to higher investment, oil production in- Gini index 48.9 that began in 2016. GDP per capita has creased by about 5.0 percent y-o-y in b 93.7 School enrollment, primary (% gross) now regressed to levels reminiscent of the 2023H1 following three consecutive years b 63.5 Life expectancy at birth, years early 1970s, just a decade after gaining in- of decline. Non-oil sector growth in Total GHG emissions (mtCO2e) 33.1 dependence. The country’s reliance on 2023H1 was spurred by manufacturing Source: WDI, Macro Poverty Outlook, and official data. volatile oil revenue, weak governance, and (including beverages, mineral water, and a/ Most recent value (2011), 2017 PPPs. high levels of non-concessional borrowing, cement), and services (including hotels, b/ WDI for School enrollment (2018); Life expectancy (2021). led its debt to be classified as “in distress” restaurants and transport). Despite a and unsustainable in 2017, with its debt- drop in oil revenues due to lower oil to-GDP ratio increasing from 42.3 percent prices, the budget posted a surplus in in 2014 to 103.5 percent in 2020. Higher oil 2023Q1. Fiscal discipline and strong re- Economic recovery is set to strengthen in prices, improved debt management, and forms such as the 30 percent increase 2023, with growth expected at 3.2 per- debt restructuring agreements helped re- in gasoline retail prices since January cent, driven by higher oil and non-oil ac- store debt sustainability in the second half 2023 are helping sustain the budget sur- tivities. Elevated oil export receipts and of 2021, but the Republic of Congo (ROC) plus (expected at 3.1 percent of GDP at ongoing reforms will support the fiscal remains in debt distress due to the accu- end-2023). Lower export receipts and in- mulation of external arrears. The protract- creased imports are anticipated to reduce and external surpluses. Inflation is accel- ed recession and negative GDP per capita the current account surplus to 6.4 percent erating in 2023 with the fuel price adjust- growth rates since 2015 have resulted in of GDP in 2023. ment but should return to the 3.0 percent extreme poverty incidence (less than The banking sector remains solvent, but target by 2025. Growth prospects, albeit US$2.15 PPP per day) increasing from 34.8 vulnerability to non-performing loans percent in 2015 to 46.4 percent in 2021. The (NPLs) remains high. The NPL to gross improved, remain vulnerable to unsteady enduring reliance on oil revenues has left loan ratio has been around 19 percent oil production, volatile oil prices, and the economy vulnerable to oil price volatil- over the past year, which is high by in- weak reform implementation. ity and weakened long-term growth ternational standards. Bank deposits were FIGURE 1 Republic of Congo / Real GDP growth FIGURE 2 Republic of Congo / Actual and projected poverty rates and real GDP per capita Percent change Poverty rate (%) Real GDP per capita (constant LCU) 8 100 1200000 6 90 4 1000000 80 2 70 800000 0 60 -2 50 600000 -4 40 400000 -6 30 -8 20 200000 -10 10 -12 0 0 2019 2020 2021e 2022e 2023f 2024f 2025f 2011 2013 2015 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate Oil GDP Non-Oil GDP Real GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Note: Oil GDP growth rate in 2025 is projected at -0.1. Source: World Bank. Notes: see Table 2. MPO 24 Oct 23 up as of April 2023, but credit to the With the ongoing fuel subsidy reform, private sector declined partly due to the strengthening social protection interven- high cost of borrowing. The Bank of Cen- Outlook tions is necessary to mitigate the impact on tral African States (BEAC) continued to the most vulnerable. The fiscal balance is ex- tighten its monetary policy to contain The Congolese economy is expected to con- pected to remain positive, fueled by high oil inflationary pressures and support the tinue its gradual recovery. GDP is expected prices, increased oil production and fiscal external viability of the exchange rate to grow at 3.2 percent in 2023 and to average discipline.Thenon-oilprimarybalanceisset arrangement. The BEAC increased the 3.5 percent in 2024-25. Oil sector growth (ex- to improve, partly driven by the reduction in policy rate in March 2023 by another 50 pected to average 3.8 percent in 2023-25) will direct oil subsidies to energy SOEs and the basis points to 5.0 percent, a cumulative be driven primarily by increased invest- increase of fuel retail prices. Although debt 175 basis points increase since Novem- ments by oil companies. Non-oil sector vulnerabilities remain elevated (with a high ber 2021. Moreover, the BEAC ended its growth (expected to average 3.6 percent in level of non-concessional debt stock and do- weekly liquidity injections after steadily 2023-25) will be spurred by growth in agri- mestic arrears), debt-to-GDP ratio is project- scaling them back since June 2021. culture, non-oil industry and services, sup- edtodeclineto83.6percentby2025thanksto GDP growth per capita remained nega- ported by the continued clearance of gov- improved debt management, fiscal disci- tive in 2022 and poverty incidence conse- ernment arrears, gradual increase in social pline, and significant oil revenues. The cur- quently increased slightly to an estimat- spending and public investment, and the rent account surplus is projected to decline ed 46.6 percent. The fuel price adjust- implementation of reforms in governance driven by lower oil prices and increased im- ment and increased domestic demand are and the business environment. Overall in- portstosupportoilinvestment. pushing up inflation, which averaged 3.5 flation will initially accelerate to an average Risks to the outlook are tilted to the down- percent (y-o-y) in 2023H1. Food inflation of 3.4 percent in 2023-24 with the fuel price side and include volatile oil prices and un- decelerated in 2023H1 but remains elevat- adjustment but is expected to return to steady oil production, an escalation of the ed (averaging 4.6 percent, y-o-y), which BEAC’s 3.0 percent target by 2025. The war in Ukraine and related spillovers, weak- is likely to continue to affect the poorer poverty rate is expected to marginally de- er-than-expected global demand, a further segments of the population more as they crease to 46.4 percent in 2023 and to an aver- tightening of global or regional financial typically spend a higher share of their age of 45.2 percent in 2024-25, consistent conditions, adverse weather conditions and household budget on food. with projected growth in GDP per capita. weak reform implementation. TABLE 2 Republic of Congo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021e 2022e 2023e 2024f 2025f Real GDP growth, at constant market prices -6.3 1.0 1.5 3.2 4.1 3.0 Private consumption -8.2 11.5 5.0 4.9 4.9 4.4 Government consumption -38.8 2.1 -5.2 0.6 2.6 0.8 Gross fixed capital investment -23.1 14.0 10.0 8.0 7.0 6.0 Exports, goods and services -9.4 -1.0 -0.7 4.0 6.2 1.8 Imports, goods and services -35.8 25.0 5.9 9.2 9.7 4.2 Real GDP growth, at constant factor prices -5.4 1.0 1.5 3.2 4.1 3.0 Agriculture 3.9 1.9 3.0 2.8 3.0 3.4 Industry -2.4 -3.3 -0.6 4.1 6.1 3.0 Services -11.7 2.0 3.1 2.9 3.1 3.2 Inflation (consumer price index) 1.4 2.0 3.0 3.5 3.3 3.0 Current account balance (% of GDP) 12.3 8.9 18.7 6.4 6.6 2.9 Net foreign direct investment inflow (% of GDP) -8.7 2.4 3.3 4.2 4.4 4.7 Fiscal balance (% of GDP) -2.2 1.2 7.9 3.1 3.8 3.8 Revenues (% of GDP) 19.7 21.1 28.6 24.5 25.3 25.5 Debt (% of GDP) 103.5 92.1 90.6 89.5 85.7 83.6 Primary balance (% of GDP) -0.5 3.1 10.2 5.5 6.2 6.3 a,b International poverty rate ($2.15 in 2017 PPP) 45.5 46.4 46.6 46.4 45.4 45.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 70.1 70.6 70.9 70.6 70.1 69.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.4 90.6 90.7 90.6 90.3 90.1 GHG emissions growth (mtCO2e) 3.3 3.2 3.2 3.7 3.8 3.7 Energy related GHG emissions (% of total) 13.6 14.0 14.7 15.2 15.3 15.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2011-ECOM. Actual data: 2011. Nowcast: 2012-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2011) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 25 Oct 23 CÔTE D'IVOIRE Key conditions and Recent developments challenges Economic growth momentum moderated in 2022 owing to the fallout from Rus- Table 1 2022 After almost a decade as one of the sia's invasion of Ukraine, global mon- Population, million 28.2 fastest growing economies in SSA – etary tightening, and increased political GDP, current US$ billion 69.9 with real GDP growth averaging 8 per- instability in the WAEMU. Amid higher GDP per capita, current US$ 2482.6 cent over 2012–19 (5.5 percent in per import prices, rising global and domestic a 11.5 International poverty rate ($2.15) capita terms) – the global crises brought interest rates and slowing external de- a 39.7 about by COVID-19 and Russia’s inva- mand, economic growth softened to 6.7 Lower middle-income poverty rate ($3.65) a 75.6 sion of Ukraine, have underlined the percent in 2022 from 7 percent in 2021. Upper middle-income poverty rate ($6.85) Gini index a 37.2 need for continued structural reforms to Real GDP growth is estimated to slow School enrollment, primary (% gross) b 99.4 move towards the objective of doubling to 6.3 percent in 2023 (3.6 in per capita b 58.6 GDP per capita by 2030. Lifting produc- terms) mainly due to weakening external Life expectancy at birth, years tivity growth and creating better jobs and domestic demand. Private consump- Total GHG emissions (mtCO2e) 56.9 will require leveraging private invest- tion showed signs of moderating in the Source: WDI, Macro Poverty Outlook, and official data. ment, capital deepening, reducing al- first half of the year (with fuel consump- a/ Most recent value (2018), 2017 PPPs. b/ WDI for School enrollment (2022); Life expectancy locative inefficiencies through pro-com- tion growth declining from 7.8 percent (2021). petition policies, improving human cap- in H1-2022 to 3.7 percent in H1-2023). ital, as well as increasing resilience to Low agricultural productivity, unfavor- climate risks. able weather conditions, and higher fer- Downside risks predominate in the tilizer costs are expected to weigh on the Amid global and regional turbulence and short term. The war in Ukraine in- sector. Cocoa production declined due to creases commodity price volatility and the temporary halt to the distribution of tight financial conditions, economic has worsened external and fiscal bal- improved seeds in line with the gov- growth is set to ease to 6.3 percent in ances of net commodity and oil im- ernment's decision to stabilize produc- 2023 as inflation remains elevated (aver- porters. Heightened market uncertain- tion at 2 million tons to ensure a fair aging 5.2 percent at mid-year 2023), im- ties and tight monetary policy have farmgate price. Industrial production is driven up costs of external and do- expected to decelerate. By contrast, ser- pacting the most vulnerable. Macroeco- mestic debt, requiring active debt and vice growth will remain strong. Despite nomic imbalances should ease gradually: fiscal management. Regional insecurity the fiscal consolidation started in 2023, domestic revenue mobilization should and climate-related factors could also the continuation of major public invest- help rebuild fiscal buffers and strengthen dampen the outlook. Medium-term ments will continue to support growth debt sustainability, while improved terms prospects rest on the rollout of the na- (remain above pre-covid averages) and tional development plan (NDP), which only gradually slow down. of trade and structural reforms could sus- requires adequate financing through CPI averaged 5.2 percent in July 2023, tain growth around potential. greater domestic revenue mobilization with core inflation increasing 2.5 per- and private investment. cent year-on-year. To counter inflation FIGURE 1 Côte d'Ivoire / Fiscal balance and change in FIGURE 2 Côte d'Ivoire / Actual and projected poverty public debt rates and real private consumption per capita Percent of GDP Poverty rate (%) Real private consumption per capita (constant LCU) 10 100 1000000 8 90 900000 6 80 800000 70 700000 4 60 600000 2 50 500000 0 40 400000 -2 30 300000 -4 20 200000 -6 10 100000 0 0 -8 2008 2010 2012 2014 2016 2018 2020 2022 2024 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 International poverty rate Lower middle-income pov. rate Budget Balance Government debt WAEMU fiscal rule Upper middle-income pov. rate Real priv. cons. pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 26 Oct 23 across WAEMU countries, the Central from expanding services and industry, and signaling continued progress on domestic Bank of West African States (BCEAO) increase poverty in 2023. revenue mobilization efforts. This trend raised policy interest rates by a cumu- would support the re-alignment of the fis- lative 125 basis points since the start cal deficit, achieving the 3 percent regional of 2022 to 3.25 percent for liquidity target by 2025, stabilizing debt at around calls and 5.25 percent for the marginal Outlook 58 percent of GDP, and creating fiscal lending facility. However, the mone- headroom for sustained infrastructure de- tary policy stance remains broadly ac- Assuming prudent macroeconomic poli- velopment. Capital expenditures are ex- commodative, inflation is still above cies and structural reforms, growth should pected to remain above pre-pandemic lev- target and foreign exchange reserves remain robust over the medium term, al- els in the medium term. Private sector-led have been on a downward trend. beit below pre-pandemic levels amid con- export diversification should boost the The fiscal deficit widened to a multi- tinued adverse global and regional eco- trade balance, and together with the lower decade high of 6.8 percent in 2022, while nomic and political trends. Real GDP fiscal deficit, narrow the CAD. public debt rose to almost 60 percent of growth should average 6.5 percent in On the downside, heightened regional ten- GDP at end-2022. It is projected at 5.3 per- 2024-25. On the upside, continued invest- sions, including recent developments in cent of GDP in 2023, containing the in- ments in network infrastructure notably Niger, could curtail external capital in- crease in public debt. The improvement of on digital and transport sectors, and ex- flows and foreign private investments. the fiscal stance is backed by a revenue- ploitation of the recent oil discoveries, to- Protracted tight financial conditions in based fiscal consolidation and lower gether with prudent macroeconomic poli- global and regional markets could weigh spending as inflation-related subsidies and cies, should boost business confidence and on debt sustainability. foregone fuel revenues are scaled back, increase productivity. Plans to develop val- Extreme poverty should continue increas- and electricity tariffs are raised. ue chains could raise agricultural produc- ing in 2024 to 11.62 percent, driven by a Extreme poverty (less than $2.15 a day per tivity and boost manufacturing, sustaining weak agriculture sector and an above-tar- capita in PPP) would reach 11 percent in growth potential. Inflation is projected to get inflation rate, especially among food 2023, 0.8 percentage points higher than in start easing slowly in the second half of 2024 items (expected at 4.7 percent). Poverty re- 2022. Contracting agriculture (employing in line with global food and commodity duction should resume in the medium 45 percent of the workforce, 74 percent of prices, reaching the WAEMU 1 to 3 percent term, reflecting abated inflation and sus- rural workers and 70 percent of the poor) target band in the medium term. tained economic growth, especially in agri- and increased food prices offset the pover- Tax revenue should increase by close to culture and services. Extreme poverty ty-reducing effects of economic growth, 1 percentage point of GDP by end-2023, should fall to 10.7 percent by 2025. TABLE 2 Côte d'Ivoire / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.7 7.0 6.7 6.3 6.5 6.5 Private consumption 4.7 3.5 3.3 3.0 3.9 4.3 Government consumption 2.5 8.6 8.0 6.8 5.5 4.4 Gross fixed capital investment 26.8 8.6 9.8 14.3 12.1 11.1 Exports, goods and services 10.7 10.6 10.2 10.5 8.5 6.5 Imports, goods and services 6.1 13.4 6.8 12.9 9.5 7.0 Real GDP growth, at constant factor prices 1.3 7.0 6.7 6.3 6.5 6.5 Agriculture 8.9 2.7 5.1 -0.3 1.4 11.1 Industry -1.6 7.4 8.1 6.0 10.0 4.1 Services -0.2 8.6 6.8 8.9 6.8 6.0 Inflation (consumer price index) 2.4 4.2 5.2 5.0 3.7 3.0 Current account balance (% of GDP) -3.1 -4.0 -6.5 -4.7 -3.8 -3.7 Net foreign direct investment inflow (% of GDP) 1.1 1.5 1.3 1.7 2.4 2.0 Fiscal balance (% of GDP) -5.4 -4.9 -6.8 -5.3 -4.1 -3.0 Revenues (% of GDP) 15.0 15.9 15.3 16.4 17.0 17.4 Debt (% of GDP) 48.1 52.1 58.1 59.1 59.1 58.3 Primary balance (% of GDP) -3.6 -2.9 -4.5 -3.0 -1.8 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) 9.6 9.6 10.2 11.0 11.6 10.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 36.9 36.4 37.2 38.0 38.3 36.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 74.3 73.3 73.6 73.5 73.0 72.3 GHG emissions growth (mtCO2e) 3.6 3.7 2.9 1.7 1.9 2.1 Energy related GHG emissions (% of total) 25.7 27.6 28.7 28.9 29.0 29.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 27 Oct 23 low. Life expectancy at birth is estimated at 60.7 years, considerably lower than the av- EQUATORIAL Key conditions and erage of 75 years for countries of the same income group. Around 40 percent of challenges GUINEA households experienced at least one day without electricity per month. Scarce As a result of declining oil reserves and poverty data remain a challenge to an ef- failure to diversify the economy, Equato- fective protection of vulnerable groups. Table 1 2022 rial Guinea’s output has been shrinking The data collection phase of the National Population, million 1.7 steadily for almost a decade. Between Household Survey II is expected to be over GDP, current US$ billion 11.8 2013 and 2021, the country registered an in September 2023 (with a minor delay in GDP per capita, current US$ 7053.5 average 5.0 percent negative growth per Annobón province). The survey will fill School enrollment, primary (% gross) a 61.8 year. Hydrocarbons accounted for nearly out knowledge gaps in poverty and in- a 60.6 50 percent of both exports and GDP and equality, enabling evidence-based social Life expectancy at birth, years over 70 percent of government revenues protection policies. Total GHG emissions (mtCO2e) 19.3 in 2022. Structural reforms are needed Source: WDI, Macro Poverty Outlook, and official data. to prevent long-term economic decline, a/ WDI for School enrollment (2015); Life expectancy (2021). by diversifying growth drivers and build- ing fiscal stability through domestic rev- Recent developments enue mobilization efforts and more effi- cient public spending. Equatorial Guinea grew by 3.1 percent in Reforms have been adopted in recent years 2022. Stronger natural gas output drove to improve governance and business con- the rebound, following repairs on the Pun- Equatorial Guinea grew by 3.1 percent in ditions. An anticorruption law was enact- ta Europa complex after a devastating fire 2022, mainly driven by stronger hydro- ed in 2022 and audits of state-owned oil in September 2021. Meanwhile, growth in carbon output. However, the country is and gas companies were published. Mea- the non-oil sectors was supported by ser- sures are underway to boost trade with a vices, benefitting from oil windfalls and expected to fall back into recession in one-stop shop, simplified work permits, the removal of COVID-19 restrictions. De- 2023 due to declining petroleum reserves. and a law reducing import and export du- mand-side GDP was driven by public in- After benefiting from hydrocarbon wind- ties and expanding port operating hours. vestments and net exports. However, the falls in 2022, fiscal and external balances Yet, weaknesses persist in the governance economy has been showing signs of re- are expected to decrease sharply over the of extractive revenues and the business en- verting to negative growth. In 2023Q1, vironment, preventing the country from GDP contracted by 0.4 percent (q-o-q), coming years. Meanwhile, severe develop- attracting investments, creating jobs, and due to maturing oilfields and the decom- ment challenges remain, and are exacer- unlocking trade to achieve sustained missioning of a floating production unit bated by the impact of rising inflation on growth and diversification goals. following flooding in September 2022. living conditions. Actions are also needed to better protect High oil prices boosted hydrocarbon ex- and include the poor. Despite having one ports, bringing the current account bal- of the highest incomes per capita in Sub ance to -1.0 percent of GDP in 2022 from Saharan Africa, living standards remain -2.1 percent in the year before. FIGURE 1 Equatorial Guinea / Hydrocarbon production and FIGURE 2 Equatorial Guinea / Non-income poverty revenues indicators Percent of GDP Thousand barrels per day Percent 30 300 250 EqG relative to regional average EqG relative to MIC average 25 250 200 150 20 200 100 15 150 50 10 100 0 5 50 Maternal mortality Malnutrition Mortality rate ratio (modeled prevalence, height for attributed to unsafe estimate, per 100,000 age (modeled water, unsafe 0 0 live births) estimate, % of children sanitation and lack of 2015 2017 2019 2021 2023f 2025f under 5) hygiene (per 100,000 Hydrocarbon revenue (lhs) Hydrocarbon production (rhs) population) Sources: Official data and World Bank staff calculations. Source: World Bank. MPO 28 Oct 23 Also benefitting from the temporary recov- 2023 (y-o-y). Rising costs are likely impact- hydrocarbon production or prices risks ery in hydrocarbons, in 2022 the fiscal bal- ing food security and living conditions, al- undermining fiscal and external stability ance reached a surplus of 13.2 percent of though poverty data remains scarce. given Equatorial Guinea’s overdepen- GDP, due to higher than anticipated oil dence on oil. Sustained global financial windfalls. Public expenditures increased in tightening and lower demand from China 2022 and early 2023, pushed by higher in- and India, its main export partners, could vestments in infrastructure and also fuel Outlook also compromise growth prospects. More- subsidies, which reached 1.3 percent of GDP over, global trade disruptions affecting in 2022 due to higher oil prices that were not Following a brief recovery in 2022, Equa- commodity and food prices due to the pro- passed on to users. However, structurally torial Guinea is expected to re-enter reces- longed conflict in Ukraine would increase declining production and lower prices led to sion, with a projected annual average neg- food insecurity, especially for the most a 25 percent decline in oil revenues in ative growth of 4.0 percent over 2023-2025. vulnerable, as the country relies heavily on 2023Q1 (y-o-y). The debt-to-GDP ratio con- Declining hydrocarbon production and food imports. tinued to decline in 2022, thanks to economic lower commodity prices are expected to Shrinking hydrocarbon reserves indicate growth. While the Government settled a keep impacting the Equatoguinean econo- the need for Equatorial Guinea to move share of arrears, outstanding domestic ar- my. Decreasing exports would lead to cur- to a new growth model, promoting re- rears with construction companies remain rent account deficits over the coming silient non-oil sectors capable of sustain- high at 10.8 percent of GDP. years. Albeit at a slower pace, imports ing future growth. Ultimately, imple- As a result, high levels of non-performing would also decrease, on account of declin- menting the country’s economic diversifi- loans - 57.9 percent of total loans in 2023Q1 ing public spending due to limited fiscal cation vision will require efforts to facil- - remain a source of banking system vul- space. The fiscal balance is projected to itate trade and improve business condi- nerability. The Bank of Central African turn to deficits in 2024-2025, as public ex- tions. Actions are also needed to improve States continued to tighten its monetary penditure cuts would not be sufficient to public financial management, maximizing policy to contain inflationary pressures compensate for the larger drop in hydro- the public benefit derived from oil rev- and support the exchange rate peg, in- carbon revenues. enues while preparing for a sustainable creasing the policy rate in March 2023 by In the absence of growth, living stan- post-oil fiscal model. Finally, a stronger another 50 basis points to 5.0 percent, and dards would likely stagnate or deterio- social protection system would help pro- ending its weekly liquidity injections. rate. Furthermore, projected lower public tect the most vulnerable and reduce in- Credit to the economy decreased by 2.0 spending would have negative economic equities, especially as social spending in percent in 2022. Meanwhile, the Russian and social implications. Equatorial Guinea is below 2 percent of invasion of Ukraine is still impacting in- Several factors risk aggravating the GDP, three times lower than the West flation, which stood at 4.2 percent in June economic decline. A stronger decline in and Central Africa average. TABLE 2 Equatorial Guinea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -4.2 -0.9 3.1 -2.5 -6.1 -3.9 Private consumption 2.2 3.4 3.4 -7.5 -0.3 -2.6 Government consumption -3.2 -5.7 -0.6 42.5 -6.6 -4.0 Gross fixed capital investment -64.5 18.8 65.1 -76.1 -11.6 -5.0 Exports, goods and services -4.9 4.4 2.4 -8.4 -10.1 -6.3 Imports, goods and services -10.8 12.5 6.2 -7.0 -6.5 -6.0 Real GDP growth, at constant factor prices -4.2 -0.8 2.8 -2.5 -6.1 -3.9 Agriculture -6.3 5.9 3.6 -5.7 2.2 2.0 Industry -4.4 -6.4 1.3 -49.5 -18.0 -10.0 Services -3.8 8.2 5.0 63.2 -1.2 -1.9 Inflation (consumer price index) 4.8 -0.1 4.9 3.5 2.2 2.3 Current account balance (% of GDP) -10.4 -2.1 -1.0 -2.9 -1.6 -1.5 Net foreign direct investment inflow (% of GDP) 3.7 5.1 5.7 4.9 4.9 5.6 Fiscal balance (% of GDP) -1.7 2.6 13.2 8.2 -4.2 -4.5 Revenues (% of GDP) 14.1 15.4 30.7 26.8 12.3 11.9 Debt (% of GDP) 48.4 42.8 40.0 33.9 32.9 34.9 Primary balance (% of GDP) -0.4 3.6 14.5 9.6 -3.0 -3.3 GHG emissions growth (mtCO2e) -14.5 27.6 16.2 -9.9 -8.3 -3.9 Energy related GHG emissions (% of total) 25.6 35.5 41.8 38.6 35.5 34.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 29 Oct 23 and full balance of payments accounts are missing. The last population census ERITREA Key conditions and in Eritrea took place more than 25 years ago, and the last official poverty rate for challenges the country dates from 1996/97, when it was calculated that 70 percent of ur- Table 1 2022 Eritrea emerged from a decade of interna- ban households lived in poverty. Limited Population, million 3.7 tional isolation with the lifting of UN sanc- growth and the multiple economic shocks GDP, current US$ billion 2.4 tions in November 2018. During that pe- since then suggest that this figure may GDP per capita, current US$ 647.4 riod, the government followed a self-suf- now be higher. a 68.6 School enrollment, primary (% gross) ficiency policy. As a result, the economy a 66.5 is dominated by large state-owned enter- Life expectancy at birth, years Total GHG emissions (mtCO2e) 7.1 prises, limiting the participation of private Source: WDI, Macro Poverty Outlook, and official data. sector. Zinc, copper and gold account for Recent developments a/ WDI for School enrollment (2019); Life expectancy over 90 percent of exports, underscoring (2021). risks to metal price fluctuations. Monetary Real GDP growth had slowed to 2.5 per- policy is characterized by administrative cent in 2022, impacted by weak demand measures, fiscal dominance, and a fixed ex- from global trading partners, especially change rate regime pegged to the US dol- China, while inflation had risen to over 7 lar, enabled by severe import restrictions percent in line with rising global commod- in the context of low foreign exchange re- ity prices and supply chain disruptions. serves. The financial sector is small and un- Although data is limited, activity during GDP growth is projected to recover mod- derdeveloped. The country is vulnerable the first half of the year is likely to have estly from 2.6 percent in 2023 to 3.2 per- to climate change, with frequent weather been supported by a recovery in demand cent in 2024 supported by mining and shocks posing a heavy burden for the in China. Declines in global energy and service sector activity, while inflation economy and rural livelihoods. grains prices have helped to ease price The COVID -19 crisis hit Eritrea amid a pressures, providing some respite for should moderate in line with global com- hiatus in its engagement with develop- households, who have seen their purchas- modity prices. Risks to the outlook in- ment partners, leaving it without much ing power substantially eroded in past clude production delays at the Colluli needed external funding. Informal cross- years on account of the high inflation, and mine, geopolitical tensions, and climate border trade seemed less affected as the supporting service sector activity. Al- conflict in northern Ethiopia ended. though global zinc prices have fallen by a vulnerabilities. National accounts and The emergency conditions that prevailed third relative to average prices last year, poverty statistics have not been produced in Eritrea over the past decade have led gold and copper prices have remained rel- over the last decade, although poverty is to severe data production capacity con- atively high helping to support export rev- expected to be widespread. straints. National accounts data are limit- enues; alongside lower fuel and food im- ed to unofficial GDP estimates produced port costs, this is helping Eritrea maintain by the Ministry of Finance that are not large double-digit current account sur- endorsed by the government. Inflation es- pluses. Notwithstanding such large sur- timates cover only the capital, Asmara, pluses, international reserves are estimated FIGURE 1 Eritrea / Evolution of total public debt FIGURE 2 Eritrea / Primary and overall fiscal balances Percent of GDP Percent of GDP 300 15 250 10 200 5 150 0 100 -5 50 0 -10 2019 2020 2021 2022 2023e 2024p 2025p 2019 2020 2021 2022 2023e 2024p 2025p Domestic debt External debt Total public debt Overall fiscal balance Primary fiscal balance Sources: Ministry of Finance, Planning and Economic Development; IMF and Sources: Ministry of Finance, Planning and Economic Development; IMF and World Bank estimates. World Bank estimates. MPO 30 Oct 23 at around three months of imports. Con- and creation of productive employment tinued mining export receipts have, in in urban areas will be critical to dent de- turn, supported government revenues. Outlook privation in the country. Public debt was estimated at around 239.8 Significant downside risks include weaker- percent of GDP at end-2022, of which near- After remaining broadly flat in 2023, GDP than-expected global/Chinese demand for ly 80 percent is owed to domestic banks, growth should increase by 3.2 percent in Eritrean commodity exports and related and the country is in debt distress. As of 2024, driven by mining exports, the ser- volatility in metals and minerals prices, January 2023, Eritrea was at a pre-decision vices sector and as production from the production delays at the Colluli mine, and point in the Highly Indebted Poor Coun- Colluli potash mine begins. In line with spillovers from the conflict in Sudan. Final- tries (HIPC) list. easing global food prices, inflation is ex- ly, severe climate vulnerabilities that bur- Eritrea has recently begun to reengage pected to ease further, reaching about 5 den Eritrea could worsen in coming years, with development partners and revitalize percent in 2024. The current account sur- posing high risks to food security. some bilateral relations. The African De- plus is expected to widen to over 14 per- Against this backdrop, Eritrea’s reengage- velopment Bank Board approved US$49.9 cent of GDP, helped by strong mining ment with the international community million to build a 30 megawatt Solar Pho- sector performance amid tight import could help to significantly reduce external tovoltaic Power Plant in Dekemhare in controls. A gradual fiscal consolidation arrears and provide much-needed financ- March 2023. In the same month, the Chi- and continued strong mining sector re- ing to build essential infrastructure over nese company Sichuan Road and Bridge ceipts should support a narrowing of the the medium term, help abate the risks as- Group (SRBG) has completed the acquisi- fiscal deficit to below 4 percent of GDP sociated with climate change, and jump- tion of a 50 percent stake in the Colluli by 2025. The economic recovery should start the private and financial sectors. De- potash project and the mine is anticipated support a reduction in the public debt-to- velopment of the private and financial to come onstream in 2024. In addition, Er- GDP ratio, which is projected at 210 per- sectors could enhance job creation and itrea has rejoined the East African trade cent of GDP in 2024. Poverty is not ex- promote inclusive growth. The produc- bloc, the Inter-Governmental Authority on pected to vary significantly in the coming tion of reliable information for the econo- Development (IGAD), nearly 16 years after years, remaining very high. Significant my and on living conditions remain a pri- it pulled out of the body. improvements in the agricultural sector ority, as well. TABLE 2 Eritrea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -0.5 2.9 2.5 2.6 3.2 3.3 Private consumption -1.9 3.0 3.6 4.0 4.3 4.1 Government consumption 16.4 14.0 5.7 3.7 4.1 4.1 Gross fixed capital investment 152.2 39.1 13.1 22.7 6.6 14.5 Exports, goods and services -4.9 31.0 9.2 5.1 3.7 4.1 Imports, goods and services -3.5 21.6 11.0 5.3 4.1 4.3 Real GDP growth, at constant factor prices -0.5 2.9 2.5 2.6 3.2 3.3 Agriculture -0.5 4.5 1.6 3.5 3.6 3.2 Industry -0.7 1.4 3.2 2.9 3.3 3.1 Services -0.1 5.3 1.3 1.5 2.7 3.8 Inflation (consumer price index) 5.6 6.6 7.4 6.4 5.1 5.2 Current account balance (% of GDP) 14.4 14.0 13.0 14.1 14.4 14.6 Net foreign direct investment inflow (% of GDP) 1.4 1.4 1.3 1.2 1.1 1.0 Fiscal balance (% of GDP) -6.5 -5.8 -5.6 -4.8 -4.0 -3.3 Revenues (% of GDP) 24.9 26.7 27.0 27.6 27.8 28.0 Debt (% of GDP) 260.6 241.7 239.8 219.4 210.2 195.3 Primary balance (% of GDP) -5.0 -4.2 -4.2 -3.7 -2.9 -2.3 GHG emissions growth (mtCO2e) 1.0 2.5 1.8 1.8 2.5 2.9 Energy related GHG emissions (% of total) 12.9 13.4 13.0 12.6 12.8 13.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. MPO 31 Oct 23 ESWATINI Key conditions and Recent developments challenges The slowdown in economic growth, which started in 2022 due to higher global infla- Table 1 2022 Eswatini is trapped in a low growth tion and supply chain disruptions, persist- Population, million 1.2 path, partly due to structural challenges, ed in early 2023. Real GDP growth slowed GDP, current US$ billion 4.8 business climate, and sociopolitical un- to 1.1 percent in 2023Q1, from 8.1 percent GDP per capita, current US$ 3989.6 certainty. Limited private investment and in 2022Q1. The primary sector grew by 3.4 a 36.1 International poverty rate ($2.15) weak trade diversification remains inad- percent and the tertiary sector grew by 8.6 a 58.0 equate to generate growth and create percent, while the industrial sector con- Lower middle-income poverty rate ($3.65) a 78.1 enough jobs to reduce the unemploy- tracted by 10.1 percent during the quarter. Upper middle-income poverty rate ($6.85) Gini index a 54.6 ment rate of 33 percent. Inflationary pressures limited demand. School enrollment, primary (% gross) b 114.5 Given low private investment, the gov- Inflationary pressures persisted in 2023, b 57.1 ernment has relied on public spending, with annual inflation averaging 5.4 percent Life expectancy at birth, years despite volatile South African Customs for the first seven months of 2023 compared Total GHG emissions (mtCO2e) 2.9 Union (SACU) revenue that have led to to 4 percent the previous year, driven by the Source: WDI, Macro Poverty Outlook, and official data. high debt, public expenditure arrears, impact of elevated global prices (particular- a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy and low international reserves (Figure ly energy and food), which were transmitted (2021). 1). The severe decline in SACU revenues to local prices. Food inflation breached the observed in 2022 has negative ripple ef- central bank’s threshold for the first time in fects on the economy, moving the cur- five years in June 2022 and it has grown at Real GDP growth is projected to rebound rent account into deficit, reducing inter- double-digit levels since August 2022. In re- to 3.6 percent in 2023, from 0.5 percent national reserves below three months of sponse, the Central Bank increased the repo imports, and worsening the fiscal deficit rate by 350 basis points, from 4 percent in in 2022, supported by higher SACU rev- to 5.0 percent of GDP. It also deepens January 2022 to 7.5 percent in July 2023. enue and public spending. Nevertheless, Eswatini’s reliance on South Africa, as Non-performing loans are rising, reaching industrial growth was muted while pri- SACU revenue depends also on South 7.5 percent in May 2023 from an average of vate consumption declined during Africa’s economic performance. To mit- 6.6 percent in 2022. igate this, Eswatini needs to boost Implementation of the fiscal adjustment 2023Q1, constrained by inflationary domestic revenue. plan (FAP) was uneven in 2022, resulting pressures which have persisted since In 2022, an estimated 31 percent of the in the overall fiscal deficit rising from 4.6 2022. Higher SACU revenue will help re- population lived below the US$2.15/day percent in 2021 to 5.0 percent in 2022. duce fiscal deficit. Poverty is projected to (2017 PPP) international poverty line, SACU revenue declined while spending decrease slightly from 54 percent in 2022 while 54 percent of the population fell increased in 2022, and public debt reached under the lower-middle-income country a peak of 41.8 percent of GDP in 2022. The to 52.7 percent in 2024 using the lower- poverty line (US$3.65/day, 2017 PPP). current account registered a deficit of 2.4 middle-income country poverty line High inequality (54.6 percent in 2016) percent of GDP in 2022 for the first time ($3.65/day, 2017 PPP). could fuel social tension. since the 2010/11 crisis, reflecting the high FIGURE 1 Eswatini / SACU revenues and macroeconomic FIGURE 2 Eswatini / Actual and projected poverty rates and variables real GDP per capita Percent of GDP Months of imports, % of GDP Poverty rate (%) Real GDP per capita (constant LCU) 14 4 100 45000 12 90 40000 2 10 80 35000 8 0 70 30000 6 60 25000 -2 50 4 20000 40 2 -4 15000 30 0 -6 20 10000 -2 10 5000 -4 -8 0 0 2018 2019 2020 2021 2022e 2023 Proj. 2009 2011 2013 2015 2017 2019 2021 2023 2025 Current account (lhs) SACU revenue (lhs) International poverty rate Lower middle-income pov. rate Fiscal deficit (rhs) International Reserves (rhs) Upper middle-income pov. rate Real GDP pc Sources: Eswatini Ministry of Finance and World Bank projections. Source: World Bank: Notes: see Table 2. MPO 32 Oct 23 cost of imports and a sharp decline in reach 3.6 and 2.9 percent in 2023 and risks in future should SACU receipts SACU revenues. External shocks are per- 2024, respectively. The public sector is decline. Nevertheless, the govern- sisting in 2023 as imports prices remain likely to drive growth, buoyed by an ment’s commitment to put about E1.5 high, with the trade balance in deficit be- almost doubling of SACU receipts. The billion (1.8 percent of GDP) into the tween April and June 2023. International projected increase in government expen- new SACU Revenue Stabilization reserves remain low at 2.6 months of im- diture will boost economic activity, in- Fund is a step in the right direction ports in July 2023, despite the almost dou- cluding the beginning of major invest- to protect the economy against future bling of SACU revenues in 2023 compared ment projects such as the Mkhondvo- volatility. Debt is projected to stabi- to the previous year. Ngwavuma dam. However, unfavorable lize in the medium term, as the fiscal Higher transport and food prices dispro- weather conditions as well as social deficit declines. The current account portionately affect the poor, who spend a and political uncertainty may affect the is projected to return into surplus in higher share of their resources on these growth outlook. Inflation is projected to 2023 and 2024, on the back of high- items. The combination of slow economic increase to 5.1 percent in 2023, reflecting er SACU receipts and expected fiscal growth and high inflation have limited the continued external shocks, and should consolidation from 2024 onwards. progress in poverty reduction, with esti- gradually return to 4.5 percent annually Poverty, based on the lower-middle-in- mated poverty rates only showing a slight over the medium term. come country poverty line (US$3.65/day, increase from 53.7 percent to 54 percent, High SACU receipts are projected to 2017 PPP), is projected to decline slightly using the lower middle-income country help reduce the fiscal deficit to 2.1 from 54 percent in 2022 to 52.1 percent poverty line, between 2021 and 2022. percent of GDP in 2023 and 1.4 per- in 2025. While the projected economic re- cent in 2024. This is despite higher covery will have a positive impact on election spending and higher public households, such improvement will be wages in 2023. If authorities imple- constrained by the negative impact of Outlook ment the FAP, the deficit is projected higher food and energy prices on lower- to decline further to about 0.7 per- income households, with poverty esti- The medium-term economic outlook has cent of GDP in 2025. The growing mated to hover around 52 percent in the improved, with growth expected to public-sector wage bill might pose short term. TABLE 2 Eswatini / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.6 10.7 0.5 3.6 2.9 2.8 Private consumption 1.1 5.7 -5.3 4.1 2.8 2.6 Government consumption 7.3 -10.6 -0.3 9.7 2.2 0.8 Gross fixed capital investment -8.2 11.4 -10.8 -5.8 4.7 4.4 Exports, goods and services -2.4 8.8 -0.4 8.0 2.6 2.4 Imports, goods and services -1.3 14.0 3.4 7.0 2.7 2.0 Real GDP growth, at constant factor prices -1.5 10.7 0.2 3.6 2.9 2.8 Agriculture -7.5 4.6 5.1 2.7 1.5 3.0 Industry -9.7 17.9 -0.3 2.6 2.5 2.1 Services 5.5 7.1 -0.1 4.4 3.3 3.2 Inflation (consumer price index) 3.9 3.7 4.8 5.1 4.9 4.5 Current account balance (% of GDP) 7.1 2.6 -2.4 3.7 2.1 0.4 Net foreign direct investment inflow (% of GDP) 1.2 1.2 0.7 0.8 0.8 0.7 Fiscal balance (% of GDP) -4.6 -4.6 -5.0 -2.1 -1.4 -0.7 Revenues (% of GDP) 29.4 25.1 23.9 28.9 28.0 26.6 Debt (% of GDP) 39.6 37.9 41.8 39.1 35.8 34.0 Primary balance (% of GDP) -2.4 -2.7 -2.7 -0.3 0.1 0.6 a,b International poverty rate ($2.15 in 2017 PPP) 35.2 30.9 31.0 30.1 29.4 28.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 57.4 53.7 54.0 53.3 52.7 52.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 77.7 76.1 76.2 75.4 75.0 74.8 GHG emissions growth (mtCO2e) 0.3 4.0 2.4 0.6 1.6 2.1 Energy related GHG emissions (% of total) 35.3 38.0 39.4 39.8 40.6 41.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 33 Oct 23 trade, productivity, and climate resilience. Implementation of these reforms, includ- ETHIOPIA Key conditions and ing swiftly addressing the distortions in the forex market, is key to support macro- challenges economic stability, private sector led growth and over the medium term, to Table 1 2022 State-led economic development lifted dampen fragility and conflict risks. Population, million 123.4 growth to over 10 percent between Already acute food insecurity has wors- GDP, current US$ billion 131.8 2004-19, placing Ethiopia among the ened due to global food and energy price GDP per capita, current US$ 1067.9 fastest-growing economies in the world. shocks, disruptions to grain supply due to a 27.0 International poverty rate ($2.15) However, overvalued exchange rates, fi- the war in Ukraine, and below-average lo- a 65.0 nancial repression, and regulatory and cal crop production. Humanitarian condi- Lower middle-income poverty rate ($3.65) a 90.9 other policy distortions that underpinned tions in Ethiopia are deteriorating due to Upper middle-income poverty rate ($6.85) Gini index a 35.0 this SOE-led growth model undermined the combination of climate shocks, disease School enrollment, primary (% gross) b 106.0 external competitiveness, depleted macro- outbreaks, armed conflict, and the socioe- b 65.0 economic buffers, depressed productivity conomic impacts of COVID-19. In 2023, Life expectancy at birth, years and stalled the country’s structural trans- about 28.6 million people – around one- Total GHG emissions (mtCO2e) 196.5 formation. The 2019 Home-Grown Eco- fourth of the country’s population – need Source: WDI, Macro Poverty Outlook, and official data. nomic Reform Agenda sought to course humanitarian assistance, an increase of a/ Most recent value (2015), 2017 PPPs. b/ Most recent WDI value (2021). correct by prioritizing reforms that un- about 2.7 million from 2022. locked greater private sector participation and market orientation. However, imple- Growth is estimated to have slowed to 5.8 mentation was slowed by multiple shocks percent in FY23 from 6.4 percent in including COVID-19, soaring global food Recent developments and energy prices and conflict in the north FY22 as fiscal and external pressures in- that exacerbated macroeconomic vulnera- Growth slowed to an estimated 5.8 percent tensified. Amid heightened macroeconom- bilities. As a result, growth slowed to in FY23 (ending June 2023) from 6.4 per- ic vulnerabilities and depleted buffers, about 6 percent since FY20. In 2021, the cent in FY22 as good harvests supported country applied for debt treatment under agricultural growth despite protracted growth remains lower than before the G-20 Common Framework amid grow- drought in pastoral areas. Service activity COVID-19, and poverty and inequality ing external and fiscal financing pressures. also held up, offsetting the drag on man- have increased due to multiple, compound The November 2022 peace agreement has ufacturing and construction from worsen- shocks of conflict, droughts and inflation. ended conflict in the north, but conflict of ing forex shortages, restrictions on non-es- The peace agreement to end the conflict in varying intensity remains widespread sential imports and the suspension of pref- throughout the country. The government erential US market access. the north provides an opportunity to ad- is seeking to revive reform momentum: the The current account deficit in FY23 nar- vance reforms to support macroeconomic revised Home-Grown Economic Reform rowed to 3.1 percent of GDP from 4 per- stability and economic transformation for Agenda (HERA 2.0) announced in June cent in FY22 due to lower imports related sustained and inclusive growth. 2023 targets reforms in four pillars: macro- to forex shortages and strong service ex- economic stabilization, investment and ports. It was largely financed through FDI, FIGURE 1 Ethiopia / Gross foreign exchange reserves FIGURE 2 Ethiopia / Actual and projected poverty rates and real GDP per capita Million US$ Months of imports Poverty rate (%) Real GDP per capita (constant LCU) 4,500 3.0 100 25000 4,000 90 2.5 80 20000 3,500 70 3,000 2.0 60 15000 2,500 1.5 50 2,000 40 10000 1,500 1.0 30 1,000 20 5000 0.5 500 10 0 0 0 0.0 2010 2012 2014 2016 2018 2020 2022 2024 Jul-16 Jul-17 Jul-18 Jul-19 Jul-20 Jul-21 Jul-22 International poverty rate Lower middle-income pov. rate In million US$ In months of imports Upper middle-income pov. rate Real GDP pc Source: National Bank of Ethiopia. Source: World Bank. Notes: see Table 2. MPO 34 Oct 23 which continued to decline, and the draw- fuel and fertilizer prices – have further ex- options, both fiscal and current account down of FX reserves, which fell to less than acerbated inflation. deficits are projected to narrow further over two weeks of import cover by June 2023. Armed conflict, back-to-back droughts in the medium term. A gradual deceleration in Fiscal space tightened further amid declin- lowland regions, and high food prices inflation is projected, supported by reduced ing revenues and donor flows. At 7 percent have contributed to a stagnation and re- monetary financing in line with narrowing in FY23, Ethiopia’s tax-to-GDP ratio is in- versal of poverty reduction in recent years. fiscal deficits. sufficient to fund essential spending and The number of poor people increased by Faster implementation of critical macro- anchor fiscal sustainability, let alone fi- about 410 thousand in 2022. Moreover, the economic and structural reforms could nance additional growth-enhancing health poor, who are net consumers of food, re- lead to better growth outcomes in the and education investments. To contain fis- main at high risk of falling into extreme medium term. However, the resumption cal deficits, public spending has been poverty and food insecurity. of conflicts could complicate reform imple- steadily cut, falling to 10 percent of GDP mentation and forex inflows from develop- in FY23 (less than half the levels in the ear- ment assistance and investment. Address- ly-2000s). With financing options severe- ing the significant distortions in the forex ly constrained, the deficit narrowed from Outlook market is critical to restoring productivi- 4.2 percent of GDP in FY22 to 2.9 percent ty-led growth by improving resource al- in FY23, and was financed mainly through A modest increase in growth to 6.4 percent is location and alleviating external payment domestic borrowing, including from the expected in FY24 as recent domestic and ex- risks. Debt treatment and the resumption central bank. Public debt-to-GDP ratios ternal shocks wane and service activity re- of official external flows will also be critical continued to decrease in FY23 as external mains strong. Over the medium term, to ease external financing pressures. disbursements remained constrained. growth is anticipated to rise to about 7 per- Substantial poverty reduction in the medi- Despite some easing in recent months, in- cent amid slow progress in reform imple- um term will depend on a strong perfor- flation remained high at 28.8 percent in Ju- mentation with continued policy distor- mance in the agricultural sector, which em- ly, driven mainly by nonfood inflation due tions, notably overvalued exchange rate ploys over 70 percent of the labor force, and to the phased removal of fuel subsidies, policies, expected to reduce the payoff from the creation of economic opportunities in monetary financing of deficits and widen- the ongoing liberalization of telecom and other sectors. Additional shocks could push ing of premiums in parallel currency mar- banking sectors and to continue to drag on millions more into poverty and increase spa- kets (that reached over 100 percent in re- domestic and foreign private investment. tial inequalities. The acceleration of reforms cent months). Overlapping crises – persis- With fiscal and external pressures expected to rebuild fiscal and social buffers will be tent droughts and a surge in global food, to persist, and amid constrained financing critical to mitigating this risk. TABLE 2 Ethiopia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2019/20 2020/21 2021/22 2022/23e 2023/24f 2024/25f Real GDP growth, at constant market prices 6.1 6.3 6.4 5.8 6.4 7.0 Private consumption 5.0 3.0 4.5 6.8 6.8 5.6 Government consumption 0.6 12.2 1.5 -13.5 -6.4 12.7 Gross fixed capital investment 5.6 7.6 11.0 9.2 7.3 7.1 Exports, goods and services 3.4 5.5 11.7 2.7 2.5 2.7 Imports, goods and services -1.9 2.0 10.8 2.7 3.2 3.4 Real GDP growth, at constant factor prices 6.1 6.3 6.4 5.8 6.4 7.0 Agriculture 4.3 5.5 6.0 5.8 4.8 5.8 Industry 9.6 7.3 4.8 2.3 4.7 4.8 Services 5.2 6.3 7.9 8.2 8.8 9.3 Inflation (consumer price index) 19.9 20.2 33.7 32.6 26.3 17.2 Current account balance (% of GDP) -4.1 -2.7 -4.0 -3.1 -2.3 -2.1 Fiscal balance (% of GDP) -2.8 -2.8 -4.2 -2.9 -2.0 -1.8 Revenues (% of GDP) 11.7 11.2 8.3 7.6 6.7 7.1 Debt (% of GDP) 56.5 56.6 54.4 50.4 44.6 35.2 Primary balance (% of GDP) -2.4 -2.2 -3.6 -2.3 -1.5 -1.3 a,b International poverty rate ($2.15 in 2017 PPP) 24.8 24.5 24.3 24.0 23.7 23.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 61.3 60.8 60.3 59.9 59.4 58.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 89.0 88.7 88.5 88.2 88.0 87.7 GHG emissions growth (mtCO2e) 2.0 2.4 2.6 2.5 2.7 2.7 Energy related GHG emissions (% of total) 15.2 14.8 14.3 13.6 13.0 12.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2010-HICES and 2015-HICES. Actual data: 2015. Nowcast: 2016-2022. Forecasts are from 2023 to 2025. b/ Projection using annualized elasticity (2010-2015) with pass-through = 0.87 based on GDP per capita in constant LCU. Note: Growth projections reflect limited available information, and are subject to revision as better data becomes available. MPO 35 Oct 23 protect the poorest while fostering sustain- able job-based growth. GABON Key conditions and Improved access to health, power and water services, and education are also key to tackle challenges high unemployment and poverty, while better and climate-resilient infrastructure, Table 1 2022 Gabon faces a challenge of reversing a especially energy, roads, and railways, are Population, million 2.4 decades-long trend of insufficient re- needed to boost business activity and trade. GDP, current US$ billion 21.1 source-based growth and persistent pover- Heavy rains and landslides caused trans- GDP per capita, current US$ 8820.3 ty. The already difficult situation has been port disruptions that affected the economy a 2.5 International poverty rate ($2.15) compounded by the August 2023 coup in early 2023, from halting manganese ex- a 8.1 d’état that happened without bloodshed ports to causing shortages in drinking water Lower middle-income poverty rate ($3.65) a 31.2 immediately after election results were an- and sugar supply. Upper middle-income poverty rate ($6.85) Gini index a 38.0 nounced, declaring the incumbent presi- School enrollment, primary (% gross) b 107.9 dent as winner. The head of the Presiden- b 65.8 tial Guard was installed as Transition Pres- Life expectancy at birth, years Total GHG emissions (mtCO2e) 21.9 ident, borders were reopened and econom- Recent developments ic life resumed briefly after the coup. How- Source: WDI, Macro Poverty Outlook, and official data. ever, economic uncertainty increased, and Gabon’s economy grew by 3.0 percent in a/ Most recent value (2017), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy financing and investments could be com- 2022, intensifying the recovery from the (2021). promised. Establishing and following a Covid-19 crisis. Strong demand from Chi- clear and credible path for returning to na, lower OPEC+ restrictions, and previ- constitutional order is key for stability. ous investments boosted oil production. Benefiting from positive developments in Improving governance is much needed. Growth was also driven by the wood, the commodities sector, Gabon grew by 3.0 Publishing the first Extractive Industries manganese, agriculture, and services sec- Transparency Initiative report in April 2023 tors. Private investments, especially in the percent in 2022, with fiscal and external was a positive signal, but further strength- oil sector, and net exports boosted by com- balances boosted by higher oil revenues. ening transparency of extractive revenues modities supported demand-side growth. However, rising food prices impacted living would highly benefit public finances. However, in 2023Q1, GDP contracted by 1.5 standards. Following the August 2023 Moreover, regaining reform momentum, percent (q-o-q) due to weaker manganese improving the business environment, and production amid transport disruptions. coup d’état, the economic outlook is highly promoting jobs remain essential to move Thanks to stronger commodity exports and uncertain and will depend on a political set- the economy up in global value chains and a smaller increase in imports, the current ac- tlement that avoids conflict and disrup- into diversified sectors. To achieve its de- count balance reached a surplus of 6.7 per- tions to economic activities and restores in- velopment and poverty reduction goals, cent of GDP in 2022. Likewise, higher oil rev- vestor confidence. Confronted with declin- Gabon needs to rebalance public finances, enues resulted in a fiscal surplus of 2.5 per- repurposing expenditures from costly tax cent of GDP in 2022, the highest since the ing oil reserves, structural reforms are ur- 2014 oil price shocks. Tax collection efforts exemptions and regressive fuel subsidies gently needed to achieve stability, resilient toward targeted social support and pro- and cuts in tax exemptions also contributed growth and poverty reduction. ductive public investments, enabling it to to improved government revenues in 2022. FIGURE 1 Gabon / Real GDP growth and contributions to FIGURE 2 Gabon / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 5 40 2.58 4 35 2.56 2.54 3 30 2.52 2 25 2.50 1 20 2.48 0 15 2.46 2.44 -1 10 2.42 -2 5 2.40 -3 0 2.38 2015 2016 2017 2018 2019 2020 2021 2022 2023f 2024f 2025f 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP growth Upper middle-income pov. rate Real GDP pc Sources: Official government data and World Bank calculations. Source: World Bank. Notes: see Table 2. MPO 36 Oct 23 Overall public expenditures remained un- 2023-2025. Public debt was to maintain its der control, but the cost of fuel subsidies gradual downward path. grew exponentially, despite the removal of Outlook However, with modest growth projections fuel subsidies for industrial consumers and population increase, poverty was ex- since July 2022. While public debt contin- Following the coup d’état, the economic pected to rise. Hence, 36.3 percent of ued to decline, the recurrent accumulation outlook is highly uncertain; this section Gabonese would be living under the upper of arrears, which stood at 81 billion CFAF reflects the assessment and projections middle-income poverty rate of US$6.85 per in March 2023 (0.6 percent of GDP), re- made prior to the coup. Heightened po- day by 2025, above the average for coun- mains a challenge for public finances. Pub- litical instability risks and diminished in- tries in Gabon’s income group. Further- lic financial management weaknesses and vestor confidence after the coup could more, Gabon remains exposed to fragile a slow reform pace led Fitch Ratings to adversely impact the near-term outlook. growth drivers and strong export concen- downgrade Gabon’s outlook from positive Rating agencies already downgraded tration. Stricter OPEC+ quotas, price to stable in August 2023. Gabon’s outlook. Regional sanctions shocks, decreased Chinese demand, trade Credit to private firms expanded by 13.6 could jeopardize growth and financing disruptions amid prolonged conflict, and percent in December 2022 (y-o-y). Yet, the sources, especially as Gabon increasingly climate shocks could impact macroeco- regional regulatory forbearance was re- relies on regional markets. nomic performance, food prices, exports, moved in July 2022, and non-performing Just prior to the coup, Gabon was projected and fiscal stability. loans rose by 27 percent in 2022, reaching to grow by 2.8 percent on average over Faced with increased uncertainty during 10.5 percent of loans. The Bank of Central 2023-2025. Expanding manganese and the political transition, reforms will be key African States continued to tighten mone- wood production, along with the oil palm, to improve governance of public finances tary policy, raising the policy rate by 50 ba- public works, and services sectors would and spending efficiency, further mobilize sis points to 5.0 percent in March 2023, and compensate for the impending decline in domestic revenues, and reduce reliance on ending weekly liquidity injections. Infla- hydrocarbon production, as oilfields reach oil. Implementing the recently adopted tion started to abate, dropping to 3.9 per- maturity. Investments are underway in oil public sector hiring methodology and cent in June 2023. Despite tax exemptions palm refineries and biodiesel generation. adopting further measures to contain fuel and price ceilings being expanded under Over the years, strong commodity ex- subsidies are needed to avoid spending the La Vie Chère program in July 2023, ports and a lower growth in imports slippages. Forest and biodiversity conser- living costs remain high. While the post- were expected to translate into current vation could also play a role in mobilizing Covid recovery led to a decline in poverty account surpluses. Commodity revenues future financing. In August 2023, Gabon in 2021, rising food prices resulting from were projected to remain high, resulting launched a tender for a USD 500 million the war in Ukraine led poverty to increase in continued fiscal surpluses, although debt-for-nature swap, with a lower coupon slightly, to 32.3 percent in 2022. declining to 2.0 percent of GDP over rate than the bonds that were repaid. TABLE 2 Gabon / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.8 1.5 3.0 2.7 3.0 2.8 Private consumption -2.0 -1.4 -0.3 1.4 1.7 1.6 Government consumption 5.5 3.2 3.8 3.8 -0.8 1.3 Gross fixed capital investment -16.7 9.2 8.3 1.1 2.1 2.9 Exports, goods and services 10.1 -2.0 7.4 6.2 5.4 4.0 Imports, goods and services -16.7 30.9 8.6 3.3 2.4 2.8 Real GDP growth, at constant factor prices -1.9 2.9 3.4 2.7 3.0 2.8 Agriculture 5.9 10.2 9.5 6.2 4.9 5.7 Industry -2.2 3.1 3.4 3.3 3.9 2.3 Services -2.8 1.6 2.4 1.7 2.1 2.5 Inflation (consumer price index) 1.6 1.1 4.3 3.2 2.5 2.2 Current account balance (% of GDP) -0.5 3.3 6.7 7.1 8.6 12.1 Net foreign direct investment inflow (% of GDP) -0.7 -2.1 -1.3 -2.4 -2.4 -2.4 Fiscal balance (% of GDP) -2.1 -1.9 2.5 1.7 2.3 2.2 Revenues (% of GDP) 17.6 15.8 19.5 18.5 18.9 18.2 Debt (% of GDP) 77.4 60.7 55.3 56.4 55.1 53.1 Primary balance (% of GDP) 1.2 0.9 5.0 4.1 4.8 4.8 a,b International poverty rate ($2.15 in 2017 PPP) 3.0 2.3 2.4 2.6 2.8 3.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 9.8 8.3 8.5 9.5 9.9 10.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 35.9 32.1 32.3 34.3 35.2 36.3 GHG emissions growth (mtCO2e) 4.0 4.2 2.6 -0.7 0.5 1.0 Energy related GHG emissions (% of total) 15.6 16.3 16.5 15.5 14.9 14.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2017-EGEP. Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 37 Oct 23 contingent liabilities and the high depen- dence on external grant financing due to THE GAMBIA Key conditions and low tax collection, which averaged 10.3 percent of GDP over 2017-2023. High do- challenges mestic debt also crowds out private credit. Against this backdrop, the Government Table 1 2022 The Gambia has made progress in macro- has adopted the National Development Population, million 2.7 economic stabilization, with implementa- Plan (NDP) 2023-2027, building on the GDP, current US$ billion 2.2 tion of structural reforms and higher in- NDP 2018-2021, to consolidate gains in de- GDP per capita, current US$ 797.8 vestment levels, benefiting from substan- mocratic governance, accelerate green eco- a 17.2 International poverty rate ($2.15) tial support from development partners. nomic and social transformation, and a 47.0 However, structural challenges continue to build resilience to shocks and crises. Im- Lower middle-income poverty rate ($3.65) a 80.6 hamper economic growth, including the plementing this agenda poses significant Upper middle-income poverty rate ($6.85) Gini index a 38.8 dominance of low-productivity agricul- financing needs and political commitment School enrollment, primary (% gross) b 103.0 ture, limited economic diversification to reforms. b 62.1 (high dependence on a low value-added Life expectancy at birth, years tourism), constrained fiscal space for pub- Total GHG emissions (mtCO2e) 3.3 lic investments, weak infrastructure, and Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2020), 2017 PPPs. human capital challenges compounded by Recent developments b/ WDI for School enrollment (2022); Life expectancy high population growth. (2021). The result has been depressed growth, lim- Growth is projected at 4.8 percent in 2023 ited job creation, and high poverty. Be- (2.2 percent per capita), driven by in- tween 1991 and 2020, real GDP growth av- creased activity across all sectors. Agricul- eraged 3 percent, below the Sub-Saharan ture and services benefited from favorable Growth is projected to rise to 4.8 percent Africa (SSA) average of 3.4 percent, with rainfall and a gradual recovery in tourism. annual population growth of 3.1 percent. Private sector investment, supported by re- in 2023, driven by increased activity With real GDP per capita stagnating for mittance inflows, and public investment, across all sectors, supported by private in- more than three decades, an estimated 17.2 are also expected to drive growth. Inflation vestment and public infrastructure. The percent of the population were in poverty increased to 18.4 percent (year-on-year) in medium-term outlook faces several chal- in 2020, using the international poverty July 2023, the highest level in decades, dri- line of $2.15 (in 2017 PPPs). ven by food prices due to both imported lenges, including large external imbal- These weaknesses are coupled with down- food and poor domestic production due to ances, fiscal pressures, high public debt side risks such as high external imbal- climatic conditions, utility tariffs increases, levels, and spillovers from weak global de- ances, with high dependence on imports and currency depreciation. mand and persistent inflation. Poverty is of basic goods and services putting persis- Rising food prices are expected to lead to estimated to have increased in 2023, re- tent pressure on the balance of payments an increase poverty to 18.5 percent in 2023, and forex market and exacerbating the vul- from 17.7 percent in 2022 - an increase of flecting weak per capita growth and high over 33,000 people, using the international nerability to global shocks in commodity food prices and could remain elevated. markets. Fiscal risks also remain substan- poverty line of $2.15 (in 2017 PPPs). The tial given State-Owned Enterprises (SOEs) sharp increase in poverty is largely due FIGURE 1 The Gambia / Fiscal deficit, current account FIGURE 2 The Gambia / Actual and projected poverty rates deficit, and real GDP growth and real GDP per capita Percentage points Percent Poverty rate (%) Real GDP per capita (constant LCU) 6 18 100 30000 90 5 15 25000 80 4 12 70 20000 60 3 9 50 15000 40 2 6 10000 30 1 3 20 5000 10 0 0 0 0 2020 2021 2022 2023e 2024f 2025f 2010 2012 2014 2016 2018 2020 2022 2024 Real GDP growth (lhs) Current Account Deficit (rhs) International poverty rate Lower middle-income pov. rate Overall fiscal deficit (rhs) Upper middle-income pov. rate Real GDP pc Sources: The Gambian authorities and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 38 Oct 23 to weaker growth in per capita GDP, and 18.8 percent in 2024, before declining to high prices eroding the purchasing power 17.9 percent by 2025. of households. Outlook The CAD is expected to gradually narrow, The fiscal deficit is expected to remain although remaining high at 9 percent in high, at 4.2 percent of GDP in 2023, despite GDP growth is projected to average 5.4 2024-25, reflecting robust remittances revenue collection efforts, including in- percent 2024-25, driven by increased activ- trend, a decrease in investment-related im- creases in some excise and ad valorem tax- ity in all sectors. Agriculture and services ports, and robust export growth, especially es. Public expenditure is set to remain high are expected to sustain growth, assuming in tourism. The tightening of the monetary owing to increased investment spending favorable rainfall and continued recovery policy is set to remain as inflation persists. in road infrastructure and higher debt ser- in tourism. Robust remittances will sup- The fiscal deficit is projected to narrow to 2.7 vicing, as yields on government securities port the recovery in private sector demand percent of GDP over 2024-25 supported by rose due to monetary tightening. Public which, together with infrastructure pro- the completion of major infrastructure pro- debt is projected to decrease to 81 percent grams, are expected to drive growth. Infla- jects, and domestic revenue mobilization ef- of GDP in 2023, and the Gambia remains at tion is expected to gradually ease to an av- forts, including simplification of the tax sys- high risk of debt distress. erage of 9.2 percent in 2024-2025, reflecting tem to reduce compliance costs, introduc- The current account deficit (CAD) is project- the restrictive monetary policy and easing tion of electronic tax stamp traceability on ed to remain large in 2023 at 12.3 percent of of global supply conditions. excisable goods and fuel products, and GDP, as imports pick up due to private and Projected agriculture growth and the ex- strengthening customs borders and inland public construction projects. The Central pansion of cash transfers are expected to controls. Public debt is projected to decrease Bank maintained a tight monetary stance, have a positive effect on household wellbe- to 74.9 percent of GDP in 2024, but The Gam- increasing its policy rate by 1 ppt to 17 per- ing. However, sustained increases in food bia is expected to remain at high risk of debt cent in August 2023 – the 6th increase since prices are likely to undermine such gains, distress and the end of the debt-service de- May 2022. International reserves are project- given poor households spend 65 percent ferrals scheme, negotiated with some cred- ed to decline to 4.4 months of imports in on food. Consequently, the international itors, in 2024 could weigh on debt sustain- 2023, from 5.1 months in 2022. poverty rate is expected to increase to ability and economic growth. TABLE 2 The Gambia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 0.6 4.3 4.3 4.8 5.3 5.5 Private consumption -1.0 3.5 3.3 3.2 3.7 3.9 Government consumption 20.1 -7.9 2.3 2.4 2.5 2.4 Gross fixed capital investment 26.7 22.2 16.6 15.3 11.5 11.1 Exports, goods and services -20.0 5.7 -0.4 13.0 16.0 16.0 Imports, goods and services 6.0 13.3 10.9 13.0 11.1 11.0 Real GDP growth, at constant factor prices 0.6 4.3 4.3 4.8 5.3 5.5 Agriculture 11.0 4.7 6.9 7.0 5.3 5.1 Industry 8.2 10.4 6.1 6.5 6.3 6.1 Services -5.1 2.1 2.7 3.3 4.9 5.5 Inflation (consumer price index) 5.9 7.4 11.5 17.0 12.3 6.1 Current account balance (% of GDP) -3.7 -8.0 -14.7 -12.3 -9.7 -8.3 Fiscal balance (% of GDP) -2.2 -5.7 -5.6 -4.2 -3.1 -2.4 Revenues (% of GDP) 22.7 18.5 18.9 23.4 22.6 22.9 Debt (% of GDP) 85.1 83.8 83.9 81.0 74.9 69.9 Primary balance (% of GDP) 1.0 -2.7 -3.6 -1.0 0.4 0.9 a,b International poverty rate ($2.15 in 2017 PPP) 17.2 17.5 17.7 18.5 18.8 17.9 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 47.0 47.3 47.8 49.0 49.4 48.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 80.6 81.1 82.3 83.6 84.0 83.0 GHG emissions growth (mtCO2e) 5.9 4.3 3.5 3.1 2.9 2.8 Energy related GHG emissions (% of total) 20.1 20.4 20.9 21.4 22.0 22.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2020-IHS. Actual data: 2020. Nowcast: 2021-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 39 Oct 23 The government has completed a Domes- tic Debt Exchange Programme (DDEP), GHANA Key conditions and implemented an external debt repayments standstill, and sought official debt restruc- challenges turing under the Common Framework. Table 1 2022 Ghana’s economy entered a full-blown Population, million 33.5 macroeconomic crisis in 2022 on the back of GDP, current US$ billion 72.8 pre-existing imbalances and external Recent developments GDP per capita, current US$ 2175.9 shocks. Large financing needs and tighten- a 25.2 International poverty rate ($2.15) ing financing conditions exacerbated debt In Q1 of 2023, GDP growth surprised to the a 48.8 sustainability concerns, shutting-off Ghana upside with a rebound of 4.2 percent, com- Lower middle-income poverty rate ($3.65) a 78.5 from the international market. Large capital pared to 3.0 percent in Q1 of 2022, on the Upper middle-income poverty rate ($6.85) Gini index a 43.5 outflows combined with monetary policy back of strong growth in services (10.1 per- School enrollment, primary (% gross) b 103.4 tightening in advanced economies put sig- cent) and agriculture (4.8 percent), while b 63.8 nificant pressure on the exchange rate the industrial sector contracted by 3.2 per- Life expectancy at birth, years which, on top of monetary financing of the cent as all industry sub-sectors (extrac- Total GHG emissions (mtCO2e) 19.8 budget deficit, resulted in high inflation. tives, manufacturing, water and sewerage, Source: WDI, Macro Poverty Outlook, and official data. The authorities resorted to domestic bor- and construction) shrank, with the excep- a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy rowing causing an upward pressure on in- tion of electricity. (2021). terest rates and crowding out the private The January-June 2023 fiscal balance im- sector. These developments interrupted the proved to a deficit of 0.8 percent of GDP, post COVID-19 recovery of the economy as significantly below the H1 target of 3.5 per- GDP growth declined from 5.1 percent in cent of GDP; the primary balance (commit- Since 2022, Ghana has been in a macro- 2021 to 3.1 percent in 2022. Public debt rose ment basis) recorded a surplus of 1.1 per- from 76.7 percent in 2021 to nearly 90 per- cent of GDP. Revenues, at 7.4 percent of economic crisis caused by macroeconomic cent of GDP in 2022, as debt service-to-rev- GDP, were below the 8.1 percent target as imbalances and external shocks. The enue reached 117.6 percent in 2022. oil revenue and international trade taxes economy stabilized in 2023H1 in re- To help restore macroeconomic stability, underperformed. To make up for the sponse to reforms including public debt Ghana has secured a three-year IMF Ex- shortfall, the government cut down capital tended Credit Facility (ECF) program of expenditures and benefited from lower in- restructuring, fiscal consolidation, and about US$3 billion and has embarked on terest payments, thanks to the external monetary policy tightening. However, in- a comprehensive debt restructuring. The debt service standstill. flation remains over 40 percent, public authorities have committed to a frontloaded Inflation, driven by food prices, remained debt is unsustainable and in distress, and fiscal consolidation while pursuing a tighter elevated at 43.1 percent in July 2023, signifi- growth will slow down to 1.5 percent in monetary policy, complemented by struc- cantly above the Bank of Ghana target range tural reforms in the areas of tax policy, rev- of 8±2 percent. The Bank of Ghana has cumu- 2023. In 2022, poverty worsened by 2.2 latively increased the monetary policy rate enue administration, and public financial ppts from 2021 levels as inflation eroded management, as well as steps to address by 15.5 points since the beginning of 2022, to the purchasing power of Ghanaians. weaknesses in the energy and cocoa sectors. 30 percent in July 2023, and signed an MoU FIGURE 1 Ghana / Real GDP growth and contributions to FIGURE 2 Ghana / Actual and projected poverty rates and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 25 90 4000 20 80 3500 15 70 3000 10 60 5 2500 50 0 2000 40 -5 1500 30 -10 20 1000 -15 -20 10 500 2020 2021 2022 2023 2024 2025 0 0 Gov. cons. Exports GFCF 2012 2014 2016 2018 2020 2022 2024 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real priv. cons. pc Sources: Statistical Service and World Bank. Source: World Bank. Notes: see Table 2. MPO 40 Oct 23 with the government to halt monetary fi- 2023, reflecting higher loan impairments Reflecting the government’s consolidation nancing of the fiscal deficit. The cedi has sta- and elevated credit risks. efforts, the fiscal deficit for 2023 is project- bilized at around GH¢11 per US$ since the Poverty has worsened. The “international ed at 7.5 percent of GDP (primary deficit second quarter of 2023, after having lost ap- poverty” rate is estimated at 27 percent in of 0.5 percent of GDP), thanks to measures proximately more than 20 percent of its val- 2022, an increase of 2.2 percentage points generating 1 percent of GDP in additional ue against the dollar earlier this year. since 2021. Ghanaian households have revenues and 2 percent of GDP in expen- The current account for H1 2023 recorded been under pressure from high inflation diture savings. By 2025, the authorities ex- a surplus of 1.1 percent of GDP compared and slowing economic growth. pect to generate 1.5 percent of GDP of pri- with a deficit of 1.5 percent for H1 2022, mary surplus, implying a fiscal adjustment due to higher gold receipts, lower imports, of more than 5 percentage points of GDP and lower investment income payments for the period (2023-2025). (thanks to the moratorium on external debt Outlook Risks to the outlook include financial sector service). Gross international reserves (ex- stress following the DDEP, contingent lia- cluding Ghana Petroleum Funds, pledged Growthisexpectedtoslowfurtherto1.5per- bilities in the energy and cocoa sector, do- and encumbered assets) stood at US$2.4 cent in 2023 and to remain muted in 2024 at mestic policy slippages with the 2024 elec- billion (1.1 months of imports) at the end 2.8 percent. The ongoing fiscal consolida- tions being a particular risk, delays in exter- of June 2023, compared with 0.7 months of tion, corrective monetary policies, high in- nal debt restructuring, commodity price imports in December 2022. flation, interest rates, and macroeconomic and other external shocks, and sharper- The banking sector performance for the first uncertaintieswillkeepprivateconsumption than-expected monetary policy tightening half of 2023 reflects the lingering impact of and investment low, leading to muted non- in advanced economies. the DDEP which resulted in significant bank extractive growth. Extractives are expected Poverty is projected to worsen between now losses at the end of 2022. Nevertheless, there to support 2023 growth thanks to the open- and 2025, increasing to nearly 34 percent (in- has been a strong rebound in profitability as ing of large new gold mines and a planned ternational poverty line) by 2025, consistent total assets of the banking industry grew by expansioninoilandgasproduction.Growth with a muted outlook on growth in services 21.2 percent in January-June 2023, boosted is projected to recover to its long-term poten- and agriculture and rising prices which are by the robust growth of total deposits. Key tial of about 5 percent by 2025 as conditions outpacing the income growth of those at the financial soundness indicators remained normalize. The balance of payments is ex- bottom of the distribution. Despite consid- positive on the back of the temporary regu- pected to continue to deteriorate in 2023, on erable inflation in the country, its minimum latory reliefs in the wake of the DDEP. The the back of continued capital outflows, be- wage has only increase by 10 percent – insuf- industry’s NPL ratio deteriorated in June forerecoveringinthemedium-term. ficient given the pace of inflation. TABLE 2 Ghana / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 0.5 5.1 3.1 1.5 2.8 5.0 Private consumption -1.0 0.8 4.8 4.5 5.0 5.5 Government consumption 10.1 82.1 -31.7 2.6 4.7 5.4 Gross fixed capital investment 1.8 4.5 24.3 -2.1 -4.7 11.4 Exports, goods and services -50.7 69.1 9.6 13.2 18.0 13.2 Imports, goods and services -54.5 113.8 13.0 15.1 15.1 16.3 Real GDP growth, at constant factor prices 0.8 5.4 3.6 1.6 2.9 5.1 Agriculture 7.3 8.5 4.2 1.8 3.3 5.0 Industry -2.5 -0.5 0.9 1.7 4.0 3.7 Services 0.7 9.4 5.5 1.4 1.8 6.3 Inflation (consumer price index) 10.4 10.0 31.5 45.4 22.2 11.5 Current account balance (% of GDP) -3.2 -3.7 -2.1 -2.8 -2.3 -2.4 Net foreign direct investment inflow (% of GDP) 1.6 2.0 2.0 2.0 2.8 3.5 a Fiscal Balance (% of GDP) -14.7 -11.4 -11.0 -7.5 -8.0 -6.7 Revenues (% of GDP) 14.1 15.3 15.7 16.8 17.3 17.8 a,b Debt (% of GDP) 74.4 76.7 89.1 98.1 92.0 90.2 a Primary Balance (% of GDP) -8.4 -4.1 -3.6 -0.5 0.5 1.5 c,d International poverty rate ($2.15 in 2017 PPP) 25.4 24.8 27.0 30.8 33.3 33.5 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 48.1 47.0 50.4 56.5 59.7 59.7 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 77.5 76.7 79.4 83.8 85.0 84.9 GHG emissions growth (mtCO2e) 24.6 12.7 10.4 6.2 6.2 7.0 Energy related GHG emissions (% of total) 136.5 126.8 119.2 114.6 110.4 106.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Fiscal and debt forecasts do not factor in the impact of the ongoing Debt Restructuring (DR) as the process is yet to conclude. b/ Starting from 2022, public debt numbers include, in addition to central government debt, explicitly guaranteed (and certain implicitly guaranteed) SOE debt, cocobills issued by Cocobod, and reconciled domestic arrears to suppliers. c/ Calculations based on 2016-GLSS-VII. Actual data: 2016. Nowcast: 2017-2022. Forecasts are from 2023 to 2025. d/ Projections using microsimulation methodology. MPO 41 Oct 23 and streamlined tax collection; yet fur- ther digitalization and structural reforms GUINEA Key conditions and are needed to spur diversification and inclusive growth. Guinea has moderate challenges risk of external debt distress with some space to absorb shocks, but must main- Table 1 2022 Growth was robust over 2018-22, averag- tain prudent borrowing by maximizing Population, million 13.9 ing 5.2 percent (2.6 percent per capita) dri- concessional financing. GDP, current US$ billion 20.3 ven by the mining sector, supporting low GDP per capita, current US$ 1463.0 fiscal deficits (1.5 percent on average). a 13.8 International poverty rate ($2.15) However, weak linkages to non-mining Lower middle-income poverty rate ($3.65) a 46.6 sectors limit job creation and poverty re- Recent developments a 86.8 duction. The national poverty rate de- Upper middle-income poverty rate ($6.85) Gini index a 29.6 clined from 48.5 percent in 2014 to 43.7 Growth is projected to accelerate to 5.1 School enrollment, primary (% gross) b 100.8 percent in 2018-19, equivalent to a growth percent in 2023 (2.6 percent per capita) due b 58.9 elasticity of poverty of only 0.47. About to a strong mining sector, and the post- Life expectancy at birth, years 32 percent of the population lacked access to pandemic recovery of non-mining activity Total GHG emissions (mtCO2e) 45.6 education, health, and basic infrastructure was sustained by favorable rainfall. Source: WDI, Macro Poverty Outlook, and official data. in 2018, with a rapid phone survey in depri- Nonetheless, output decline in the large ar- a/ Most recent value (2018), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy vation (September-October 2022) reporting tisanal gold sector contributes to a sharp (2021). 9 percent of households being unable to ac- fall in private consumption projected for cess medicines when needed, since the be- 2023. External price pressures are only par- ginning of Russia’s invasion of Ukraine. tially offset by the Guinean franc apprecia- The recent mining boom, high inflation tion vis-à-vis the US dollar, prudent fiscal Mining activity will boost growth to 5.1 and associated real appreciation of the lo- and monetary policy, and the absence of cal currency, adversely affects the compet- central bank fiscal financing. Inflation per- percent in 2023, poverty rates will de- itiveness of the non-mining sectors and sists—buoyed by supply constraints, fuel crease, and the fiscal deficit widen to 2.6 hampers efforts to diversify the economy costs and road-network deficiencies ham- percent of GDP as expenditures rise. to create more and better jobs. Guinea has pering food distribution—although it is Mining-FDI-related imports sustain low human capital levels, weak institution- projected to decelerate from 12.1 percent al capacity, and large gender gaps in edu- in 2022, to 9.1 percent in 2023 due to the current account deficits and medium- cation, earnings, agriculture productivity, appreciating real exchange rate and tight term growth. Downside risks include and political representation. Major struc- monetary policy, including limiting central delays to the political transition and to tural constraints include weak fiscal rev- bank lending to the government. At the implementing productivity-enhancing enue mobilization that constrains public same time, food price inflation is projected reforms. Extreme poverty is expected to investment, an underdeveloped financial to decelerate from 13.9 percent in 2022 to sector, and large infrastructure gaps. Re- 9.7 percent in 2023, leading to an expected decline to 9.1 by 2025, as food prices decrease in the US$2.15 international cent increases in digital access and e-gov- moderate and agricultural and service ernment transactions have helped bolster poverty rate to 11.1 percent in 2023, down growth strengthens. economic activity during the pandemic 0.8 percentage points from 2022. FIGURE 1 Guinea / Debt, fiscal deficit, and inflation FIGURE 2 Guinea / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent Poverty rate (%) Real GDP per capita (constant million LCU) 50 14 100 6.5 45 90 6.0 12 5.5 40 80 5.0 35 10 70 4.5 30 60 4.0 8 3.5 25 50 3.0 20 6 40 2.5 15 30 2.0 4 1.5 10 20 1.0 2 10 5 0.5 0 0 0 0.0 2020 2021 2022 2023 e 2024 f 2025 f 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate Debt (lhs) Fiscal defit (rhs) Inflation (CPI, rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 42 Oct 23 The fiscal deficit (including grants) is although higher fertilizer prices may damp- projected to widen to 2.6 percent of en earnings. Poor quality transport infra- GDP in 2023, from 0.9 percent in 2022, Outlook structure is likely to keep food prices high, due to increases in current and capital reducing household purchasing power and expenditures. Tax revenues are set to Mining-related (foreign direct) investment thereby undermining poverty reduction. increase one percentage point to 12.1 will continue to drive growth and, as The CAD is projected to improve in percent of GDP, buoyed by tax ad- non-mining sectors recover, growth is 2024-2025 to an average 2.6 percent of ministration reforms and mining rev- projected to accelerate to 6 percent on av- GDP following a 7.3 percent deterioration enues from the bauxite-transfer-price erage in 2024–2025, about equal to its po- in 2023. Reductions in the mining-related mechanism enacted in July 2022. Sub- tential of 5.9 percent. Commensurately, trade surplus are projected to be lower sidies (electricity and petrol) will re- extreme poverty is projected to decline than the projected fall in net outflows of main high, due to low electricity tar- to 10.1 percent in 2024 and 9.1 percent non-factor services and transfers during iffs and the cost of a widened supply- in 2025, consistent with recovery in agri- 2024-25. Fiscal space would be rebuilt as demand gap in hydropower gener- culture and services. Given the limited recent tax administration reforms, includ- ation, pending extension of power poverty impact of mining-driven growth, ing digitalized tax declarations and pay- transmission lines to customers. Debt- redistribution mechanisms to vulnerable ments, start bearing fruit from 2024. In- to-GDP is projected to decrease slightly populations and generalized productivity flation is expected to decline gradually to to 35.9 percent. The current account gains in non-mining sectors will be re- 8.7 percent by 2025. Risks are tilted to deficit (CAD) is projected to deteriorate quired for inclusive growth. Public invest- the downside as political transition un- to 7.3 percent in 2023, as lower export ments to expand access to electricity, roads, certainties in the lead up to elections in prices reduce the trade surplus. Mining- and telecom services, in addition to increas- 2025 could slow implementation of re- related FDI, the main source of external ing agricultural productivity, human capi- forms to strengthen SOE corporate gov- financing, is projected to decline slightly tal, and urban and local development, ernance, potentially reducing private in- to 11.1 percent of GDP in 2023 while should support non-mining growth. Better vestment. On the upside, mining related the real effective exchange rate is likely provisioning of fertilizers to farmers could FDI inflows could increase, reflecting to continue to appreciate. further improve agricultural productivity, planned new projects. TABLE 2 Guinea / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 4.9 4.3 4.7 5.1 5.8 6.2 Private consumption -2.4 0.6 7.6 2.0 4.7 4.7 Government consumption 4.4 16.8 -22.4 11.5 17.9 4.2 Gross fixed capital investment -4.0 4.1 11.9 17.8 14.8 24.4 Exports, goods and services 57.0 0.8 5.8 8.3 5.6 5.6 Imports, goods and services 37.0 -6.2 6.7 10.2 10.3 10.3 Real GDP growth, at constant factor prices 4.0 4.3 4.7 5.1 5.8 6.2 Agriculture -1.1 3.9 3.1 4.0 5.0 5.0 Industry 11.3 4.9 8.6 7.4 6.9 6.4 Services 1.4 4.0 2.4 3.7 5.2 6.6 Inflation (consumer price index) 10.6 12.6 12.1 9.1 8.8 8.7 Current account balance (% of GDP) -9.8 -3.0 -6.1 -7.3 -3.9 -1.4 Net foreign direct investment inflow (% of GDP) 10.8 11.1 12.0 11.1 10.7 11.9 Fiscal balance (% of GDP) -3.2 -1.9 -0.9 -2.6 -2.5 -2.2 Revenues (% of GDP) 14.0 15.2 13.1 13.4 14.5 15.3 Debt (% of GDP) 47.3 41.7 36.6 35.9 37.3 37.4 Primary balance (% of GDP) -2.3 -0.8 0.0 -1.4 -1.4 -1.3 a,b International poverty rate ($2.15 in 2017 PPP) 10.9 11.7 11.9 11.1 10.1 9.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 43.5 45.0 45.4 43.8 41.9 39.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 85.4 86.0 86.8 85.9 84.6 82.7 GHG emissions growth (mtCO2e) 3.8 4.2 3.8 3.8 3.8 3.8 Energy related GHG emissions (% of total) 9.9 10.0 10.2 10.5 10.8 11.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 43 Oct 23 mounting arrears. Identifying contingent fiscal liabilities is difficult, increasing fiscal GUINEA-BISSAU Key conditions and risks despite the high risk of debt distress and little capacity to absorb shocks. Non- challenges performing loans continue to make the banking sector another possible source of Table 1 2022 Exports of raw cashew nuts, which ac- contingent liabilities. Population, million 2.1 count for 90 percent of merchandise ex- GDP, current US$ billion 1.8 ports, determine economic performance. GDP per capita, current US$ 832.7 Cashew production is dispersed among International poverty rate ($2.15) a 21.7 smallholder farmers, whose income sup- Recent developments a 56.8 ports overall economic activity. Poverty re- Lower middle-income poverty rate ($3.65) a 87.2 mains widespread, with high levels of in- Economic activity is likely to slow to 2.8 Upper middle-income poverty rate ($6.85) Gini index a 34.8 equality and increasing rural-urban dis- percent in 2023 (0.7 percent per capita) fol- School enrollment, primary (% gross) b 118.7 parities. Human development indicators lowing another weak cashew campaign. b 59.7 remain among the lowest in the world, Agriculture drives growth with govern- Life expectancy at birth, years and low access to basic services con- ment investment stimulating the construc- Total GHG emissions (mtCO2e) 4.4 tributes to exclusion and marginalization. tion sector. Global inflation pressure (8.6 Source: WDI, Macro Poverty Outlook, and official data. Despite a gradual recovery of the econ- percent y/y for 2023) and a weak cashew a/ Most recent value (2018), 2017 PPPs. b/ WDI for School enrollment (2010); Life expectancy omy post-pandemic, rising global food season will dampen private consumption. (2021). and fuel prices after the Russian invasion Lower cashew exports, rice subsidies of Ukraine are a concern, especially for worth 0.2 percent of GDP, and higher than the poor who spend nearly 60 percent of anticipated capital expenditure have put their income on food. further pressure on the fiscal accounts. Weak cashew exports and high inflation The weak enabling environment for pri- Cashew production reached a record vate sector-led growth is due to poor in- 255,000 tons, but a 35 percent increase in will slow growth to 2.8 percent in 2023, frastructure, low levels of human capital, export tariffs (owing to a freight container increasing poverty. Budget overspends and limited public services. Access to cred- issue) has meant that only 100,000 tons and lower revenues will limit fiscal con- it is limited, and infrastructure is in a poor have been officially exported, with 130,000 solidation while debt increases due to in- state, but there have been recent invest- tons smuggled through Senegal and ments to improve this, mostly donor fi- Guinea. Consequently, as a percentage of frastructure investment, rice subsidies nanced as fiscal space is limited by low do- GDP, the fiscal deficit (including grants) and energy arrears. Growth is set to im- mestic revenue mobilization and the rela- will deteriorate to 9.6 percent in 2023, prove as infrastructure comes online, but tively high wage bill. with the current account deficit (CAD) sustainability depends on institutional Transparency and governance of State- rising to 17.9 percent, mostly financed by reforms. The outlook is subject to down- Owned Enterprises is limited, especially concessional loans and grants. EAGB ar- the national utility company, EAGB, which rears, rice subsidies, the 2023 legislative side risks from continued inflationary elections, and road infrastructure invest- accrued substantial public debt in the ener- pressures, shocks to the cashew sector, gy sector through government-guaranteed ments will cause public debt to rise to and climatic shocks. letters of credit that only partially cover 83.1 percent of GDP. FIGURE 1 Guinea-Bissau / Evolution of main FIGURE 2 Guinea-Bissau / Actual and projected poverty macroeconomic indicators rates and real GDP per capita Percent, percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 100 500000 90 450000 4 80 400000 0 70 350000 60 300000 -4 50 250000 -8 40 200000 -12 30 150000 20 100000 -16 10 50000 -20 0 0 2014 2015 2016 2017 2018 2019 2020 2021 2022e 2023f 2024f 2025f 2010 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate GDP growth Fiscal balance Current account balance Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance and World Bank. Source: World Bank. Notes: see Table 2. MPO 44 Oct 23 To counter inflation across WAEMU coun- control of the wage bill. The fiscal deficit tries, the Central Bank of West African is projected to decline to 2.9 percent of States (BCEAO) raised policy interest rates Outlook GDP by 2025, in line with the WAEMU by a cumulative 125 basis points since the convergence criteria, while the debt-to- start of 2022 to 3.25 percent for liquidity Real GDP growth is projected at 5.6 percent GDP ratio remains high but falls to 77.8 calls and 5.25 percent for the marginal in 2024 (3.4 percent per capita) as interna- percent of GDP. lending facility. However, the monetary tional demand for cashew recovers and local The poverty rate is expected to decline in line policy stance remains broadly accom- supply issues are addressed, with private with higher agricultural growth and lower modative, inflation is still above target and consumption also increasing as inflation inflation, falling to 22.1 percent (lifting over foreign exchange reserves have been on a eases, and road and energy infrastructure 16,000 out of poverty) in 2024 and reaching downward trend. open. Inflation is expected to decelerate to 2 20 percent by 2025. However, high food Using the international poverty line of percent in 2025, as the spillovers from the prices will remain a concern for the poor. $2.15 (in 2017 PPPs), poverty is esti- Russian invasion of Ukraine ease. While the instituted price controls on basic mated to increase to 23.4 percent in The CAD will narrow to 5.7 percent of GDP food items—notably rice—could cushion 2023- equivalent to over 39,000 addi- in 2024 as imported inflation falls and the short-term impact for poor net con- tional poor people. The sharp increase cashew exports increase but could reach 7 sumers, this is a market-distorting, untar- in poverty is partly due to weaker percent by 2025 as imports for highway con- geted, and costly instrument, especially giv- growth in per capita GDP, high food struction begin. External financing needs en the limited fiscal space. prices, and weak performance of the will continue to be met by concessional loans The outlook is subject to substantial down- cashew sector. Rising food prices and and grants. The commitment to medium- side risks stemming from political instabil- low returns from cashew production term fiscal consolidation includes enhanced ity, climate, and other agricultural shocks, are expected to disproportionately af- management of fiscal risks, notably from uncertainty of EAGB operations, and fi- fect the well-being of the poor. SOEs, domestic revenue mobilization, and nancial sector non-performing loans. TABLE 2 Guinea-Bissau / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.5 6.4 3.5 2.8 5.6 4.5 Private consumption -9.6 9.2 5.0 1.9 2.5 2.5 Government consumption 10.1 10.8 16.6 13.7 -12.8 9.7 Gross fixed capital investment 1.5 2.3 11.3 18.4 9.0 6.6 Exports, goods and services -12.4 13.0 -20.0 -30.0 80.0 7.0 Imports, goods and services -15.5 7.4 9.5 8.5 6.2 6.2 Real GDP growth, at constant factor prices 1.5 6.4 3.5 3.1 5.5 4.5 Agriculture 3.2 5.4 5.4 5.1 5.1 5.1 Industry 1.1 5.6 7.1 4.4 4.4 4.4 Services 0.4 7.5 1.0 1.0 6.1 4.0 Inflation (consumer price index) 1.5 3.3 7.8 8.6 4.5 2.0 Current account balance (% of GDP) -2.5 -3.1 -9.6 -17.9 -5.7 -7.0 Fiscal balance (% of GDP) -8.8 -5.5 -5.2 -9.6 -4.0 -2.9 Revenues (% of GDP) 14.0 19.0 18.2 16.0 17.3 18.2 Debt (% of GDP) 69.8 76.9 80.2 83.1 80.3 77.8 Primary balance (% of GDP) -7.3 -4.0 -3.7 -7.4 -1.7 -0.8 a,b International poverty rate ($2.15 in 2017 PPP) 22.8 21.6 22.0 23.4 22.1 20.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 56.3 56.0 57.4 59.1 56.9 54.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.4 86.7 87.5 88.4 87.2 85.7 GHG emissions growth (mtCO2e) 1.3 1.6 1.4 1.5 1.5 1.5 Energy related GHG emissions (% of total) 8.0 8.3 8.5 8.7 9.0 9.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 45 Oct 23 and livelihoods calling for sustained invest- ments for resilience and adaptation. KENYA Key conditions and Prior to the COVID-19 pandemic, the contri- bution of economic growth to poverty re- challenges duction had weakened because of enduring inequalities that have resulted in poverty be- Table 1 2022 Kenya’s economy has demonstrated re- coming more concentrated in arid and Population, million 54.0 silience in the face of multiple shocks, with drought-prone parts of the country. The GDP, current US$ billion 113.4 real GDP growing on average by 5.0 percent COVID-19 pandemic sharply increased GDP per capita, current US$ 2099.3 before the pandemic and rebounding poverty in urban areas with the number of a 36.1 International poverty rate ($2.15) strongly in 2021 and 2022 with an average poor doublings in cities and towns. The a 70.1 growth of 6.2 percent. Nevertheless, ensur- post-pandemic recovery has been interrupt- Lower middle-income poverty rate ($3.65) a 91.3 ing sustainable and inclusive economic de- ed by a severe drought and a spike in food Upper middle-income poverty rate ($6.85) Gini index a 38.7 velopment has proven to be challenging. prices inflation. The poverty rate is expected School enrollment, primary (% gross) b 77.3 Decades of public investment-driven to decline marginally in 2023 to 35.2 percent. b 61.4 growth have led to rapid debt accumulation Life expectancy at birth, years without substantially strengthening the Total GHG emissions (mtCO2e) 89.1 country’s growth potential and resulting in Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2021), 2017 PPPs. a high risk of debt distress. Coupled with a Recent developments b/ WDI for School enrollment (2019); Life expectancy large, inefficient public sector marred by (2021). corruption, this state-driven development Economic activity has been stable in 2023 model has failed to create opportunities for despite political tensions in part fueled by greater private investment and more pro- increased cost of living. The economy ex- ductive jobs. Levels of international trade panded by 5.3 percent in Q1 2023 driven Kenya’s growth remains strong despite and foreign direct investment (FDI) fall by a recovery in agriculture coupled with a short of peers’, depriving Kenya of an en- rebound in households’ consumption. The multiple shocks. Elevated cost of living gine of growth. Closing the gap between the economy is expected to grow 5 percent in and climate shocks have slowed down projected one million workers entering the 2023. The current account deficit narrowed poverty reduction. The economy faces ex- workforce annually over the next decade to 4.7 percent of GDP as of May 2023, re- change rate pressures, debt vulnerabili- and private sector wage job creation of flecting increased exports (of tea, manufac- around 100,000 jobs annually registered on tures, and tourism) as well as a slowdown ties, and tight financial conditions. In the average in 2021 and 2022 is a key priority. in imports due to decline in public invest- medium term, continued recovery in agri- Government’s sustained commitment to ments and depreciation of the shilling. culture and consistent fiscal consolidation multi-year fiscal consolidation and gover- Kenya’s foreign exchange reserves de- policies are expected to support private nance reforms are imperative for maintain- clined to the equivalent of 4.0 months of sector-led growth supporting households’ ing macroeconomic stability and creating imports as of July 2023 as tight global fi- conditions for private sector-driven growth. nancing conditions reduced net financial income. GDP growth is projected at 5.2 inflows. Global credit rating agencies Furthermore, Kenya’s high climate vulnera- percent in 2024-25. bility, as demonstrated by the recent long downgraded Kenya’s outlook to negative drought, hasbecomeamajorthreattooutput in July 2023, citing investors’ concerns FIGURE 1 Kenya / Annualized quarterly real GDP growth FIGURE 2 Kenya / Actual and projected poverty rates and and contributions to annualized real quarterly GDP growth real private consumption per capita Percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 12 100 160000 90 140000 8 80 120000 70 4 60 100000 50 80000 0 40 60000 30 -4 40000 20 10 20000 -8 0 0 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3 2023Q1 2015 2017 2019 2021 2023 2025 Agriculture Industry Services International poverty rate Lower middle-income pov. rate Taxes GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: World Bank and Kenya National Bureau of Statistics Source: World Bank. Notes: see Table 2. MPO 46 Oct 23 about high financing needs and declining 2024–25 increasingly driven by the pri- The outlook is subject to elevated uncer- international reserves. vate sector. Improved investor confi- tainty because of domestic and external The Central Bank of Kenya (CBK) raised the dence and credit to the private sec- risks. Spending pressures, driven in part policy rate by 175 basis points cumulatively tor—helped by reduced domestic bor- by political tensions, such as reintroduc- in March and June to respond to the headline rowing by the government—will tion of main consumption subsidies, and inflation which remained above the ceiling strengthen private investment over the failure to achieve fiscal consolidation of inflation target band of 7.5 percent. The medium term. The government projects could significantly exacerbate Kenya’s government maintained the pace of fiscal to reduce the fiscal deficit substantially debt vulnerabilities and hamper the eco- consolidation in FY2022/23, reducing the in 2023 and 2024 and achieve primary nomic outlook. Drought or floods would primary deficit to 0.6 percent of GDP by ra- fiscal surplus and positive public sav- resume inflationary pressures and food tionalizing non-priority spending and un- ings in FY2024/25. New tax adminis- insecurity, dampening growth. Lower winding subsidies, despite a low growth in tration and policy measures; including than anticipated growth in Europe revenue (16.4 percent of GDP in FY2022/23 among others increased tax on employ- could undercut ongoing recovery in compared to 17.6 percent the previous year). ment income above KSh 6 million, VAT tourism and other exports and remit- Improved agriculture harvests and easing of on petroleum products, and withholding tances. Persistent inflation in advanced global food prices coupled with the tighten- tax on digital content, are expected to economies remains and elevated com- ing macroeconomic policy stance helped to generate 1.6 percent of GDP in addition- modity prices driven by international reduce inflationary pressures bringing the al revenue and complement continued conflicts would further tighten financial headline inflation to 7.2 percent in July 2023. expenditure rationalization. condition, weaken external balances, Real per capita incomes are expected and elevate the cost of reducing CPI in- to grow, and poverty incidence is ex- flation. Upside risks are mostly linked pected to resume its pre-pandemic to faster than expected normalization in Outlook downward trend, declining by global financing conditions and lower around a percentage point each year. international fuel and food prices, which Real GDP is projected to grow at The $2.15 poverty rate is expected to would strengthen Kenya’s external bal- around 5.2 percent on average in fall to 34.4 percent in 2024. ances and ease domestic price pressures. TABLE 2 Kenya / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -0.3 7.6 4.8 5.0 5.2 5.3 Private consumption -1.5 6.2 3.1 4.5 5.1 5.4 Government consumption 3.1 6.0 7.4 3.3 3.0 2.9 Gross fixed capital investment 2.3 10.8 -1.1 7.7 9.1 9.5 Exports, goods and services -14.9 15.3 10.7 8.1 7.8 7.6 Imports, goods and services -9.4 22.2 4.5 5.2 7.3 8.1 Real GDP growth, at constant factor prices 0.4 7.1 4.5 5.0 5.2 5.3 Agriculture 4.6 -0.4 -1.6 3.8 4.2 4.2 Industry 3.3 7.5 3.9 4.9 5.1 5.3 Services -1.8 9.6 6.7 5.3 5.5 5.7 Inflation (consumer price index) 5.3 6.1 7.6 7.8 5.8 5.5 Current account balance (% of GDP) -4.8 -5.2 -5.1 -5.0 -5.5 -5.5 Net foreign direct investment inflow (% of GDP) 0.6 0.0 0.3 0.9 1.0 1.0 Fiscal balance (% of GDP) -7.9 -7.2 -5.8 -5.1 -4.4 -3.8 Revenues (% of GDP) 16.4 16.6 16.7 17.2 18.1 17.9 Debt (% of GDP) 66.0 68.3 67.4 66.2 60.9 58.2 Primary balance (% of GDP) -3.7 -2.8 -1.1 -0.2 0.5 0.7 a,b International poverty rate ($2.15 in 2017 PPP) 35.0 36.1 35.8 35.2 34.4 33.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 68.6 70.1 69.8 69.3 68.6 67.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.0 91.3 90.9 90.2 89.3 88.3 GHG emissions growth (mtCO2e) 9.3 7.7 3.2 2.6 3.6 4.3 Energy related GHG emissions (% of total) 32.0 32.7 33.3 33.7 34.2 34.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-IHBS and 2021-KCHS. Actual data: 2021. Nowcast: 2022. Forecasts are from 2023 to 2025. b/ Projection using point to point elasticity at regional level with pass-through = 1 based on private consumption per capita in constant LCU. MPO 47 Oct 23 Lesotho is in the top quintile of countries with the most unequal income distribution. LESOTHO Key conditions and Improving the efficiency of fiscal policy and boosting private sector investment are, challenges therefore, key to stimulating growth and spurring job creation. Containing the large Table 1 2022 Growth has lost momentum over the past public sector wage bill and strengthening Population, million 2.3 decade. A large and increasingly inefficient public sector financial management are pri- GDP, current US$ billion 2.3 public sector, accounting for nearly half of orities to ensure efficient use of public re- GDP per capita, current US$ 997.9 GDP, has constrained economic growth and sources. Enhancing entrepreneurship and a 32.4 International poverty rate ($2.15) crowded out the private sector, which is reducing the high costs of doing business by a 54.6 largely informal and concentrated in low- streamlining business regulations and facil- Lower middle-income poverty rate ($3.65) a 81.0 productivity sectors. The formal sector is itating access to credit would incentivize Upper middle-income poverty rate ($6.85) Gini index a 44.9 weakly diversified as mining, textiles and business entry and investment and increase School enrollment, primary (% gross) b 108.4 apparel industries account for two-thirds of job opportunities. b 53.1 exports. Southern African Customs Union Life expectancy at birth, years (SACU) receipts are the main source of fiscal Total GHG emissions (mtCO2e) 2.6 revenue and foreign exchange, but have Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017), 2017 PPPs. been extremely volatile. This has put signif- Recent developments b/ WDI for School enrollment (2019); Life expectancy icant pressure on international reserves and (2021). fiscal accounts, as public expenditure is In the aftermath of the COVID-19 pandem- rigid, mainly driven by a high public sector ic and adverse climatic shocks, the econo- wage bill, which, at 15 percent of GDP, is the my recovered at a modest pace at 1.6 and largest in Sub-Saharan Africa. 1.8 percent in 2021 and 2022. Such recovery Lesotho’s economy continues to recover Economic performance is vulnerable to was largely driven by construction, min- shocks given the economy’s small size, and ing, manufacturing, business services, and slowly. GDP growth is projected to acceler- large dependences on a few sectors and public administration. Agriculture has also ate in 2023 and 2024, driven by the Lesotho South Africa’s economy. Such vulnerability contributed positively to growth due to fa- Highlands Water Project, but will stabilize has been exacerbated by the procyclical fis- vorable seasonal rainfalls in these years around 2 percent in the medium-term. cal policy and severe and frequent weather and the introduction of seed and fertilizer events. The increasing frequency of these subsidies, which increased yields. Follow- Poverty is expected to remain high at about events underscore the need to invest in cli- ing delays, construction activities associat- 36 percent (using the international poverty mate risk management and resilience. ed with the mega Lesotho Highlands Wa- rate). The outlook is subject to downside The weakness of the private sector con- ter Project (LHWP-II) accelerated, further risks from weak global and regional tributes to high unemployment, estimated supporting growth. growth, geopolitical tensions, adverse cli- at 22.5 percent in 2019 but can reach 38.3 per- Headline inflation decreased from 9.8 per- cent when discouraged job seekers are in- cent in July 2022 to 4.5 percent in July 2023 mate change shocks, and delays in imple- due to the decline in fuel and food prices, cluded, and high poverty rates. Over one- menting the domestic reforms needed to third of the population was estimated to live which limited the impact of the introduction boost resilience and inclusive growth. on less than $2.15 per day (2017 PPP) in 2022. of the levy on alcohol and tobacco levy in FIGURE 1 Lesotho / Fiscal dynamics FIGURE 2 Lesotho / Actual and projected poverty rates and real GDP per capita Percentage of GDP Percentage of GDP Poverty rate (%) Real GDP per capita (constant LCU) 60 6 90 10200 4 80 10000 50 70 9800 2 9600 40 60 0 9400 50 30 -2 9200 40 9000 -4 30 20 8800 -6 20 8600 10 10 -8 8400 0 8200 0 -10 2017 2019 2021 2023 2025 2020 2021 2022e 2023f 2024f 2025f International poverty rate Lower middle-income pov. rate Total revenues Total expenditures Fiscal balance (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 48 Oct 23 early 2023. However, the level of domestic and indirect effects of LHWP-II, and de- Maseru district hospital and road in- food prices remain elevated, owing to per- celerate in 2025, in tandem with the frastructure upgrades, which counterbal- sistently high imported inflation driven by LHWP-II investment cycle. By 2025, the ance the increased imports for LHWP-II. the weaker South African rand, and hence economy will still not have restored its The deficit is expected to widen in 2024 the Lesotho loti. The Central Bank of pre-pandemic GDP level. Consequently, as LHWP-II construction peaks. Exports Lesotho’s monetary policy stance has re- the US$2.15 per day (in 2017 PPP terms) are projected to remain stable, assum- mained broadly aligned with the regional poverty rate is projected to fall only ing the African Growth and Opportuni- monetary policy stance and maintained slightly from 36.3 percent in 2022 to 35.1 ty Act (AGOA) is extended. the cost of domestic funds in line with the percent in 2025. Domestic and external risks are tilted regional average. Inflation is expected to continue declin- to the downside. Weaker-than-projected The current account deficit widened from ing, reflecting the easing of global ener- global and regional growth would re- 1.0 percent of GDP in the first quarter gy and food prices. The fiscal position duce diamond exports and remittances, of 2022 to 2.8 percent in the first quarter is projected to improve, with the deficit curbing household consumption. Failure of 2023, primarily due to higher imports projected to decline from 7.6 percent of to renew the AGOA could lead to for- of capital goods and services related to GDP in 2022 to 1.4 percent of GDP in eign direct investment outflows, increas- LHWP-II. The fiscal balance deteriorated 2023, driven by higher SACU revenues ing unemployment and reducing ex- from 1.2 percent in May 2022 to 1.7 per- (which have doubled between 2022 and ports. A prolonged or severe El Niño cent of GDP in May 2023 due to higher 2023) and lower government expendi- carries the risk of reduced water avail- government spending. tures in line with announced consolida- ability and deteriorating livestock con- tion measures. SACU revenues will con- ditions, negatively affecting liveli- tinue to determine the fiscal trajectory hoods, the rebound in economic activ- over the medium term. ity, and the external balance. On the Outlook The current account deficit will remain other hand, the swift implementation high, narrowing slightly in 2023 owing of a bold reform agenda could lift pri- Growth is projected to moderately accel- to the completion of import-intensive vate sector investment and the coun- erate in 2023 and 2024, driven by direct public construction projects such as try’s growth prospects. TABLE 2 Lesotho / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -5.6 1.6 1.8 2.2 2.5 2.0 Private consumption 6.9 -6.7 9.1 3.6 3.5 3.2 Government consumption 19.7 -5.3 2.4 5.0 -1.8 -0.7 Gross fixed capital investment -46.3 1.6 14.8 38.8 54.0 32.8 Exports, goods and services -17.2 5.1 36.7 2.2 2.2 2.2 Imports, goods and services -0.6 -0.4 22.5 10.3 11.5 10.2 Real GDP growth, at constant factor prices -5.6 1.6 1.8 2.2 2.5 2.0 Agriculture 8.7 -16.0 12.5 2.4 2.4 2.4 Industry -12.2 4.7 5.0 5.0 5.3 5.0 Services -4.4 1.9 0.3 1.4 1.6 1.0 Inflation (consumer price index) 5.0 6.0 8.3 6.5 5.3 5.0 Current account balance (% of GDP) -1.9 -4.9 -7.1 -6.4 -8.5 -7.3 Net foreign direct investment inflow (% of GDP) 1.3 1.2 1.2 1.4 1.7 1.3 Fiscal balance (% of GDP) 4.2 -4.2 -7.6 -1.4 1.0 0.1 Revenues (% of GDP) 48.3 49.4 39.1 45.8 44.0 39.3 Debt (% of GDP) 51.2 59.1 59.0 56.2 54.5 51.8 Primary balance (% of GDP) 5.1 -3.2 -6.6 -0.6 1.6 0.7 a,b International poverty rate ($2.15 in 2017 PPP) 36.6 36.6 36.3 35.8 35.4 35.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 59.0 59.0 58.7 58.5 58.1 57.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 84.3 84.3 84.1 83.7 83.4 83.3 GHG emissions growth (mtCO2e) -2.2 -0.9 4.6 3.6 3.6 3.6 Energy related GHG emissions (% of total) 28.2 28.1 27.2 26.7 26.3 25.9 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2017-CMSHBS. Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2017) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 49 Oct 23 global inflation, and depressed demand in advanced economies). The country experi- LIBERIA Key conditions and enced a 4.8 percent growth in real GDP, driven by mining and agriculture, partic- challenges ularly in the production of gold, rice, and cassava. However, in agriculture, there Table 1 2022 Liberia has recorded positive economic was a decline in rubber and palm oil pro- Population, million 5.3 growth and maintained broad macroeco- duction in the first half of 2023 by 12.1 per- GDP, current US$ billion 4.0 nomic stability in the last two years, but in- cent and 7.7 percent, year-on-year (y/y), re- GDP per capita, current US$ 754.5 flationary pressures have increased in 2023 spectively. In industry, gold production in- a 27.6 International poverty rate ($2.15) due to higher food costs and a weaker Liber- creased by 13.6 percent (y/y), but iron ore a 60.6 ian dollar. The country’s medium-term out- production declined by 4.5 percent (y/y), Lower middle-income poverty rate ($3.65) a 88.9 look is promising, but long-term growth is reflecting the trend in international prices; Upper middle-income poverty rate ($6.85) Gini index a 35.3 not enough to quicken the pace of poverty cement production also declined by 11.6 School enrollment, primary (% gross) b 77.5 reduction as the population continues to percent (y/y) as construction activity b 60.7 grow. Liberia still faces multifaceted socioe- scaled down. Electricity production more Life expectancy at birth, years conomic challenges, including high poverty than doubled and beverages output re- Total GHG emissions (mtCO2e) 17.0 rates, limited access to healthcare and edu- mained broadly stable, reflecting the Source: WDI, Macro Poverty Outlook, and official data. cation, and inadequate infrastructure. The uptick in services. Liberia’s international a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy country has low levels of electricity access, poverty rate (US$2.15 per person/day 2017 (2021). paved roads, and human capital. Only ap- PPP) is projected to decline by 0.7 percent- proximately 30 percent of Liberia’s popula- age points to 34.8 percent in 2023. tion has access to electricity, 7 percent of the Headline inflation decreased slightly in Despite shocks, Liberia’s recovery re- total road network is paved, and the coun- 2022 to 7.6 percent, from 7.9 percent in 2021, mained strong in 2022, but inflationary try’s human capital index, at 0.32, is among despite higher global fuel and food prices, the lowest in the world. but inflationary pressures are rising in 2023. pressures are rising. Medium-term Investing in both human and physical cap- In July 2023, y/y inflation was 11.0 percent, growth prospects are promising as the ital, improving productivity and economic driven by food prices and a weaker Liberian country benefits from mining and consol- efficiency in vital sectors such as agricul- dollar – the Liberian dollar to US dollar ex- idates gains from macroeconomic stability ture, and creating a better environment for change rate increased by 19.1 from January businesses are all necessary for achieving to July 2023. The increase in food prices dis- and ongoing structural reforms in key en- sustainable and inclusive growth. proportionately affects the poor, who re- abling sectors. However, the outlook is main at risk of becoming even poorer and ex- subject to considerable downside risks periencing food insecurity. The WFP from inflationary pressures, fiscal risks HungerMap Live 2023 shows the high ahead of the 2023 elections, and fluctua- Recent developments prevalence of insufficient food consump- tion in Liberia, affecting 37.0 percent of the tions in commodity prices. The poverty Liberia’s recovery remained strong in population in the second quarter of 2023, rate is expected to decline moderately 2022 despite the external headwinds and chronic malnutrition in children under reaching 33.8 percent by 2025. (from Russia’s invasion of Ukraine, high the age of five is still high at 30.1 percent. FIGURE 1 Liberia / Real GDP growth and contributions to FIGURE 2 Liberia / Actual and projected poverty rates and real GDP growth real private consumption per capita Percent, percentage points Poverty rate (%) Real private consumption per capita (constant LCU) 8 120 1000 900 6 100 800 700 4 80 600 2 60 500 400 0 40 300 200 -2 20 100 -4 0 0 2020 2021 2022e 2023f 2024f 2025f 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 International poverty rate Lower middle-income pov. rate Agriculture Industry Services Real GDP growth Upper middle-income pov. rate Real priv. cons. pc Sources: Liberian authorities and World Bank staff estimates and projections. Source: World Bank. Notes: see Table 2. MPO 50 Oct 23 In July 2023, the Central Bank of Liberia deficit of 4.7 percent of GDP compared to domestic resources and boosts investment (CBL) raised the policy rate by 250 basis 2.2 percent in the same period in 2022. In and consumption. The current account points to 20.0 percent to rein in inflation. June 2023, the gross external reserves fell deficit is expected to increase to 22.5 per- To strengthen its monetary policy opera- to US$533 million (about 2.9 months of im- cent of GDP in 2023, from 17.7 percent in tions, the CBL also lifted the ceiling on the ports), from US$644 million (3.1 months of 2022, and remain high over the medium offered amount of CBL bills. The lifting of imports) in December 2022. term as aggregate demand propels import the ceiling on the offered amount of CBL growth. The deficit will be financed by for- bills would accommodate the growing eign direct investments in mining, private oversubscription and help absorb the ex- financing, and project grants and loans. cess liquidity in the banking system. Outlook The poverty rate is expected to decrease Liberia’s fiscal position worsened in 2022, from 34.8 percent in 2023 to 33.6 percent due to declines in revenue and grants, an in- Liberia’s medium-term growth prospects in 2025. However, the continued decline in crease in consumption spending, and the are positive on balance. The economy is pro- agricultural value added per worker since need to provide subsidies, grants, and social jected to expand by 4.5 percent in 2023 and 2013 could hinder efforts to reduce poverty benefits to offset the effect of higher food and an average of 5.8 percent in 2024–25 due to as agriculture is the primary livelihood for fuel prices on households and the economy. continued expansion in mining, as well as over 60 percent of the workforce. Increased This resulted in a higher fiscal deficit that ongoing reforms in key sectors such as ener- vulnerability due to severe climate and was financed through concessional re- gy, transportation, trade, and financial ser- high food prices could also pose risks to sources and borrowing from commercial vices. The expansion and extension of oper- poverty reduction. banks. In July 2023, a “Recast Budget” was ations of existing mining projects and im- The outlook is subject to significant risks. submitted to the National Legislature for ap- proved access to affordable energy and On the downside, inflationary pressures proval, proposing a reduction in consump- roads are expected to drive output growth in from higher prices of imports (food and tion spending, grants and subsidies, and various sectors of the economy. fuel), and a decline in prices of exports capital expenditures due to lower-than-ex- Inflation is expected to increase in 2023 (rubber, iron ore, and gold) could under- pected revenue performance. The proposed due to a weaker domestic currency and cut macroeconomic stability and slow re- spending is 3.5 percent lower than the origi- higher food prices but stabilize around 6.6 covery. It may also be difficult to safe- nal budget for 2023. percent in 2024-25 as the CBL tightens guard public finances ahead of the 2023 In 2022, the current account deficit stabi- monetary policy. The fiscal deficit is pro- elections due to spending pressures, lized at 17.7 percent of GDP, despite boom- jected to narrow to 2.8 percent of GDP in which could increase fiscal risks and debt ing gold exports and slower import 2023 as the government strengthens ex- vulnerabilities. Upside risk could stem growth. However, in the first half of 2023, penditure controls and stays below 4 per- from improved external demand for the trade balance worsened, resulting in a cent in the medium term as it mobilizes Liberian exports. TABLE 2 Liberia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -3.0 5.0 4.8 4.5 5.4 6.2 Private consumption 3.8 4.7 3.3 3.5 3.0 3.9 Government consumption 0.8 0.2 -5.7 -21.0 4.5 9.4 Gross fixed capital investment -5.5 -7.9 9.4 8.3 6.8 2.4 Exports, goods and services -1.4 14.7 7.7 9.8 13.6 13.6 Imports, goods and services 11.7 1.8 3.1 2.3 5.5 4.7 Real GDP growth, at constant factor prices -2.9 4.8 4.8 4.5 5.4 6.2 Agriculture 2.4 3.3 5.9 3.0 5.0 5.7 Industry 0.2 13.3 6.7 6.9 6.3 7.9 Services -8.6 3.0 2.8 4.8 5.3 5.8 Inflation (consumer price index) 17.0 7.8 7.6 10.4 7.7 5.6 Current account balance (% of GDP) -15.6 -17.8 -17.7 -22.5 -21.4 -22.3 Fiscal balance (% of GDP) -3.7 -2.4 -5.6 -2.8 -3.0 -3.4 Revenues (% of GDP) 29.9 27.2 21.5 21.4 22.8 23.0 Debt (% of GDP) 55.8 53.2 53.4 52.6 53.8 52.4 Primary balance (% of GDP) -2.4 -1.6 -4.6 -1.8 -2.1 -2.5 a,b International poverty rate ($2.15 in 2017 PPP) 37.0 36.0 35.4 34.8 34.5 33.6 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 70.1 69.3 69.1 68.3 68.0 67.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 92.8 92.5 92.3 92.2 92.1 91.7 GHG emissions growth (mtCO2e) 0.6 3.2 3.2 3.0 3.1 3.1 Energy related GHG emissions (% of total) 6.8 6.6 6.4 6.2 5.9 5.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-HIES. Actual data: 2016. Nowcast: 2017-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2016) with pass-through = 0.7 (Low (0.7)) based on private consumption per capita in constant LCU. MPO 51 Oct 23 line. However, extreme poverty has re- duced slightly, declining from 52.6 percent MADAGASCAR Key conditions and in 2012 to 51.8 percent in 2022, supported by slight increases in rural rice prices. challenges Table 1 2022 For decades, Madagascar has grappled Population, million 29.6 with sluggish growth and enduring pover- Recent developments GDP, current US$ billion 15.3 ty, primarily due to governance shortcom- GDP per capita, current US$ 516.6 ings, inadequate human and physical cap- Economic growth decelerated from 5.7 a 80.7 International poverty rate ($2.15) ital, and slow economic transformation. percent in 2021 to 3.8 percent in 2022, re- a 92.4 The situation is further strained by increas- flecting weakening global growth and cli- Lower middle-income poverty rate ($3.65) a 98.2 ing climate crises and heightened vulner- mate shocks. Moreover, inflationary pres- Upper middle-income poverty rate ($6.85) Gini index a 42.6 ability to external shocks. However, the sures have intensified, with rates increas- School enrollment, primary (% gross) b 134.1 government’s commitment to fiscal consol- ing from 6.9 percent in June 2022 to 11.3 b 64.5 idation, coupled with low budget execu- percent in June 2023. Rice prices increased Life expectancy at birth, years tion rates, helped lower the fiscal deficit by 12.2 percent, while energy costs rose by Total GHG emissions (mtCO2e) 39.6 to an average of 1.4 percent of GDP over 14.5 percent. Meanwhile, core inflation, ad- Source: WDI, Macro Poverty Outlook, and official data. 2016-19, with total public debt falling to justed for rice and energy price increases, a/ Most recent value (2012), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy 38.7 percent of GDP by 2019. increased from 8.3 percent to 10.8 percent (2021). Madagascar has been unable to effectively over the same period. leverage its rich natural resources, open Madagascar’s central bank adopted a more trade policies, and young workforce, with stringent monetary policy, narrowing the After a robust recovery in 2021, growth de- weak economic growth falling short of sig- interest rate corridor. From January 2022, clined to 3.8 percent in 2022, reflecting nificantly improving living standards. Ad- the central bank increased its policy rates ditional challenges arise from an uncon- considerably by 520 basis points for de- weakening global growth and natural haz- ducive business environment marked by posits (reaching 9 percent in August 2023) ards. Growth is projected to recover to 4.5 deteriorating connectivity infrastructure, and 380 basis points for marginal lending percent over 2023-25, supported by im- restricted market competition, and limited facilities (reaching 11 percent by August proved global demand and structural re- access to essential resources like energy, 2023). Furthermore, the reserve require- land, and finance. This environment hin- ment ratio was reduced from 13 percent to forms in key sectors. Yet, persistent double- ders growth even in sectors that have his- 9 percent in April 2023. digit inflation poses challenges. Poverty af- torically driven GDP growth – like mining, The current account deficit widened from 5 fects more people in urban areas as job construction, telecommunications, bank- percent of GDP in 2021 to 5.6 percent in 2022. prospects deteriorate following a drop in ing, and utilities. The first half of 2023 saw merchandise ex- firm productivity. Risks remain substan- Weak economic growth, combined with ports plunge by 8.1 percent compared to rapid population growth, has resulted in 2022, primarily due to a sharp decline in key tial, including uncertainty around the up- spices and strategic minerals exports. Con- Madagascar having one of the highest coming presidential elections, elevated poverty rates in the world, reaching 75 per- versely, merchandise imports declined mar- prices, and the vanilla sector crisis. cent in 2022, using the national poverty ginally by 1 percent, with a rise in petroleum FIGURE 1 Madagascar / Real GDP growth and contributions FIGURE 2 Madagascar / Actual and projected poverty rates to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant LCU) 30 100 820000 20 800000 95 780000 10 90 760000 0 85 740000 -10 720000 80 -20 700000 75 -30 680000 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 70 660000 Gov. cons. Exports GFCF 2010 2012 2014 2016 2018 2020 2022 2024 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 52 Oct 23 product volumes being counteracted by a about 4.7 percent in 2024-25. Inflation, primary vanilla trading partners are likely dip in their import prices. meanwhile, is expected to hover at 10.5 to hinder progress. The overall fiscal deficit increased from 2.8 percent in 2023 before easing to around 8.5 The fiscal deficit is forecast to shrink to 3.8 percent of GDP in 2021 to 6.4 percent in percent during 2024-25. This moderation percent of GDP in 2023, as the resolution 2022, and total public debt rose to 56.9 per- will likely mirror global trends and be in- of cross-liabilities between the government cent of GDP by 2022. This deterioration in fluenced by the effects of a tightening mon- and oil distributors is expected to boost the fiscal balance was largely a result of de- etary stance. However, the poverty rate is tax revenues to 12.8 percent of GDP from ferred oil customs tax payments by oil dis- projected to show little sign of improve- 9.6 percent in 2022. Moreover, the project- tributors. Preliminary figures for the first ment, remaining steady at 80.1 percent in ed gradual increase in capital expenditure, four months of 2023 suggest a subdued tax 2023, with a larger increase in urban areas from 5.1 percent of GDP in 2021 to 8.7 per- revenue collection. According to the latest as job prospects deteriorate due to a sharp cent in 2025, reflects improved budget exe- debt sustainability assessment, Madagas- drop in business productivity. cution and the implementation of the gov- car is at moderate risk for both external A decline in global oil prices is projected ernment’s priority projects. debt distress and overall debt distress. to further contribute to the narrowing of Several risks could impact these projections, the current account deficit to 4.6 percent of including recurring natural hazards, fluctu- GDP in 2023-25, as the drop in imports sur- ations in commodity prices, financial insta- passes the deceleration in exports. Howev- bility, and lower global demand for Mada- Outlook er, the recovery of exports may face chal- gascar’s exports. The upcoming presiden- lenges as restrictive import directives – like tial elections add a layer of uncertainty, with Growth is anticipated to stabilize at 4 per- lowering permissible nicotine levels in im- rising political tensions and potential social cent in 2023, before picking up pace to ported food products – from Madagascar’s unrest exacerbated by high inflation. TABLE 2 Madagascar / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -7.1 5.7 3.8 4.0 4.8 4.7 Private consumption 2.2 3.0 2.5 2.5 3.5 3.5 Government consumption 24.3 0.2 -8.0 9.6 5.7 7.2 Gross fixed capital investment -10.3 12.7 -19.1 2.8 5.8 7.0 Exports, goods and services -36.6 55.0 27.5 3.4 3.8 4.2 Imports, goods and services -16.6 12.7 19.8 1.9 2.8 4.0 Real GDP growth, at constant factor prices -9.4 6.5 3.7 4.0 4.8 4.7 Agriculture -1.4 -1.6 0.9 2.3 3.1 3.6 Industry -29.5 19.7 10.9 8.6 8.9 9.1 Services -6.9 7.3 3.1 3.4 4.3 3.8 Inflation (consumer price index) 4.2 6.2 8.2 10.5 8.8 8.1 Current account balance (% of GDP) -4.8 -5.0 -5.6 -4.4 -4.6 -4.6 Net foreign direct investment inflow (% of GDP) 1.8 1.7 1.9 1.6 2.2 2.3 Fiscal balance (% of GDP) -4.0 -2.8 -6.4 -3.8 -3.1 -5.0 Revenues (% of GDP) 12.8 11.4 10.8 14.9 13.9 13.6 Debt (% of GDP) 49.6 53.5 56.9 56.2 55.4 56.5 Primary balance (% of GDP) -3.2 -2.2 -5.6 -2.8 -2.2 -4.1 a,b International poverty rate ($2.15 in 2017 PPP) 81.7 81.0 80.6 80.1 79.6 78.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 93.0 92.6 92.4 92.1 91.9 91.6 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 98.3 98.2 98.1 98.1 98.0 97.9 GHG emissions growth (mtCO2e) -2.1 -0.1 0.7 0.9 1.5 1.7 Energy related GHG emissions (% of total) 14.8 15.2 15.4 15.5 15.9 16.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2012-ENSOMD. Actual data: 2012. Nowcast: 2013-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2012) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 53 Oct 23 that government has often missed its fis- cal targets, resulting in unexpected and MALAWI Key conditions and high deficits. High and rising domestic interest rates mean that debt servicing challenges costs continue to erode fiscal space. Inter- est payments were 34 percent of revenues Table 1 2022 With low agricultural productivity and in FY2022/23, and domestic debt service Population, million 20.4 limited commercialization, the majority was 94 percent of interest payments. GDP, current US$ billion 13.5 of Malawians face stagnant incomes. Persistent inflation, coupled with the po- GDP per capita, current US$ 660.3 Structural challenges faced by the sector tential for further price increases and re- a 70.1 International poverty rate ($2.15) include market distortions such as price current climate shocks, poses a consider- a 89.1 controls, trade restrictions, poorly target- able risk for exacerbating food supply Lower middle-income poverty rate ($3.65) a 97.3 ed subsidies, and low access to imported shortages. Consequently, the proportion of Upper middle-income poverty rate ($6.85) Gini index a 38.5 inputs, which constrain investment and the population living below the poverty School enrollment, primary (% gross) b 144.8 export-led growth. These effects are mag- threshold of USD $2.15 per day (2017 PPP) b 62.9 nified by increasingly frequent and de- has seen an uptick, rising from 70 percent Life expectancy at birth, years structive tropical cyclones, including Cy- in 2019 to 71 percent in 2022. Total GHG emissions (mtCO2e) 20.3 clone Freddy in February 2023, which re- Source: WDI, Macro Poverty Outlook, and official data. sulted in estimated losses and damages a/ Most recent value (2019), 2017 PPPs. b/ WDI for School enrollment (2019); Life expectancy in excess of USD$ 500 million. (2021). External imbalances impede more rapid Recent developments economic growth. Exports as a share of GDP have been declining over decades, driven by Malawi’s economy is estimated to grow by weak demand for tobacco and an overval- 1.6 percent in 2023. The resumption of elec- Amidst continued imbalances, Malawi’s ued exchange rate, which has resulted in tricity production at the Kapichira hydro- low foreign exchange reserves and a rising power plant has bolstered economic activi- economic challenges are only easing grad- spread between the official and parallel ty. However, production inputs have often ually. Growth is projected to increase in rates. The imbalance has made foreign ex- been unavailable due to foreign exchange 2023 to 1.6 percent as electricity supply change scarce, in turn constraining imports. shortages, which has dampened growth. improves. However, severe and persistent Recently increased exchange rate flexibility Following Tropical Cyclone Freddy, is a tepid step to alleviating external balance agriculture output is only marginally shortages of foreign exchange continue to challenges, though plans to increase capital larger than last year. Domestic food subdue growth. While the economy is controls could further disincentivize the ac- prices are increasing rapidly, reaching expected to grow at 2.8 percent in 2024, cumulation of foreign exchange through in- 39.4 percent year-on-year in August supported by ongoing and announced vestment and remittances. 2023 due to supply constraints. Imports reforms, such growth remains insuffi- Fiscal balances remain unsustainable. are also becoming increasingly expensive Large fiscal and external deficits have led as the kwacha depreciates. Inflation has re- cient to substantially mitigate the pre- mained high at 28.6 percent in August. In to high public debt levels at 74.7 per- vailing high levels of poverty, estimated cent of GDP in 2022. Weak public fi- turn, the policy rate was increased to 24 at 72 percent in 2023. nancial management systems have meant percent, from 14 percent a year earlier. FIGURE 1 Malawi / Fiscal deficit and public debt FIGURE 2 Malawi / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 12 90 120 390000 80 10 380000 100 70 370000 8 60 80 360000 50 6 60 350000 40 340000 4 30 40 330000 20 2 20 320000 10 0 0 0 310000 2010 2013 2016 2019 2022 2025 2010 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate Fiscal Deficit (lhs) Public Debt (rhs) Upper middle-income pov. rate Real GDP pc Sources: Ministry of Finance, Economic Planning and Development and World Bank. Source: World Bank. Notes: see Table 2. MPO 54 Oct 23 With higher interest rates, the fiscal burden Due to rising domestic prices and an an- as well as a continued exchange rate mis- of debt service has increased. ticipated decline in per capita income, the alignment may weigh on growth. Foreign exchange reserves have exhibited a percentage of individuals subsisting on Inflation will remain relatively high in modest improvement, but they remained less than USD $2.15 per day (2017 PPP) is the near term and is expected to average low at 0.9 months of import cover in June estimated to increase to 72 percent in 2023. 29.2 percent in 2023. Domestic food 2023. The Reserve Bank of Malawi com- prices are high and still rising, which menced foreign exchange auctions to sup- will contribute to upward inflationary port reserve accumulation and align the of- pressures. Successful implementation of ficial and market rates. Despite these efforts, Outlook fiscal consolidation may further con- the spread between official and parallel rate tribute to reduced growth in money sup- has increased to 64 percent in August 2023. The economy is projected to grow by 2.8 ply and contain inflation, especially for An IMF Extended Credit Facility (ECF) is percent in 2024 on the basis of ongoing non-food products. currently under negotiation and with and announced macroeconomic reforms to The fiscal deficit for FY2023/24 is expected broader macroeconomic reforms and con- address the current crisis. However, the to remain within the target for the fiscal comitant donor support, this has the poten- share of people living on less than year. However, there are risks that may tial to alleviate foreign exchange challenges. USD$2.15 a day (2017 PPP) is expected to widen the deficit. Disruption in economic The implementation of fiscal consolida- remain close to 72 percent in 2024 due to activity, especially from lower supply of tion reforms is expected to result in a stagnant per capita growth. raw materials due to forex shortages could modest decrease in expected deficits, A favorable agriculture season supported negatively impact revenues. from 10.2 percent in 2023 to 9.2 percent by improved foreign exchange inflows can Successful implementation of fiscal and in 2024. Public debt is still in distress and support economic activity in 2024, though structural reforms will be key to contain unsustainable, estimated to reach 79.5 this assumes conclusion of a program with these pressures, and a potential ECF percent of GDP in 2023. Amidst rising the IMF and increased donor support. The arrangement could unlock increased bud- rates and continued borrowing, interest government remains committed to contin- get support and enable increased invest- expenditure is expected to consume 24 ue forex auctions to support the realization ment. Finally, the implementation of ex- percent of the current budget. Negotia- of a market-determined exchange rate. ternal debt restructuring, improved ex- tions with commercial and bilateral in- This would improve the trade balance in penditure management and reduced do- ternational creditors on external debt re- the short term. However, downside risks mestic borrowing are essential for easing structuring are ongoing. from El Niño and delayed access to inputs, the public debt burden going forward. TABLE 2 Malawi / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 0.8 2.8 0.9 1.6 2.8 3.3 Private consumption 0.8 2.6 0.6 3.8 5.4 4.6 Government consumption 0.8 -1.1 4.3 13.9 -0.2 -11.0 Gross fixed capital investment 0.8 -0.2 -6.5 -17.7 2.3 11.4 Exports, goods and services 0.8 2.9 3.6 1.5 5.5 5.9 Imports, goods and services 0.8 0.4 0.1 3.6 9.3 5.8 Real GDP growth, at constant factor prices 0.8 2.8 0.9 1.6 2.8 3.3 Agriculture 3.4 5.2 -1.0 0.6 2.4 3.0 Industry 1.2 1.9 0.9 1.6 2.7 3.2 Services -0.5 2.0 1.8 2.1 3.0 3.4 Inflation (consumer price index) 8.6 9.2 21.8 29.2 19.2 11.9 Current account balance (% of GDP) -14.0 -14.4 -1.5 -3.0 -8.6 -8.9 Net foreign direct investment inflow (% of GDP) 3.4 0.8 1.2 1.1 1.5 1.7 Fiscal balance (% of GDP) -6.4 -6.9 -8.7 -10.2 -9.2 -8.3 Revenues (% of GDP) 14.7 14.7 14.6 15.2 15.7 16.5 Debt (% of GDP) 53.4 60.5 74.7 79.5 78.1 79.1 Primary balance (% of GDP) -3.4 -3.1 -3.5 -3.9 -2.4 -2.2 a,b International poverty rate ($2.15 in 2017 PPP) 70.7 70.6 71.3 71.7 71.5 71.3 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.4 89.4 89.5 89.7 89.6 89.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 97.4 97.4 97.5 97.5 97.5 97.5 GHG emissions growth (mtCO2e) 1.7 1.6 1.4 1.5 1.5 1.5 Energy related GHG emissions (% of total) 7.1 7.0 7.0 6.9 6.8 6.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-IHS-V. Actual data: 2019. Nowcast: 2020-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2019) with pass-through = 0.7 (Low (0.7)) based on GDP per capita in constant LCU. MPO 55 Oct 23 growth of 3.7 percent in 2022 (0.7 percent per capita), reflecting the strong perfor- MALI Key conditions and mance of gold mining and subsistence agriculture – sectors less impacted by the challenges sanctions – and public services. Growth slowed in Q1-2023 due to insecurity- Table 1 2022 Mali’s economy remains under-diversified linked transport bottlenecks and weak Population, million 22.6 and dominated by agriculture and low- cotton ginning output. However, growth GDP, current US$ billion 18.8 productivity services. Manufacturing ab- is expected to reach 4 percent in 2023 (0.9 GDP per capita, current US$ 833.3 sorbs little employment and is concentrat- percent per capita), supported by agri- a 15.2 International poverty rate ($2.15) ed in agro-industries and cotton ginning, culture exports, agri-food manufacturing, a 48.2 reflecting low levels of physical and hu- trade and financial services. Lower middle-income poverty rate ($3.65) a 81.0 man capital. Exports are dominated by The current account deficit (CAD) nar- Upper middle-income poverty rate ($6.85) Gini index a 36.0 gold and cotton, exposing the economy to rowed to 7 percent of GDP in 2022 de- School enrollment, primary (% gross) b 78.7 commodity and climatic shocks. Per capita spite a terms of trade deterioration as b 58.9 growth stagnated during the last decade the ECOWAS trade embargo reduced im- Life expectancy at birth, years (0.4 percent average) limiting progress in ports while gold exports continued. Both Total GHG emissions (mtCO2e) 48.1 poverty reduction while human develop- exports and imports are expected to re- Source: WDI, Macro Poverty Outlook, and official data. ment indicators show mixed results with cover in 2023, maintaining a CAD of 7 a/ Most recent value (2018), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy improvements in school attendance but percent of GDP. (2021). deteriorating access to healthcare. Inflation rose to 9.7 percent in 2022, due Persistent insecurity and a weakened so- to sanctions and high global food and en- cial contract are key bottlenecks for inclu- ergy prices but decelerated in 2023 (aver- sive growth, with the absence of the State aging 4.2 percent y/y over January-July) as GDP growth is projected to reach 4 per- in remote areas undermining service de- food inflation declined (1.8 percent over livery. Political instability following the the period), due to higher supply from last cent in 2023 (0.9 percent per capita), coups in 2020-2021 and delays in the po- year’s agricultural campaign. With lower supported by the recovery of cash crops litical transition leading to the six-month inflation, the extreme poverty rate ($2.15/ and agri-food manufacturing. Poverty is ECOWAS commercial and financial sanc- day 2017 PPP), estimated at 18.5 percent expected to resume a gradual decline af- tions in 2022 have constrained growth. The in 2022, is projected to decrease slightly to adoption of a new constitution in June 18.1 percent in 2023, mainly in rural ar- ter rising in 2022. The fiscal deficit is 2023 paves the way for general elections, eas where poverty is expected to decline expected to remain elevated with rising currently scheduled for 2024. by 0.7 percentage points. However, the hu- security outlays and the outlook is sub- manitarian situation remains serious with ject to downside risks related to the po- an estimated 1.26 million people severely litical transition, regional instability, in- food insecure during the 2023 lean season. security, climate-related shocks, and Recent developments Population displacement continues, partic- ularly in the border areas with Burkina Fa- high borrowing costs. Despite the ECOWAS sanctions, Mali’s so and Niger with over 375,000 internally economy showed resilience with real GDP displaced persons at end-April 2023. FIGURE 1 Mali / Real GDP growth, current account and FIGURE 2 Mali / Actual and projected poverty rates and real fiscal balances GDP per capita Percent, Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 6 120 270000 4 100 260000 2 80 250000 0 60 240000 -2 40 230000 -4 -6 20 220000 -8 0 210000 2017 2018 2019 2020e 2021e 2022p 2023p 2024p 2025p 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate Fiscal balance Current Account Balance GDP growth growth Upper middle-income pov. rate Real GDP pc Sources: Malian government and the World Bank. Source: World Bank. Notes: see Table 2. MPO 56 Oct 23 To counter inflation across WAEMU coun- debt stock), is projected to reach 51.3 administration reforms and improved tries, the Central Bank of West African percent in 2023. public expenditure efficiency. Fiscal States (BCEAO) raised policy interest rates deficits will continue to be mainly fi- by a cumulative 125 basis points since the nanced through domestic borrowing as start of 2022 to 3.25 percent for liquidity the availability of external financing is calls and 5.25 percent for the marginal Outlook limited. Public debt is expected to in- lending facility. However, the monetary crease to 52.3 percent of GDP by 2025. policy stance remains broadly accom- GDP growth is expected to average 4.5 per- The outlook is subject to multiple down- modative, inflation in the region is still cent over 2024-25 (1.4 percent per capita) un- side risks. Further election delays could above target and foreign exchange re- derpinned by agriculture and services, and trigger economic sanctions again and re- serves have been on a downward trend. by private consumption and the recovery of duce private investments. Other econom- The fiscal deficit is expected to stay el- capital investments. However, the with- ic risks relate to intensified insecurity evated at 4.9 percent in 2023 with high- drawal of the MINUSMA peacekeeping following the withdrawal of MINUSMA er revenues from tax administration and force by end-2023 could have localized and climatic shocks. Contingent liabili- policy measures offset by higher expen- economic impacts where the bases are lo- ties, notably of the energy utility (EDM), ditures, driven by wage bill, security out- cated. The CAD is expected to gradually domestic arrears and continued growth lays and interest payments. With limit- narrow to 4.9 percent of GDP by 2025, as new of the wage bill constitute significant fis- ed external concessional financing avail- lithium exports come onstream in 2024. cal risks. The coup in neighboring Niger able, the deficit will be primarily fi- Annual inflation is projected to gradually on 26 July 2023 and the response from nanced through domestic borrowing on fall, with the recovery of food production, ECOWAS and WAEMU (economic and the regional market, where interest rates towards the regional target of 2 percent financial sanctions) have increased re- have risen to around 8 percent for 3- by 2025. Consequently, the extreme pover- gional instability with risks of negative and 5-year bonds, compared with around ty incidence is expected to gradually de- spillover effects on security, economic, 6 percent earlier this year. Public debt, crease to 16.3 percent by 2025. and humanitarian fronts, including fur- now dominated by relatively more ex- A gradual fiscal consolidation could be ther increasing the cost of financing on pensive domestic debt (55 percent of the achieved with sustained tax policy and the regional market. TABLE 2 Mali / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.2 3.1 3.7 4.0 4.0 5.0 Private consumption 1.9 3.0 3.2 3.2 3.0 4.0 Government consumption 4.5 5.8 7.1 17.2 0.6 -0.5 Gross fixed capital investment -1.2 4.8 -10.4 -1.6 11.1 12.4 Exports, goods and services 0.5 -1.0 8.0 4.2 5.0 5.0 Imports, goods and services -2.9 14.1 -2.5 5.0 4.0 4.0 Real GDP growth, at constant factor prices -1.1 3.0 4.0 4.0 4.0 5.0 Agriculture -4.8 1.4 1.7 5.0 5.0 5.0 Industry -0.1 1.0 5.4 6.0 4.0 4.0 Services 1.4 5.1 5.0 2.5 3.3 5.4 Inflation (consumer price index) 0.5 4.0 9.7 4.0 2.5 2.0 Current account balance (% of GDP) -2.2 -7.7 -7.0 -7.0 -5.5 -4.9 Net foreign direct investment inflow (% of GDP) 3.1 3.0 2.6 2.5 3.1 3.0 Fiscal balance (% of GDP) -5.4 -4.9 -4.8 -4.9 -4.5 -3.6 Revenues (% of GDP) 20.7 22.0 19.8 21.4 21.7 22.5 Debt (% of GDP) 46.9 50.4 51.7 51.3 51.9 52.3 Primary balance (% of GDP) -4.2 -3.5 -3.3 -3.2 -2.6 -1.7 a,b International poverty rate ($2.15 in 2017 PPP) 14.9 16.2 18.5 18.1 17.7 16.2 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 47.3 48.6 51.0 50.6 50.0 48.8 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 79.8 80.3 81.4 81.5 81.1 80.2 GHG emissions growth (mtCO2e) 2.3 3.4 3.2 3.0 3.9 4.5 Energy related GHG emissions (% of total) 14.5 15.7 16.2 16.3 16.7 17.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 57 Oct 23 The macroeconomic outlook is subject to various risks. Regional insecurity per- MAURITANIA Key conditions and sists with multiple military coups and refugees migrating from neighboring challenges countries. Weak global demand could affect exports and extractive revenues. Table 1 2022 Mauritania's economic performance re- Poverty reduction remains dependent Population, million 4.7 flects structural weaknesses related to its on agricultural performance and food GDP, current US$ billion 11.1 heavy dependence on extractives, low ca- inflation; the poor depend on agricul- GDP per capita, current US$ 2334.0 pacity to implement investment projects ture for 45 percent of their total income, a 6.5 International poverty rate ($2.15) and rising quasi-fiscal recurrent expendi- and food products comprise 57 percent a 26.2 tures. Potential output growth has tripled of their consumption. Lower middle-income poverty rate ($3.65) a 66.8 over the last decade due to its rich natur- Upper middle-income poverty rate ($6.85) Gini index a 32.6 al resources, making it a lower middle-in- School enrollment, primary (% gross) b 94.3 come country subject to commodity price Life expectancy at birth, years b 64.4 shocks. The ripple effects of global shocks Recent developments on prices of iron, gold and copper are Total GHG emissions (mtCO2e) 14.4 currently constraining resources needed Economic activity is expected to remain ro- Source: WDI, Macro Poverty Outlook, and official data. to implement the national strategy bust at 4.3 percent in 2023 (1.6 percent per a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy (SCAPP, 2016-2030) which focuses on capita), supported by the expansion of ser- (2021). achieving strong, inclusive, and sustain- vices and higher mineral exports. Industri- able economic growth. al production had a slow start in the first Central to the development agenda is the quarter, contracting by 18 percent due to impact of climate change. Hazards in- weak mining, manufacturing, and con- Economic activity is expected to remain clude droughts, floods, wildfires, and ex- struction activity. This was mostly offset treme heat. Over 2000-2021, Mauritania by the services sector, while growth re- robust in 2023 after the economy re- ranked third highest in SSA on the level mained weak in the primary sector. Indus- bounded sharply in 2022, weathering of human impact from climate-related try and primary sectors recovered in the the impact of rising prices and expan- events, after Somalia and Eswatini. Loss- second quarter thanks to increases in iron, sionary fiscal conditions. Inflation eased es and damages from the July 2022 copper and electricity production and floods reached 2.7 percent of GDP and good rainfall. Inflation continued its in mid-2023 as monetary and exchange may get higher for future floods due to downward trend, driven by lower increas- rate policy helped to absorb excess liq- unplanned urbanization and inadequate es in food prices, reaching 3.7 percent (y/y) uidity. Poverty is expected to peak at 6 drainage. Deadly floods occur at least in August 2023, compared to 11.1 percent percent in 2023 and decline to 4 per- once every two years, resulting in esti- (y/y) in 2022. The downward trend is ex- cent in 2025 as the medium-term mated annual average losses of 0.25 per- pected to continue through 2023 to reach cent of GDP over the last two decades. an annual average inflation of 6 percent growth outlook remains favorable, but (y/y). The Central Bank increased the pol- The government is developing a miti- subject to downside risks. gation strategy to safeguard livelihoods icy rate from 5 to 7 percent in August and the budget. 2022, and intervened in the forex market FIGURE 1 Mauritania / Evolution of main macroeconomic FIGURE 2 Mauritania / Actual and projected poverty rates indicators and real GDP per capita Percent Percent of GDP Poverty rate (%) Real GDP per capita (constant LCU) 8 0 80 70000 -2 6 70 60000 -4 60 4 -6 50000 50 -8 40000 2 40 -10 30000 0 -12 30 -14 20000 20 -2 -16 10 10000 -4 -18 0 0 2015 2017 2019 2021 2023p 2025p 2008 2010 2012 2014 2016 2018 2020 2022 2024 GDP growth (lhs) Primary fiscal balance (lhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 58 Oct 23 to absorb excess liquidity, in an effort to The decline in food inflation in 2023, along lower food and non-food inflation (-3.4 pp subdue inflation. with growth in agriculture and services, and +2.6 pp respectively) and higher value The fiscal balance registered a deficit of 3 is expected to reduce the US$3.65 a day added per capita growth in all sectors. This percent of GDP in 2022, due to higher poverty rate. However, this decline will be decline should continue in 2025. transfers, and lower revenues. Compared tempered by higher non-food inflation and The CAD is projected to narrow after 2023 to the first seven months of 2022, the fiscal a decline in industrial prices, which will re- with higher production of iron, gas exports balance worsened in 2023 to about -1 per- duce labor incomes of industrial workers. and stronger growth in Europe (2025), cent of GDP from a surplus of 0.26 percent These make up 14 percent of the employed which should compensate for lower com- of GDP, driven by strong growth in re- population and 12 percent of the poor. modity prices and decelerating demand current expenses (45.2 percent, y/y). Debt- from the main trading partners in 2024. to-GDP fell by 4.4 percentage points to reach FDI related to the extractive industry 44.7 percent of GDP in 2022 although the ac- should finance the current account deficits. cumulation of debt could be higher in 2023 Outlook Fiscal pressures are expected to decrease given the government’s ambitious invest- in 2024-2025 leading to an average fiscal ment plan. External debt remains sustain- During 2024-2025, growth should average deficit of 1.4 percent of GDP, supported by able and at moderate risk of debt distress. 6 percent (3.4 percent per capita) support- higher revenue mobilization, lower ener- The current account deficit (CAD) ed by higher gold and iron production, the gy subsidies and lower current transfers. widened in 2022, to 12.7 percent of GDP, commencement of gas exports, and higher However, increases in the wage bill in 2023 on account of higher imports of equipment agriculture output. The onset of gas pro- and the government’s ambitious public in- for the extractive sector. A current account duction could yield fiscal space of 0.5-1.2 vestment program may pose a risk to a deficit of 6.1 percent of GDP in H1-2023, percent of GDP per annum to support in- downward fiscal and debt-to GDP path be- driven by lower exports of gold, and high- frastructure expenditures. Average infla- tween 2023 and 2025. er imports of extractive industry equip- tion could reach 6 percent in 2023, driven Risks to the outlook remain from a slow- ment and petroleum products, is projected by lower food and energy prices, and grad- down in the Euro Zone and China, if to narrow the CAD to 11.9 percent of GDP ually fall to 2.5 percent by 2025. external demand decelerates, as well as in 2023 with lower extractive equipment The US$3.65-a-day poverty rate is expect- from vulnerabilities to climatic shocks, imports and falling food import prices. ed to fall to 23.5 percent in 2024 in line with and regional insecurity. TABLE 2 Mauritania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -0.9 2.4 7.1 4.3 5.7 6.2 Private consumption 2.4 2.4 2.5 2.4 2.6 2.7 Government consumption 9.2 26.1 22.3 11.6 9.3 8.5 Gross fixed capital investment 3.7 35.2 11.9 4.2 4.8 7.0 Exports, goods and services -8.6 -11.7 6.8 6.7 7.0 9.9 Imports, goods and services 2.1 25.1 13.6 5.4 4.5 6.5 Real GDP growth, at constant factor prices -0.2 2.0 7.1 4.3 5.7 6.2 Agriculture -2.6 -3.8 7.7 5.0 5.5 5.7 Industry 2.4 -8.2 9.2 2.8 7.2 8.4 Services -0.5 10.2 6.0 4.7 5.1 5.4 Inflation (consumer price index) 2.4 3.6 9.5 6.0 3.0 2.0 Current account balance (% of GDP) -6.9 -8.1 -12.7 -11.9 -7.8 -6.0 Net foreign direct investment inflow (% of GDP) 11.0 10.6 12.7 12.1 9.2 5.8 Fiscal balance (% of GDP) 2.3 1.4 -3.0 -2.9 -2.0 -0.8 Revenues (% of GDP) 20.2 20.5 21.9 24.6 25.3 26.8 Debt (% of GDP) 55.8 49.1 44.7 46.8 46.8 45.9 Primary balance (% of GDP) 3.0 2.2 -2.3 -2.1 -1.1 0.1 a,b International poverty rate ($2.15 in 2017 PPP) 5.6 5.7 5.8 5.8 5.0 4.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 25.8 25.1 25.3 25.1 23.5 21.3 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 67.5 65.7 66.0 65.5 63.9 61.7 GHG emissions growth (mtCO2e) 3.4 2.8 2.9 3.2 3.2 3.4 Energy related GHG emissions (% of total) 31.1 31.3 31.6 32.2 32.8 33.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2014-EPCV. Actual data: 2014. Nowcast: 2015-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 59 Oct 23 highly vulnerable to global energy shocks. In 2021, about 80 percent of its electricity MAURITIUS Key conditions and was generated from imported coal and pe- troleum products. challenges The labor market has seen a significant re- covery post-pandemic, with lower unem- Table 1 2022 Mauritius sustained spectacular growth ployment rates for both men and women Population, million 1.3 since its independence in 1968, reaching and increased female participation, sug- GDP, current US$ billion 12.7 high-income status in July 2020. But real gesting a diminished burden from house- GDP per capita, current US$ 10062.7 GDP plunged by 14.6 percent due to the holds chores. Youth unemployment has also a 1.8 Lower middle-income poverty rate ($3.65) COVID-19 pandemic, causing Mauritius shown signs of reduction over the last year. a 13.5 to fall back into the upper-middle-income Upper middle-income poverty rate ($6.85) a 36.8 category in 2021. The economy contin- Gini index School enrollment, primary (% gross) b 98.4 ues to recover following efforts to contain Life expectancy at birth, years b 73.7 the pandemic and has demonstrated re- Recent developments Total GHG emissions (mtCO2e) 7.1 silience against external shocks from the war in Ukraine. Real GDP expanded by 5.5 percent (yoy) in Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2017), 2017 PPPs. But Mauritius’ growth prospects face chal- 2023Q1 compared to 6.1 percent during the b/ Most recent WDI value (2021). lenges. Mauritius is highly dependent on same period in 2022, supported by domes- tourism, while export competitiveness has tic demand and services exports. On the been eroded by rising labor costs and skills demand side, gross fixed capital formation shortages. The pandemic responses and the grew by 8.3 percent (yoy), driven by higher expansive fiscal stance created mounting investments in construction and machin- pressure on public finances. High and in- ery in Q1. Meanwhile, consumption Real GDP is expected to grow by 5 per- creasing social spending, partly driven by spending only grew by 0.5 percent yoy, cent in 2023, as the economy continues to the aging population, has led to persistent due to weaker growth in household con- recover from the deep recession in 2020. fiscal deficits and an elevated public debt-to- sumption spending. On the supply side, a Inflation reached a projected 7.3 percent GDP ratio, which reached 94.6 percent in strong rebound in the tourism sector sup- FY20/21 before declining to 88.4 percent in ported growth in accommodation and in 2023, but is forecast to ease in the FY21/22. During the pandemic, the Bank of food services. medium term. Higher pension and social Mauritius (BOM) established the Mauritius The revival in international tourism and benefits spending will add pressure to the Investment Corporation to channel support positive inflow of primary income con- fiscal deficit in 2023. The poverty rate is measures to minimize the crisis’ impact on tributed to the narrowing of the current the private sector. Avoiding policy distor- account deficit in Q1 of 2023 to $97 mil- projected to decline from 17 percent in tion and strengthening monetary policy ef- lion compared to $333 million last year. 2020 to 13 percent in 2023. The growth fectiveness will require phasing out BOM’s International tourist arrivals in Mauritius outlook is subject to downside risks. involvement in financing firms. reached 685,000 in the first half of 2023, Mauritius faces significant risks from substantially higher than the same peri- climate change and natural disasters, af- od last year and close to the 2019H1 level fecting its growth potential. It is also before the pandemic. FIGURE 1 Mauritius / Real GDP growth and sectoral FIGURE 2 Mauritius / Actual and projected poverty rates contributions to real GDP growth and real private consumption per capita Percent Poverty rate (%) Real private consumption per capita (constant LCU) 12 25 350000 9 300000 20 6 250000 3 15 200000 0 10 150000 -3 100000 -6 5 Agriculture 50000 -9 Industry -12 Services 0 0 Gross value added at basic prices 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 -15 Lower middle-income pov. rate Upper middle-income pov. rate 2018 2019 2020 2021 2022 2023e 2024f 2025f Real priv. cons. pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 60 Oct 23 The BOM has kept the key repo rate at Poverty (upper-middle-income country ratio to 78.7 percent. Meanwhile, the 4.5 percent after increasing it by 265 basis threshold of US$6.85 a day, 2017 PPP) fell amendment to the BOM Act will likely points in 2022. Monthly headline inflation from 19 percent to 11 percent between curb BOM’s financing of the govern- declined to 5.8 percent yoy in August 2023, 2012 and 2019. However, given the dra- ment’s budget deficit. compared to 12.1 percent in December matic contraction of GDP in 2020, poverty The economic outlook remains subject 2022, supported by lower global energy that year is projected to increase by over 6 to downside risks from the tightening of and food prices, of which Mauritius is a percentage points before falling to around global financing conditions, slower glob- net importer, and a slower depreciation of 13 percent by 2023. al GDP growth, and geopolitical risks the Mauritian rupee. Higher domestic in- from the war in Ukraine. The rebound terest rates led to declining household in international tourism in Mauritius loans and stagnant loans to private corpo- could reach its peak, with the coun- rations. However, banking loans to public Outlook try facing competition from other des- non-financial corporations increased by 54 tinations. The return of El Niño could percent yoy in July 2023, reflecting higher Real GDP is projected at 5 percent in negatively affect food production in cer- activities of state-owned companies. Gross 2023, driven by a strong rebound in tain parts of the world, leading to in- official international reserves remained tourism and investments before deceler- creased prices of imported food and broadly adequate at $6.6 billion (10.3 ating to 4.6 percent in 2024. Annual infla- adding pressure to domestic inflation. months of imports) as of July 2023. tion is expected to decline to 7.3 percent The government should continue strength- In July, the government introduced a new this year, aided by lower inflation in key en macroeconomic resilience by rebuilding income tax regime, which nudges income trading partners, and the introduction of fiscal buffers by raising revenue and low- tax policy progressivity. However, the rev- a new monetary framework should help ering the public debt-to-GDP ratio. Better enue impact will depend on securing col- anchor inflation expectations. The soft- targeting of social spending for those most lection from the tax base, particularly those ening of commodity prices and the re- in need will improve spending efficiency, facing a higher effective tax rate. The bound of international tourism in Mauri- improve fiscal sustainability, and free up strong economic rebound will likely in- tius will likely narrow this year’s current scarce resources for human capital invest- crease VAT receipt. Meanwhile, social account deficit to 7.6 percent of GDP. ments. Structural reforms and policies to spending is projected to increase by 11.5 Sustained spending will likely widen the improve climate adaptation and mitiga- percent in FY23/24, owing to higher social fiscal deficit to 5.8 percent of GDP in tion can help strengthen Mauritius’ and welfare measures. FY23/24 and set the public debt-to-GDP growth trajectory. TABLE 2 Mauritius / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f a Real GDP growth, at constant market prices -14.6 3.4 8.8 5.0 4.6 3.6 Private consumption -15.7 2.1 5.3 3.2 3.0 3.0 Government consumption -4.7 -3.1 4.9 2.0 2.0 1.5 Gross fixed capital investment -25.8 13.9 6.0 7.0 3.2 2.8 Exports, goods and services -27.6 9.8 22.7 9.9 9.5 7.6 Imports, goods and services -28.5 8.0 12.8 6.8 5.8 5.9 Real GDP growth, at constant factor prices -14.1 4.0 9.8 5.0 4.5 3.6 Agriculture -1.9 7.2 3.6 3.2 3.0 1.9 Industry -19.7 10.9 6.5 4.1 3.8 2.3 Services -13.2 2.2 10.9 5.3 4.7 4.0 Inflation (consumer price index) 2.5 4.0 10.8 7.3 6.2 4.8 Current account balance (% of GDP) -8.8 -13.0 -12.3 -7.6 -8.2 -8.2 Net foreign direct investment inflow (% of GDP) 111.7 21.1 -8.3 -21.4 -21.4 -21.6 b Fiscal Balance (% of GDP) -18.7 -6.8 -5.0 -5.8 -5.2 -3.7 Revenues (% of GDP) 21.6 24.0 23.6 22.5 22.2 22.2 b Debt (% of GDP) 94.6 88.4 81.0 78.7 79.1 78.8 b Primary Balance (% of GDP) -16.0 -4.3 -2.5 -3.4 -2.8 -1.3 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 2.4 2.3 2.0 1.8 1.7 1.4 c,d Upper middle-income poverty rate ($6.85 in 2017 PPP) 17.2 16.4 14.3 13.3 12.3 11.1 GHG emissions growth (mtCO2e) -12.0 10.3 7.6 3.3 3.8 3.6 Energy related GHG emissions (% of total) 61.2 60.6 62.3 62.7 63.0 63.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Historical demand-side data is being revised due to a consistency problem. b/ Fiscal balances are reported in fiscal years (July 1st - June30th). c/ Calculations based on 2017-HBS. Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. d/ Projection using neutral distribution (2017) with pass-through = 1 (High (1)) based on private consumption per capita in constant LCU. MPO 61 Oct 23 Mozambique needs more diverse and green sources of growth and jobs. Policy MOZAMBIQUE Key conditions and priorities include enhancing macroeco- nomic stability and governance, promot- challenges ing private sector participation, and strengthening resilience to shocks. Given Table 1 2022 Mozambique faces substantial develop- the upcoming LNG revenues, managing Population, million 33.0 ment challenges, including widespread the vast LNG resources efficiently, im- GDP, current US$ billion 19.2 poverty and inequality, and limited struc- proving spending efficiency, and GDP per capita, current US$ 582.9 tural transformation. Three-quarters of strengthening domestic revenue mobi- a 74.4 International poverty rate ($2.15) the population live in poverty and lization can help generate fiscal resources a 88.6 Mozambique is one of the most unequal to finance development. Rising food Lower middle-income poverty rate ($3.65) a 50.5 countries in Sub-Saharan Africa – partly prices undermine the welfare of the poor Gini index School enrollment, primary (% gross) b 118.4 reflecting low and uneven human and and most vulnerable, who spend a large Life expectancy at birth, years b 59.3 physical capital accumulation, and vul- portion of their budget on food. High Total GHG emissions (mtCO2e) 109.7 nerability to climatic shocks. The econo- vulnerability to climate shocks, and my’s dual focus on labor-intensive, low- fragility and conflict are enduring struc- Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2019), 2017 PPPs. productivity agriculture and capital-in- tural challenges, particularly for the poor. b/ WDI for School enrollment (2020); Life expectancy tensive extractives, with limited economic Sustained, broad-based, and inclusive (2021). links, constrains inclusive growth. growth will require, among other things, Over half a million people enter the labor raising agricultural productivity, includ- force each year, but less than 30,000 new ing through improved availability and ac- formal jobs are created annually. The pri- cessibility of inputs and access to markets Growth is expected to reach 6 percent in vate sector’s potential for job creation and for smallholder farmers. economic transformation has been ham- 2023, largely reflecting the start of liq- pered by regulatory bottlenecks, a large uefied natural gas (LNG) production. infrastructure deficit, and the high cost Fiscal pressures have increased due to a of credit, among other factors. Lending Recent developments higher public sector wage bill and debt interest rates in Mozambique are among service. The poverty rate remains high the highest in Sub-Saharan Africa, reflect- The economy grew by 4.4 percent (yoy) ing a shallow financial sector, rising gov- in the first half of 2023, driven by the but is projected to fall slightly from 74.5 ernment domestic borrowing, and high- start of LNG production at the Coral percent to 72.9 percent between 2023 risk premia. Mozambique is at high risk South offshore facility. Higher growth and 2025. Medium-term prospects are of debt distress, with the country lacking in agriculture and services, particularly subject to substantial fiscal risks stem- access to international capital markets, transport, also contributed to the expan- and concessional financing remains limit- sion of the economy. Inflation moderated ming from a large wage bill in a context ed. The government’s capacity to finance from a peak of 12.9 percent yoy in August of upcoming elections, and the insecuri- development is heavily constrained, with 2022 to 5.7 percent in July 2023, as global ty in northern Mozambique. the wage bill and debt-service costs ab- food prices continued to subside. Never- sorbing 95 percent of tax revenues. theless, per capita GDP growth remains FIGURE 1 Mozambique / Real GDP growth and sectoral FIGURE 2 Mozambique / Actual and projected poverty contributions to real GDP growth rates and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant FDJ) 8 100 25000 90 6 80 20000 4 70 60 15000 2 50 40 10000 0 30 -2 20 5000 10 -4 0 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023e 2024f 2025f 2008 2010 2012 2014 2016 2018 2020 2022 2024 Agriculture Extractives Manufacturing International poverty rate Lower middle-income pov. rate Services Tax GDP Real GDP pc Source: World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 62 Oct 23 low at 1.3 percent. As a result, the poverty declined by 90 percent y/y to US$586 mil- and supplements are expected to generate rate remains high at 74.5 percent. lion, as LNG imports moderated. This con- savings amounting to 1 percent of GDP. As Fiscal pressures remain elevated. Total ex- tributed to a recovery in gross international a result, the overall fiscal deficit is project- penditure reached 32.3 percent of GDP in reserves from US$2.6 billion to US$2.9 bil- ed to decline from 4.9 percent of GDP in 2022, up from 30.9 percent in 2021, mainly lion (3.3 months of non-megaproject im- 2022 to 2.3 percent of GDP over 2023-25. reflecting overrun in the cost of ongoing ports) over the same period. The current account deficit is expected wage bill reform, which aims to unify salary to increase, averaging 31.9 percent of scales to better control public sector com- GDP in the medium term, as LNG-relat- pensations. Total revenues decreased from ed imports rise. Total imports of goods 25.5 percent to 23.4 percent of GDP between Outlook are projected to average 44.8 percent 2021 and 2022, due to lower collection of val- of GDP over 2023-25, higher than the ue-added tax on goods and services and Medium-term prospects remain positive 37 percent of GDP observed in 2022. non-tax revenue. Domestic debt rose from despite being subject to substantial risks. Gas exports, foreign direct investment 24 percent to 26 percent of GDP over the Growth is projected to average 5 percent inflows, grants, and concessional financ- same period, as the country’s access to inter- over 2023-25, driven by higher offshore ing will help support sustainable levels national capital markets remains limited. LNG production and the resumption of of gross reserves (around $3.3 billion, Pressures from higher wage bill expenses the Total-led LNG project. Inflation is ex- roughly 5 months of imports). and debt-service costs persist in 2023, with pected to decline as global pressures on Key risks to the outlook stem from the the overall fiscal deficit increasing by 30 per- food and fuel prices ease. Poverty is pro- large wage bill and debt service, climate cent in the first quarter yoy. jected to decline from 74.5 percent to 72.9 shocks, waning commitment to reforms The current account deficit increased from percent of the population by 2025, al- in the run-up to the elections, and un- 22.3 percent to 32.9 percent of GDP between though the total number of poor people certainty around the security situation in 2021 and 2022, driven by imports of LNG is expected to continue to rise owing to the north. On the fiscal side, concentra- equipment, fuel, and food. The external fi- population growth. tion of government domestic bond repay- nancing gap in 2022, estimated at 2.5 percent Despite ongoing spending pressures, the ments between 2024 and 2026 could ab- of GDP, was covered by World Bank Devel- fiscal deficit is expected to improve, as the sorb about 8 percent of total revenues, opment Policy Financing, IMF credits, debt, government takes measures to strengthen and the realization of contingent liabili- and a drawdown in reserves. In the first fiscal sustainability. Measures including ties under legal dispute could undermine quarter of 2023, the current account deficit the downward adjustments of base salaries debt sustainability indicators. TABLE 2 Mozambique / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.2 2.3 4.2 6.0 5.0 5.0 Private consumption -2.2 17.3 3.0 3.7 9.2 7.0 Government consumption -19.1 -7.8 17.2 -25.4 -3.5 -8.1 Gross fixed capital investment 60.9 32.5 -6.4 10.1 0.0 6.0 Exports, goods and services -14.9 23.8 10.2 19.5 4.7 5.1 Imports, goods and services 0.0 37.2 1.9 3.3 4.1 5.0 Real GDP growth, at constant factor prices -1.8 2.2 4.2 6.0 5.0 5.0 Agriculture 3.6 3.7 4.4 6.0 4.0 4.0 Industry -5.7 1.6 3.8 7.6 8.2 8.1 Services -2.9 1.6 4.3 5.4 4.2 4.3 Inflation (consumer price index) 3.1 5.7 9.8 7.4 6.5 6.3 Current account balance (% of GDP) -27.4 -22.3 -32.9 -15.9 -37.6 -42.4 Net foreign direct investment inflow (% of GDP) 21.5 31.6 10.3 4.3 13.4 14.4 a Fiscal Balance (% of GDP) -5.7 -4.6 -4.9 -3.4 -2.5 -1.1 Revenues (% of GDP) 27.5 27.4 27.4 27.6 26.2 26.3 Debt (% of GDP) 120.0 105.0 95.2 91.0 93.4 91.5 a Primary Balance (% of GDP) -2.6 -1.9 -2.0 -0.2 0.6 1.8 b,c International poverty rate ($2.15 in 2017 PPP) 75.8 76.0 75.6 74.5 73.6 72.9 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 89.2 89.2 89.1 88.6 88.3 87.9 GHG emissions growth (mtCO2e) 1.0 1.5 0.3 1.1 2.2 3.0 Energy related GHG emissions (% of total) 8.5 9.3 8.9 9.0 9.9 10.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Figure includes once-off capital gains revenues in 2017, estimated at 2.7 percent of GDP. b/ Calculations based on 2019-IOF. Actual data: 2019. Nowcast: 2020-2022. Forecasts are from 2023 to 2025. c/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 63 Oct 23 successfully contained spending until the COVID-19 pandemic, but reducing public NAMIBIA Key conditions and debt proved difficult in a context of low growth. Debt increased markedly during challenges the pandemic as spending increased to support households. Table 1 2022 Namibia’s growth averaged 4.4 percent be- The slow post-pandemic recovery under- Population, million 2.6 tween 2001 and 2015, favored by the com- scores Namibia’s long-standing depen- GDP, current US$ billion 12.6 modity super cycle, which spurred mining dence on mineral extraction, fiscal con- GDP per capita, current US$ 4911.3 investment and services linked to mining straints, and structurally high unemploy- a 15.6 International poverty rate ($2.15) and boosted exports. During this period, ment, which limits poverty reduction and a 33.3 growth was primarily driven by invest- efforts to reduce high inequality. Estimat- Lower middle-income poverty rate ($3.65) a 57.3 ment and a growing labor force, while to- ed at 18.8 percent in 2022, the poverty rate Upper middle-income poverty rate ($6.85) Gini index a 59.1 tal factor productivity declined due to per- (using the international poverty line) is School enrollment, primary (% gross) b 125.7 sistent structural bottlenecks, including high for a country of Namibia’s income b 59.3 highly segmented input and output mar- level. The country remains one of the most Life expectancy at birth, years kets and severe skills shortages. Resource unequal in the world (with the Gini index Total GHG emissions (mtCO2e) 21.2 wealth allowed for an increase in public at 59.1 in 2015). Source: WDI, Macro Poverty Outlook, and official data. spending, which expanded household a/ Most recent value (2015), 2017 PPPs. b/ Most recent WDI value (2021). support and the delivery of public ser- vices, although access to services remains low among the poorest segments of the Recent developments population. Stronger economic growth and improvements in education outcomes In the first six months of 2023, economic supported reductions in the national activity expanded by about 4 percent. The After a strong expansion in 2022, Namib- poverty rate from 35.9 percent in 2003 to mining sector contributed most to this ia’s economy is projected to grow at a 15.6 percent in 2015 (based on the US$2.15 growth, supported by mineral exploration slower pace of 2.8 percent in 2023 as per day international poverty line) – one of activities, higher uranium output, and ro- the fastest declines in Sub-Saharan Africa. bust growth in diamond production. From growth in the mining sector moderates The expanded social programs partly the expenditure side, higher investment and other sectors continue to recover from drove a decline in inequality. and net exports underpinned growth. the pandemic. Higher import costs led to Growthcametoahaltin2016asthecommod- Household spending declined amid high higher inflation, which has compounded ity cycle ended, major investment projects inflation, substantial increases in the inter- socio-economic challenges. The projected were completed, severe drought took its est rate since the start of 2022, and estimat- course, and the government embarked on fis- ed weak employment growth. international poverty rate remains high cal consolidation after the debt ratio more Namibia’s twin deficits have narrowed at 18.4 percent. than doubled from 2010 to 2015. This brought from their post-pandemic peaks. Higher to the fore Namibia’s structural weaknesses, exports, particularly of diamonds and oth- andthesubsequentpre-pandemicyearswere er minerals, helped to narrow the current mostly marked by recession. Authorities account deficit from 15.2 percent of GDP in FIGURE 1 Namibia / FDI inflows and real GDP growth FIGURE 2 Namibia / Actual and projected poverty rates and real GDP per capita Percent of GDP Percent (y/y) Poverty rate (%) Real GDP per capita (constant LCU) 10 6 80 70000 8 70 60000 3 6 60 50000 0 50 4 40000 40 2 -3 30000 30 0 20000 -6 20 -2 10 10000 -4 -9 0 0 2015 2016 2017 2018 2019 2020 2021 2022 Q1 2009 2011 2013 2015 2017 2019 2021 2023 2025 2023 International poverty rate Lower middle-income pov. rate FDI (lhs) GDP growth (rhs) Upper middle-income pov. rate Real GDP pc Sources: Bank of Namibia and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 64 Oct 23 2022Q1 to 8.2 percent in 2023Q1. The cur- moderation of headline inflation to a is projected to narrow further in FY 2023/ rent account deficit is being adequately fi- 16-month low of 4.5 percent in July 2023. 24, supported by stronger SACU inflows. nanced by foreign direct investment, lead- Spending will increase in FY2023/24, dri- ing to an increase in foreign exchange re- ven by higher cash transfers, costs related serves to $3 billion in July 2023 from $2.8 to the census and national elections, and billion in December 2022. The reserve lev- Outlook higher capital expenditure in transport els were comfortable at 5.3 months of im- and water. The wage bill growth is expect- ports and above 20 percent of GDP. There Namibia’s economic growth is projected to ed to remain contained, although its mag- was progress on fiscal consolidation in reach 2.8 percent in 2023, and to remain nitude, representing 40 percent of expendi- FY2022/23 – the primary deficit was re- around this level over the next 2-3 years. ture, and a high debt service, will continue duced by 3.8 percentage points and the fis- Relatively moderate growth is due to still- to constrain fiscal policy flexibility. Given cal deficit narrowed to 5.1 percent of GDP. high inflation and monetary tightening, high debt levels, fiscal policy should build Amid better-than-expected growth and en- sluggish growth in South Africa and Eu- on recent gains and remain prudent and hanced tax administration measures, rev- rope, and base effects from the launch of support the stabilization of the debt ratio enues were higher than predicted, offset- a new diamond recovery vessel, which in the medium term. ting higher-than-budgeted expenditure. boosted mining output from 2022Q2. Risks to the recovery remain elevated. A The public debt ratio, including guaran- Against a tepid recovery, unemployment weaker global outlook and a tighter mon- tees, was contained at 72.5 percent of GDP, is expected to remain elevated. Severe skill etary policy stance could lower export de- supported by stronger GDP growth. shortages will require an increase in ser- mand. While global oil prices are projected Monetary policy remains broadly aligned vices imports to support energy invest- to stabilize at high levels, supply concerns with the one adopted by the South African ments. As the recovery in jobs continues to and renewed food price pressures could Reserve Bank given that the Namibian dol- lag, the international poverty rate is pro- generate new bouts of inflation, with neg- lar is pegged to the South African rand. jected at 18.4 percent in 2023. ative impacts on households’ purchasing The Bank of Namibia hiked its policy rate Inflation is projected to decline as fuel power. Water and electricity supply dis- by a further 100 basis points in 2023H1, prices decrease and food price pressures ruptions and an intensification of the adding to the cumulative 300 basis points ease. Foreign direct investment-related im- drought could also weigh on the recov- in hikes in 2022. The restrictive policy ports are expected to drive a large deficit ery, with severe impacts on mining and stance and lower fuel prices supported in the current account. The fiscal deficit agricultural output. TABLE 2 Namibia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -8.1 3.5 4.6 2.8 2.9 3.1 Private consumption -9.8 12.7 14.4 1.7 3.4 3.8 Government consumption 0.3 1.5 0.7 1.3 1.0 1.0 Gross fixed capital investment -17.7 18.4 -10.7 9.0 8.8 7.7 Exports, goods and services -16.6 1.4 20.0 9.8 3.9 3.1 Imports, goods and services -15.0 20.3 23.6 5.8 4.5 4.1 Real GDP growth, at constant factor prices -6.8 1.7 4.4 2.8 2.9 3.1 Agriculture 6.3 1.3 2.6 0.5 2.0 2.0 Industry -12.8 1.6 10.4 4.0 2.6 3.2 Services -5.6 1.8 2.2 2.6 3.1 3.2 Inflation (consumer price index) 2.2 3.6 6.1 5.5 4.8 4.5 Current account balance (% of GDP) 2.8 -9.9 -12.6 -7.7 -7.9 -8.2 Net foreign direct investment inflow (% of GDP) -1.9 5.5 7.4 8.1 5.2 5.2 Fiscal balance (% of GDP) -8.9 -8.7 -5.1 -4.4 -4.3 -4.3 Revenues (% of GDP) 33.4 29.6 31.4 33.7 32.8 31.6 a Debt (% of GDP) 70.0 72.7 72.5 74.4 74.6 73.7 Primary balance (% of GDP) -4.7 -4.4 -0.6 0.5 0.5 0.5 b,c International poverty rate ($2.15 in 2017 PPP) 20.2 19.7 18.8 18.4 18.2 17.5 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 38.7 38.0 36.9 36.7 36.2 35.9 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 62.7 62.3 61.4 61.0 60.5 60.0 GHG emissions growth (mtCO2e) -1.5 -0.2 1.9 0.5 2.0 2.0 Energy related GHG emissions (% of total) 17.9 18.0 18.3 18.3 18.4 18.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Refers to Public and Publicly Guaranteed debt. b/ Calculations based on 2015-NHIES. Actual data: 2015. Nowcast: 2016-2022. Forecasts are from 2023 to 2025. c/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 65 Oct 23 NIGERIA Key conditions and Recent developments challenges Weak economic performance in H1 2023 largely reflected the difficult pre-reform Table 1 2022 To rise to its potential and reverse its in- conditions. After growing by 3.6 percent in Population, million 218.5 creasing trend in poverty, Nigeria needs to 2021, GDP growth slowed to 3.3 percent GDP, current US$ billion 477.4 grow faster and create more quality jobs, in 2022 and further to 2.4 percent year-on- GDP per capita, current US$ 2184.4 which is predicated on a stable macroecon- year (y-o-y) in H1 2023. The deceleration a 30.9 International poverty rate ($2.15) omy and a conducive business environ- was driven by the continued weakness in a 63.5 ment. Macroeconomic stability in Nigeria oil production, lower agriculture output Lower middle-income poverty rate ($3.65) b 35.1 has steadily deteriorated over the past stemming from the sustained impact of se- Gini index School enrollment, primary (% gross) c 85.7 decade due to several factors. First, over- vere floods in Q3 2022, and a disruptive Life expectancy at birth, years c 52.7 reliance on volatile oil exports, which ac- and costly demonetization policy, which Total GHG emissions (mtCO2e) 389.9 count for more than 90 percent of total ex- adversely impacted the non-oil industrial ports. Second, limited fiscal space that and service sectors. Source: WDI, Macro Poverty Outlook, and official data. a/ Most recent value (2022). stemmed from very costly petrol subsidies, Nigeria’s chronically high inflation b/ Most recent value (2018), 2017 PPPs. low tax rates, and weak tax administration reached a 17 year high of 24.1 percent (y- c/ WDI for School enrollment (2019); Life expectancy hindered the government’s ability to de- o-y) in July 2023, partly reflecting surg- (2021). liver quality public services. Third, restric- ing food prices and the temporary impact tive trade policies, weaknesses in exchange of the removal of the fuel subsidy. A rate management, monetization of the fis- cumulative 725 basis points hike in the Nigeria faced several economic challenges cal deficit by the Central Bank of Nigeria monetary policy rate since May 2022 has in H1-2023, including a growth decelera- (CBN), and surging food prices led to dou- had little effect to rein in inflation due tion in the first quarter and rising inflation, ble-digit inflation. Other external to clogged transmission channels, also which pushed more people into poverty. shocks—including the lingering effects of weakened by direct credit allocation by the COVID-19 pandemic, and Russia’s in- the central bank, and the continued mon- Recognizing the need to change course, the vasion of Ukraine—contributed to the etization of the fiscal deficit. By the end new administration undertook crucial re- macroeconomic deterioration. of 2023, the rise in inflation and low eco- forms to restore macroeconomic stability by The new administration, faced with nomic growth will have contributed to an removing the fuel subsidy and liberalizing mounting fiscal and external pressures and increase of 2.8 million people in poverty poverty, has undertaken key reforms to re- (y-o-y), a 0.4 percentage points bump to the exchange rate. If sustained, these re- store macroeconomic stability by remov- 37.5 percent of the population. forms will yield large fiscal savings and lift ing the fuel subsidy and unifying and sig- The federal fiscal deficit was 63 percent Nigeria’s growth prospects. Risks to the nificantly liberalizing the exchange rate. higher between January and May 2023 outlook include policy reversals, protracted These reforms should help free up fiscal than in the same period in 2022, due decline in oil production, insecurity, and space, unwind critical macroeconomic dis- to increasing interest payments, higher tortions that hold back growth, and reduce capital spending ahead of the elections, climate shocks. the space for rent-seeking. and the continuous large cost of the fuel FIGURE 1 Nigeria / Oil price, government revenues, and FIGURE 2 Nigeria / Real GDP growth and sectoral real GDP growth contributions to real GDP growth Percent, Percent of GDP US$/bbl Percent 20 110 5 90 4 15 70 3 10 50 2 30 1 5 10 0 0 -1 -10 -5 -30 -2 2014 2016 2018 2020 2022 2024f -3 2020 2021 2022 2023f 2024f 2025f GDP growth (lhs) GDP growth (lhs) Revenues (lhs) Revenues (lhs) Agriculture Oil Industry Non-oil Industry Oil price (rhs) Oil price (rhs) Services Real GDP growth Sources: WDI, NBS, and World Bank. Sources: NBS and World Bank. MPO 66 Oct 23 subsidy. Although non-oil revenues in- higher than the past average of 1.4 per- of Nigerians living below the internation- creased, they are still among the lowest cent in 2015-2022 and the estimated pop- al poverty line is expected to peak in globally as a share of GDP. The fiscal fi- ulation growth, driven by services, trade, 2024 at 38.8 percent before beginning a nancing need and the devaluation of the construction, and agriculture. Inflation gradual decline, as inflation cools down naira are expected to push the public debt will further increase to 24.4 percent in and economic growth picks up. Targeted to 45 percent of GDP and keep the debt 2023 due to the removal of the fuel sub- measures, including cash transfers, could service above total revenues in 2023. The sidy but gradually moderate from early mitigate short-term adjustment costs to current account balance (CAB) recorded a 2024. The revenues-to-GDP ratio will re- the poor and vulnerable and mitigate surplus of 2.2 percent of GDP in Q1 2023, bound to 7.6 percent of GDP in 2023 and their risk of falling into intergenerational driven by lower imports and income out- increase further to 8.8 percent of GDP poverty traps. flows. However, the small CAB surpluses in 2024-2025, thanks to the fuel subsidy Several risks could result in weaker than and capital flows since 2022 have been in- and the FX reforms. Although spending expected economic performance. Internal- sufficient to increase foreign reserves, as will increase as the Government rolls out ly, policy reversals and weaker reform oil export FX flows to CBN contracted, compensating measures to shield house- impetus could lower the expected pay- likely as a result of the direct crude sale-di- holds from the initial impacts of the sub- offs. A further decline in oil production rect fuel purchase arrangements. sidy reform, the fiscal deficit is projected or inability to ramp-up non-oil revenues to still shrink from 5.0 percent of GDP quickly could also affect the external and in 2022 to about 4.0 percent in 2025. fiscal balances. Externally, continued Debt servicing is expected to drop to monetary tightening globally, the war in Outlook about 68 percent of revenues by 2025. Ukraine, unilateral food export bans, and On the external front, exports and capital climate events could undermine econom- Future economic growth in Nigeria will inflows are expected to remain subdued ic activity in Nigeria. Regional instability depend on the continued implementation in the short-term but could rise substan- sparked by the recent coup in Niger of macro-fiscal and inclusive structural tially if further macroeconomic and regu- could also weigh on the recovery. Sus- reforms. Benefiting from the recent re- latory reforms are pursued. Consequent- taining the reform momentum and un- forms, the economy is expected to grow ly, the CAB is expected to remain posi- winding structural constraints to inclu- at an average of 3.4 percent in 2023-2025, tive over the projection period. The share sive growth offers a path forward. TABLE 2 Nigeria / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -1.8 3.6 3.3 2.9 3.4 3.9 Real GDP growth, at constant factor prices -1.9 3.4 3.1 2.9 3.4 3.9 Agriculture 2.2 2.1 1.9 1.5 2.0 2.5 Industry -5.8 -0.5 -4.6 1.0 1.8 2.0 Services -2.2 5.6 6.7 4.3 4.7 5.2 Inflation (consumer price index) 13.2 17.0 18.8 24.4 14.5 10.9 Current account balance (% of GDP) -3.7 -0.7 0.2 0.6 0.6 0.8 Net foreign direct investment inflow (% of GDP) -0.2 -0.3 0.0 -0.1 -0.5 -0.6 Fiscal balance (% of GDP) -5.1 -6.6 -5.0 -5.1 -4.1 -4.0 Revenues (% of GDP) 6.5 6.7 6.9 7.6 9.0 8.6 Debt (% of GDP) 36.1 38.8 40.3 42.8 45.6 44.4 Primary balance (% of GDP) -2.8 -3.9 -1.8 -1.2 -0.4 -0.6 a,b International poverty rate ($2.15 in 2017 PPP) 34.0 36.3 37.1 37.5 38.8 38.1 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 67.2 69.1 70.0 70.4 71.6 70.8 GHG emissions growth (mtCO2e) 0.3 4.8 4.7 3.1 4.2 4.6 Energy related GHG emissions (% of total) 36.6 37.8 38.8 39.0 39.7 40.4 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-LSS. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 67 Oct 23 involve access to public and private fi- nance to increase investment to nature- RWANDA Key conditions and based solutions and renewable raw ma- terial production as well as improve ca- challenges pacity to utilize the financing. Table 1 2022 In the decade to 2019, Rwanda’s GDP Population, million 13.8 per capita increased steadily at a rate GDP, current US$ billion 13.3 of 4.5 percent a year, surpassed only by Recent developments GDP per capita, current US$ 963.8 Ethiopia among SSA economies. Rwan- a 52.0 International poverty rate ($2.15) da has also achieved substantial gains GDP growth is expected to soften to a 78.0 in poverty reduction, educational attain- about 7 percent in 2023, due to weaker Lower middle-income poverty rate ($3.65) a 92.2 ment, health conditions, and access to agricultural output and recent floods, Upper middle-income poverty rate ($6.85) Gini index a 43.7 basic services. Nevertheless, the econ- despite stronger than expected real GDP School enrollment, primary (% gross) b 140.7 omy confronts significant challenges. growth of 9.2 percent in the first quarter b 66.1 While efforts have been made to estab- (Q1). Heavy rainfall in late April and Life expectancy at birth, years lish a regulatory framework, constraints early May caused loss of life, flooding, Total GHG emissions (mtCO2e) 7.4 on competition and the dominant role landslides, and significant damage to in- Source: WDI, Macro Poverty Outlook, and official data. of public investment have limited in- frastructure and agricultural production. a/ Most recent value (2016), 2017 PPPs. b/ Most recent WDI value (2021). novation and impaired allocative effi- In Q1, growth was fueled by strong pri- ciency. Many households, particularly in vate consumption and improved net ex- rural areas, have received little benefit ports as well as services and industry. from the overall development progress. Despite floods, early economic indica- Mounting public debt presents serious tors point to continued growth in the challenges to sustainability. Rapid ur- second quarter. The industrial produc- Rwanda’s strong growth momentum banization and depletion of forest and tion index increased by 6.8 percent com- continued in early 2023—led by services water resources in recent years led to pared to 0.1 percent in the same period and manufacturing. Inflationary pres- increased vulnerability to flood risks, of 2022. Similarly, the composite indi- land degradation, and biodiversity loss. cator of economic activities rose by 6.8 sures started easing but remained ele- Overcoming these challenges will re- percent. Merchandise exports rose by vated, thus monetary policy rate was quire greater reliance on private sector 40.3 percent, outpacing a 21.6 percent raised to 7.5 percent in August. Persis- investment to enhance productivity increase in imports. As in the first quar- tently high food inflation is a threat to growth, raise the income of poor farm- ter, the momentum in the tourism sector poverty reduction, especially in rural ar- ers and the supply of off-farm employ- continued with Rwanda hosting more ment in rural and urban areas, and pro- than 20 events in the second one. Strong eas. Real GDP growth is projected at vide financing to address infrastructure tourism activity is expected to narrow about 7 percent in 2023, then to 7.6 shortfalls in the face of constraints on the trade deficit in 2023. percent on average in 2024–2025. government expenditures and increasing The National Bank of Rwanda (NBR) tight- climate change related shocks. Strength- ened further its monetary stance, raising ening resilience to climate shocks will the policy rate by 50 bps to 7.5 percent FIGURE 1 Rwanda / Headline and core inflation and central FIGURE 2 Rwanda / Actual and projected poverty rates and bank rate real private consumption per capita Percent Poverty rate (%) Real private consumption per capita (constant LCU) 25 100 700000 90 600000 20 80 500000 15 70 400000 60 300000 10 50 200000 5 40 100000 0 30 0 Dec-21 Apr-22 Aug-22 Dec-22 Apr-23 Aug-23 2010 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate Inflation (CPI) Core inflation Central bank rate Upper middle-income pov. rate Real priv. cons. pc Source: World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 68 Oct 23 in August despite the headline inflation strengthening their oversight and gover- rate falling to 11.9 percent (yoy) in July nance and risk management while safe- 2023—well below the 27.7 percent peak Outlook guarding fiscal space for human capital in November 2022. To counteract the ef- spending. On the revenue side, the Gov- fect of a sharp depreciation of the franc Growth is expected to regain momentum, ernment plans to introduce a number of against the US dollar—10.6 percent be- growing by 7.6 percent on average in tax policy measures, envisioned in the tween end-December 2022 and August 2024–25. This would be driven by some MTRS. Despite increases in 2024-25, public 2023—on inflation, the NBR has doubled improvement in global tourism demand, debt is assessed to remain sustainable with its dollar sales to commercial banks from a pickup in construction with the new moderate risk of external and overall pub- US$5 to US$10 million per week. Persis- airport, and manufacturing activities sup- lic debt distress. tently high food inflation—exceeding 30 ported by Manufacture and Build to Re- This outlook is subject to substantial percent (yoy) in rural areas since July cover Program. While goods exports are downside risks. Geopolitical tensions 2022—will continue burdening poor expected to slow, the external current ac- could cause global commodity prices to households, who spend most of their re- count deficit is projected to improve to rise again, placing renewed pressure on in- sources on food. 19.3 percent of GDP on the back of the flation and the current account. Rwanda’s Fiscal deficits—both primary and over- recovering tourism sector and services ex- agricultural sector remains exposed to in- all—are expected to narrow in 2023 on ports. Continued strong FDI inflows and creasingly frequent weather shocks, which account of ongoing fiscal consolidation. concessional financing will cover external would reduce agricultural output and lead Key drivers of fiscal consolidation are financing needs. Inflation is expected to to food insecurity and higher food prices. revenue and tax policy reforms and gradually return within NBR’s target of Projected poverty reductions of 3 ppts be- spending rationalization focusing on im- 5±3 percent in 2024. tween 2023 and 2025 (from 43.1 to 40 per- proved efficiency of government services, The FY24-FY26 budget framework reflects cent) could be reduced or even reverted limits to subsides, and more efficient cap- the Government’s commitment to fiscal if high food inflation persists. To improve ital expenditure. The primary deficit is consolidation, which will largely through on resilience to climate change, Rwanda expected to decline to 4.9 percent of streamlining and gradually reducing sub- needs to invest in and operationalize na- GDP. Public debt to GDP is estimated at sidies particularly those related to energy ture-based solutions that contribute to 69.2 percent in 2023. and fuel, and state-owned-enterprises by adaptation and growth. TABLE 2 Rwanda / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -3.4 10.9 8.2 6.9 7.5 7.8 Private consumption -5.0 8.8 11.9 5.9 6.2 6.8 Government consumption 1.9 13.7 10.6 7.5 5.8 4.5 Gross fixed capital investment -4.5 16.5 -4.2 10.1 5.3 5.7 Exports, goods and services -9.2 2.9 30.1 11.4 13.2 11.2 Imports, goods and services -3.4 3.6 16.1 10.9 7.0 5.9 Real GDP growth, at constant factor prices -3.5 10.6 7.8 6.9 7.5 7.8 Agriculture 0.9 6.4 1.6 0.9 4.7 5.0 Industry -4.2 13.4 5.0 11.0 8.5 8.5 Services -5.5 11.9 12.2 8.2 8.4 8.7 Inflation (consumer price index) 7.7 0.8 13.9 7.3 5.6 5.0 Current account balance (% of GDP) -12.1 -11.3 -9.8 -11.5 -10.1 -9.4 Net foreign direct investment inflow (% of GDP) 1.5 2.1 3.0 3.2 3.2 3.4 Fiscal balance (% of GDP) -12.6 -8.8 -7.3 -7.0 -6.8 -5.7 Revenues (% of GDP) 23.9 24.6 23.8 22.8 22.3 22.8 Debt (% of GDP) 72.5 73.4 67.5 69.2 74.5 75.1 Primary balance (% of GDP) -10.9 -7.0 -5.5 -4.9 -5.1 -4.2 a,b International poverty rate ($2.15 in 2017 PPP) 51.2 48.4 44.4 43.1 41.6 40.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 77.6 75.9 73.3 72.4 71.4 70.2 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 92.1 91.6 90.8 90.5 90.2 89.8 GHG emissions growth (mtCO2e) 0.1 3.1 2.8 3.2 3.8 3.7 Energy related GHG emissions (% of total) 16.1 16.1 15.8 15.6 15.6 15.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2010-EICV-III and 2016-EICV-V. Actual data: 2016. Nowcast: 2017-2022. Forecasts are from 2023 to 2025. b/ Projection using average elasticity (2010-2016) with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 69 Oct 23 The main risks result from continued pow- er shortages due to non-implementation of SÃO TOMÉ AND Key conditions and the energy reforms, higher commodity prices, lower external financing, slow re- challenges PRÍNCIPE covery of the tourism sector. In addition, adverse climate events could continue to STP is a fragile and small island state con- undermine the primary sector, affecting strained by remoteness, a small private food production and exports. Table 1 2022 sector, limited institutional capacity, and Population, million 0.2 scarce human capital. Underdeveloped in- GDP, current US$ billion 0.5 frastructure, particularly unreliable and GDP per capita, current US$ 2401.3 costly electricity, is a key challenge to Recent developments International poverty rate ($2.15) a 15.6 growth and fiscal sustainability. STP is a 44.8 highly dependent on external concessional Growth is estimated to have decelerated in Lower middle-income poverty rate ($3.65) a financing and has primarily pursued a the first half of 2023 due to recurrent en- Upper middle-income poverty rate ($6.85) 79.7 a “public expenditure-led” growth model. ergy shortage, aggravated by severe fuel Gini index 40.7 This model has become unsustainable due shortages, and high commodities prices b 106.8 School enrollment, primary (% gross) to the decline and volatility of grants. STP (food and fuel). Thus, the economy is ex- b 67.6 Life expectancy at birth, years is especially vulnerable to climate change pected to expand by only 0.5 percent dri- Total GHG emissions (mtCO2e) 0.4 due to the high risk of drought, coastal ero- ven by the rebound of the tourism sector, Source: WDI, Macro Poverty Outlook, and official data. sion, and flooding. as monthly tourist arrivals have increased a/ Most recent value (2017), 2017 PPPs. In recent years, economic growth has from 1,339 in January 2022 to 2,172 in Jan- b/ WDI for School enrollment (2017); Life expectancy (2021). slowed significantly due to the lingering uary 2023. Tourism recovery is being pro- effects of the COVID-19 pandemic, persis- pelled by the additional flight connections tent power outages, climate shocks, and to STP and the complete removal of pan- high commodity prices triggered by the demic restrictions. In addition, higher heightened global geopolitical tensions. global growth is driving strong demand São Tomé and Príncipe (STP)´s economy is Also, delays in external financing disburse- for cocoa and palm oil, which lifted total expected to stagnate, with GDP growing ments reduced foreign exchange reserves to goods exports by 5.8 percent year-on-year only by 0.5 percent in 2023, due to persis- critical levels. The new government is com- in June 2023. tent power shortages and high commodities mitted to implement the needed structural The current account deficit (CAD), exclud- reforms to restore macroeconomic stability ing grants, has narrowed from US$ 20.2 prices. As a result, extreme poverty is ex- and promote growth, particularly energy million to US$ 15.6 million year-on-year in pected to increase. In the medium term, re- reforms. The authorities have introduced the first quarter of 2023 (H1) due to higher forms supported by the new IMF program new fiscal measures such as the value-added agricultural and tourism exports growth, will help restore macro-stability and unlock tax (VAT) and fuel price adjustments. The which helped to partially offset the higher government has also requested a new IMF costs of imports, particulary food, fuel, and growth potential. Delays in the implemen- program to support the reform agenda, fertilizers. However, the lower-than-ex- tation of energy reforms are the main risks which is also expected to mobilize addition- pected external financing disbursements to the outlook. al concessional financing. have decreased net international reserves FIGURE 1 São Tomé and Príncipe / Real GDP growth and FIGURE 2 São Tomé and Príncipe / Actual and projected contributions to real GDP growth poverty rates and real GDP per capita Percent (y/y) Poverty rate (%) Real GDP per capita (constant FDJ) 5 100 25000 4 90 3 80 20000 2 70 1 60 15000 0 50 -1 40 10000 30 -2 20 5000 -3 10 -4 0 0 2018 2019 2020 2021 2022f 2023f 2024f 2025f 2010 2012 2014 2016 2018 2020 2022 2024 Agriculture Industry International poverty rate Lower middle-income pov. rate Services Real GDP growth rate Upper middle-income pov. rate Real GDP pc Sources: São Tomé and Príncipe authorities' data and IMF and World Bank staff Source: World Bank. Notes: see Table 2. estimates. MPO 70 Oct 23 from US$ 23.3 million (equivalent to 1.5 less than US$2.15 per day (in 2017 PPP are projected to drive a moderate decline months of imports) in April 2022 to US$ terms) in 2022. in public debt in the medium term. While 12.3 million (0.8 months of imports) in May the introduction of the VAT is likely to lead 2023 after being topped up by a currency to a temporary increase in prices, inflation swap between the central bank and Afrex- is projected to drop to 7.2 percent by the imbank in the amount of US$ 30 million. Outlook end of 2024, owing to the continued sup- This transaction also aimed to protect the port of the peg by the Central Bank and currency peg to the euro. Real GDP growth is expected to recover lower commodity price pressure. Howev- Fiscal performance has deteriorated due to to 2.5 percent in 2024 supported by a dy- er, without appropriate welfare monitor- a decline of 22.3 percent in grants in H1. namic agricultural sector, stronger tourism ing and targeted social support following But it is expected to improve due to the rebound and continued implementation of the introduction of the VAT, the share of introduction of VAT, and resumption of externally funded infrastructure develop- people living in extreme poverty is expect- grants disbursements. Public expenditures ment projects. The CAD is projected to ed to slightly increase in 2023 and poverty will be contained by a front-loaded fiscal slightly narrow to 17.9 percent of GDP reduction could stagnate in 2024, despite adjustment under the new IMF program. boosted by gains from cocoa and palm oil the positive growth prospects. As such, the domestic primary deficit (ex- exports, expansion of tourism services The outlook is subject to significant cluding oil and grants) is projected to re- along with a moderate decline in the im- downside risks. Delays in the implemen- duce significantly from 5.7 percent in 2022 port of oil products as the energy sector be- tation of overdue energy reforms could to 2.4 percent in 2023. Similarly, public comes more efficient. intensify power shortages. Additional debt will decrease from 92.3 percent to 89.2 The country’s fiscal position is expected risks stem from the slower implementa- percent of GDP over the same period. In- to further improve in 2024, thanks to the tion of externally funded infrastructure flation remained high at 25.4 percent in introduction of VAT in June 2023. More- projects which could subdue industrial June 2023, reflecting continued pressure on over, the implementation of the planned activity and undermine economic prices of imported goods, and the fuel energy reforms as well as the gradual re- growth. Further delays on the new IMF price adjustments in mid-2023. These dy- sumption of fiscal consolidation supported program could lead to uncertainty on ex- namics are likely to further increase ex- by the IMF program will contribute to a ternal financing. Moreover, climate-relat- treme poverty which is already high with domestic primary surplus of around 0.5 ed events could also strain the agricultur- 15.5 percent of the population living on percent of GDP in 2024. These measures al and fisheries sectors. TABLE 2 São Tomé and Príncipe / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 3.1 1.9 0.1 0.5 2.5 3.3 Real GDP growth, at constant factor prices 2.3 1.6 0.9 0.5 2.5 3.3 Agriculture -1.1 -1.0 -1.5 0.5 2.0 2.8 Industry 4.4 -1.5 -1.2 -0.5 1.5 2.0 Services 2.2 2.6 1.6 0.7 2.8 3.6 Inflation (consumer price index) 9.4 9.5 25.2 15.4 7.2 5.0 Current account balance (% of GDP) -11.3 -18.6 -16.0 -19.3 -17.9 -16.6 Fiscal balance (% of GDP) -4.9 -6.0 -6.1 -4.9 -2.9 -1.0 Revenues (% of GDP) 26.0 19.7 21.8 19.4 20.9 21.4 Debt (% of GDP) 87.6 91.6 92.3 89.2 86.5 84.2 Primary balance (% of GDP) -4.5 -5.8 -5.6 -4.6 -2.5 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) 15.3 15.3 15.5 15.6 15.5 15.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 44.5 44.5 44.7 44.9 44.8 44.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 79.1 79.2 79.5 79.8 79.7 79.5 GHG emissions growth (mtCO2e) 1.2 0.9 0.6 1.0 1.6 1.8 Energy related GHG emissions (% of total) 37.0 37.1 37.1 37.4 38.0 38.7 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. b/ Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. Actual data: 2017. Nowcast: 2018-2022. Forecasts are from 2023 to 2025. MPO 71 Oct 23 2023 Debt Sustainability Analysis assessed Senegal at moderate risk of debt distress SENEGAL Key conditions and with limited fiscal space to absorb shocks. Interest payments have risen rapidly in re- challenges cent years, totaling 8.4 percent of public spending in 2022. Putting debt on a down- Table 1 2022 The implementation of the Emerging ward trajectory would require improved Population, million 17.3 Senegal Plan has resulted in economic governance and enhanced public expendi- GDP, current US$ billion 27.7 growth averaging 6 percent between 2014 tures efficiency, creating space for more GDP per capita, current US$ 1598.7 and 2019, thanks to the dynamism of targeted social spending. a 9.2 International poverty rate ($2.15) the agriculture and services sectors cou- a 37.6 pled with public and private investment Lower middle-income poverty rate ($3.65) a 74.4 in infrastructure. This has contrasted with Upper middle-income poverty rate ($6.85) Gini index a 38.3 persistent structural weakness, including Recent developments School enrollment, primary (% gross) b 81.2 productivity stagnation, limited human b 67.1 capital, slow poverty reduction, and in- Senegal’s GDP is expected at 4.1 percent Life expectancy at birth, years creasing informality. Recent external in 2023 (1.4 percent per capita), with a Total GHG emissions (mtCO2e) 36.6 shocks and inflation due to spillovers downward revision from the previous Source: WDI, Macro Poverty Outlook, and official data. from Russia’s invasion of Ukraine and MPO forecast of 4.7 percent growth re- a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). political tensions linked to the 2024 Pres- flecting the impact of social unrest in ad- idential elections have led to an upsurge vance of elections in 2024, combined with in social unrest, leading to the periodic higher inflation and monetary tightening. closure of businesses that disproportion- Social unrest has disrupted key sectors, ately affects the service sector, deterring reducing consumer spending and invest- Growth is projected to slow to 4.1 percent domestic and foreign investment. The sit- ment. The ICT and financial sectors are in 2023, reflecting the impact of domestic uation is further exacerbated by growing also set to contract, and foreign invest- social unrest, while the fiscal deficit regional instability, with multiple coups ment could decline, hampering growth should narrow to 4.9 percent of GDP, fol- in neighboring countries, creating a more prospects. Growth in the agriculture sec- unpredictable outlook that threatens to tor should be bolstered by a good rainy lowing a commitment to fiscal consolida- undermine efforts to reduce poverty. season and an increase in budgeted sup- tion. Growth should rebound to 8.8 per- Persistent inflationary pressures have re- port services to FCFA 100 billion. cent in 2024 driven by hydrocarbon pro- duced households purchasing power, Using the international low middle in- duction. Risks are titled to the downside, particularly for the most vulnerable, come poverty line of $3.65 per person a including persistent inflation, a delay of which have less flexibility to access alter- day, poverty is expected to slightly de- native sources of income while tighten- cline to 37.1 percent in 2023 from 37.7 hydrocarbon production, failure to elimi- ing financial market conditions continue percent in 2022. The moderation in the nate energy subsidies and domestic and to drive up the cost of debt service and downward trend is due to inflation re- regional instability. investment. Regressive energy subsidies maining high (projected to average 5 per- remain significant, to the detriment of so- cent at end-2023) while growth is expect- cial and investment spending. The June ed to rebound in per capita terms in FIGURE 1 Senegal / Evolution of main macroeconomic FIGURE 2 Senegal / Actual and projected poverty rates and indicators real GDP per capita Percent Percentage Poverty rate (%) Real GDP per capita (constant LCU) 10 0 100 1100000 8 90 -5 1000000 6 80 70 900000 4 -10 60 800000 2 -15 50 0 700000 40 -2 -20 30 600000 -4 20 -6 -25 500000 10 2015 2017 2019 2021 2023p 2025p 0 400000 GDP growth (lhs) 2011 2013 2015 2017 2019 2021 2023 2025 Primary fiscal balance (lhs) International poverty rate Lower middle-income pov. rate Current account balance (rhs) Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 72 Oct 23 the agricultural sector, which employs 28 subsidies look slower than anticipated, re- 69.1 percent by 2025 from 75.0 percent in percent of the workforce, 51 percent of sulting in less financial resources chan- 2022. The CAD is projected to narrow over rural workers, and 48 percent of workers neled towards government social and in- the medium term to 4.2 in 2025, supported in poverty. Poverty could decline faster vestment priorities. The current account by hydrocarbon exports. if the coverage and amount of social as- deficit (CAD) is projected to narrow to 13.3 The combination of rising growth, accel- sistance payments increases, notably from percent in 2023, with the resumption of erated by the production of hydrocar- savings due to the elimination of costly, trade with Mali and the gradual decline in bons, good agricultural performance, and regressive energy subsidies. investment in the hydrocarbon sector. a decline in inflation to the 3 percent To counter inflation across WAEMU regional target should lead to a signif- countries, the Central Bank of West icant decline in poverty in 2024, with African States raised policy interest rates the incidence reaching 33.1 percent in by a cumulative 125 basis points since Outlook 2025. However, sustaining more inclusive the start of 2022 to 3.25 percent for liq- growth requires greater investment in uidity calls and 5.25 percent for the mar- Growth is expected to increase to 8.8 per- human capital and adaptive social protec- ginal lending facility. However, the mon- cent in 2024 and 9.3 percent in 2025, driven tion systems to help the vulnerable cope etary policy stance remains broadly ac- by hydrocarbon production and public with shocks, along with a phasing out commodative, inflation is still above tar- and private investments. Inflation is ex- of regressive energy subsidies and more get, and foreign exchange reserves have pected to gradually decline to 2 percent by sustained domestic revenue mobilization been on a downward trend. 2025, relieving pressure on financing rates efforts. Other risks to the outlook include The fiscal balance is projected to narrow and enabling poverty reduction. The fiscal a further delay in hydrocarbon produc- to 4.9 percent of GDP in 2023. While the deficit is expected to meet the regional con- tion, poor agriculture performance due to authorities are committed to fiscal consol- vergence criteria of 3 percent of GDP by climate variability, high regional interest idation, expected tax policy reforms and the 2025, thanks to fiscal consolidation efforts. rates persistent inflation, and continued phasing out of costly, regressive energy As a result, public debt is set to decline to social instability. TABLE 2 Senegal / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 1.3 6.5 4.2 4.1 8.8 9.3 Private consumption 2.3 3.1 2.9 2.0 6.0 6.4 Government consumption 0.8 13.3 6.4 6.2 6.1 5.5 Gross fixed capital investment 7.2 16.5 7.2 8.1 10.7 11.5 Exports, goods and services -13.2 22.6 8.1 8.3 15.1 18.2 Imports, goods and services 7.0 15.5 23.8 5.7 6.9 8.9 Real GDP growth, at constant factor prices 1.9 6.3 3.9 4.1 8.8 9.3 Agriculture 12.2 0.6 -1.4 5.2 5.5 5.6 Industry -1.5 7.8 1.1 3.2 16.9 22.3 Services 0.6 7.5 6.7 4.1 6.3 4.4 Inflation (consumer price index) 2.5 2.2 9.6 5.0 3.0 2.0 Current account balance (% of GDP) -10.9 -12.1 -19.9 -13.3 -6.1 -4.2 Fiscal balance (% of GDP) -6.4 -6.3 -6.1 -4.9 -3.9 -3.0 Revenues (% of GDP) 20.1 19.5 20.5 21.5 22.0 22.3 Debt (% of GDP) 69.1 73.3 75.0 75.9 71.9 69.1 Primary balance (% of GDP) -4.3 -4.3 -3.9 -2.4 -1.5 -0.8 a,b International poverty rate ($2.15 in 2017 PPP) 8.8 8.2 9.1 8.7 7.7 6.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 37.6 36.4 37.7 37.1 35.4 33.1 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 75.4 73.9 74.8 74.5 72.7 70.4 GHG emissions growth (mtCO2e) 0.9 5.2 2.6 2.5 5.1 5.0 Energy related GHG emissions (% of total) 25.5 27.0 28.0 28.9 30.5 32.3 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 73 Oct 23 flooding, erosion, and ecosystem degra- dation. Also, an environment levy on vis- SEYCHELLES Key conditions and itors was approved in the 2023 Budget. Seychelles aims to strengthen its climate challenges resilience using mostly concessional fi- nancing, complemented by private sector Table 1 2022 A rebound in tourism, coupled with pru- efforts, given the country’s clear climate Population, million 0.1 dent fiscal management, has supported the change strategies and commitments and GDP, current US$ billion 1.6 Seychelles’ quick economic recovery from a public-private partnership law that can GDP per capita, current US$ 15931.5 the COVID-19 pandemic. The tourism re- facilitate investment in green energy and a 0.5 International poverty rate ($2.15) covery and inflows of foreign exchange eco-friendly transport. a 1.2 contributed to strengthen the Seychelles’ Wage income has played a crucial role in Lower middle-income poverty rate ($3.65) a 6.7 currency, offsetting imported food and fu- reducing poverty levels, as more house- Upper middle-income poverty rate ($6.85) Gini index a 32.1 el inflation, and helping contain annual in- holds participate in the labor market. Un- School enrollment, primary (% gross) b 99.3 flation in 2023. The rollback of COVID-19 fortunately, the rapidly growing rate of b 73.4 supports measures, including a reduced drug and alcohol addiction is becoming a Life expectancy at birth, years wage bill and the scaling back of social challenge to labor market participation. Total GHG emissions (mtCO2e) 0.9 programs, reduced spending and helped This is increasing the country’s reliance on Source: WDI, Macro Poverty Outlook, and official data. contain inflation. migrant workers to sustain its growing a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). However, the Seychelles remains vulnera- tourism industry. ble to external shocks. A global slowdown or a sudden drop in tourist arrivals could have severe negative impacts on growth. GDP growth is expected to slow to The decline of tourism-led foreign ex- Recent developments change inflows could spill over into a around 4 percent in the medium-term, sharp weakening of the Seychelles rupee, Real GDP is expected to grow by 4.3 given reduced tourism receipts; and mod- with a high pass-through to inflation. percent in 2023, compared to 9 percent erate global prices are expected to ease in- Weaker prospects for external grants may in 2022, owing to slower tourism limit financing options and weaken the growth. As of July 2023, tourist arrivals flation. Slower growth is projected to balance of payments. Moreover, financial were 201,028, or about 93 percent of marginally reduce poverty to 5.6 percent stability risks may arise from further in- 2019 levels. The inflation rate contracted of the population in 2023. The govern- creases in non-performing loans due to by 2 percent in July 2023, owing to con- ment’s effort to maintain fiscal sustain- large exposures and credit concentration. tinued currency appreciation, helped by ability while increasing resilience in the Sustaining high growth and macroeco- declining global food and fuel prices. nomic stability requires increased efforts The Seychelles rupee appreciated to fisheries and tourism sectors is expected to address the country’s high vulnerabil- SRs13.5 per US dollar in 2023 from to keep the economy on a stronger footing ity to climate shocks. More than 4 per- SRs14.3 per US dollar in 2022, owing to in the medium term. cent of Seychelles’ budget goes towards the robust performance of the tourism climate resilience measures, including industry, which has resulted in sus- strategic investments to address coastal tained foreign exchange inflows. FIGURE 1 Seychelles / Real GDP growth and sectoral FIGURE 2 Seychelles / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 10 20 300000 8 18 250000 6 16 14 4 200000 12 2 10 150000 0 8 -2 100000 6 Agriculture -4 4 Industry 50000 -6 Services 2 Gross value added at basic prices 0 0 -8 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 -10 International poverty rate Lower middle-income pov. rate 2018 2019 2020 2021 2022 2023e 2024f 2025f Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 74 Oct 23 The current account deficit is estimated to compared to 2022Q1, leading to a slight rupee is expected to remain strong at increase from 7.6 percent in 2022 to 9.5 per- decrease in poverty levels, from 5.9 percent SRs13.3 per US dollar by end-2024, sup- cent of GDP in 2023, as tourism inflows in 2022 to 5.6 percent in 2023. ported by modest flows of foreign ex- moderate and imports rise, reflecting a re- change into the tourism sector. The current bound in capital investments. Foreign ex- account deficit is projected to average 10.4 change reserves stood at US$728 million percent of GDP in the medium term, due (3.1 months of imports) as of July 2023, Outlook to lower tourism inflows and a decline in due to higher foreign exchange demand foreign direct investment inflows to hotels for goods and services imports. The fiscal The outlook remains positive; however, a and resorts. The deficit will be financed by deficit increased from 1.6 percent of GDP slowdown in GDP growth of 4 percent is concessional loans and domestic borrow- in 2022 to 3 percent in 2023, reflecting an expected in 2023-24, reflecting weak ing. Foreign exchange reserves are project- increase in capital expenditure due to tourism earnings. The outlook for tourism ed to reach 3.6 months of imports by the some new projects financed by grants (a earnings is subject to downside risks based end of 2024. drug rehabilitation center, and a new hos- on global developments that could lead to Continued fiscal consolidation is expected pital on La Digue island). Revenues re- both lower arrivals and reduced spending to put the country in a stronger fiscal po- main buoyant, supported by efforts to im- by tourists. Growth will be supported by sition and improved investor confidence. prove tax administration and compliance efforts to increase climate resilience in fish- A planned increase in the wage bill of 0.6 through the Tax Amnesty Programme. eries management while investing in new percent of GDP would be partially fi- Lower spending on wages and social pro- fish-processing units, and hotels (as well as nanced by cuts in allowances. The govern- grams, coupled with delayed capital renovation of existing establishments). ment will continue its targeted program of spending helped reduce financing needs in The ICT sector is expected to remain strong, social support and temporary cash trans- 2022, contributing to lower public debt to in line with rapid increases in data traffic. A fers to protect the most vulnerable and em- 68.3 percent of GDP in 2023 from 69.9 per- steady recovery is also expected in trans- power Seychellois to get well-paying jobs. cent of GDP in 2022. portation and storage activities. Average in- Ongoing reforms to the social protection Slower economic growth is also reflected in flation is projected to average 1.7 percent in system will ensure its sustainability and employment numbers. In 2023Q1, total em- the medium term, reflecting a moderation in promote increased labor force participa- ployment increased by 3.7 percent while av- global energy and food prices and recover- tion of working-age beneficiaries. This erage earnings increased by 0.4 percent ing private consumption. The Seychelles would contribute to reducing poverty. TABLE 2 Seychelles / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -7.7 5.4 9.0 4.3 4.1 3.9 Private consumption -5.1 4.2 6.6 6.5 6.0 3.5 Government consumption 17.0 7.3 2.6 1.2 1.4 1.4 Gross fixed capital investment -11.4 3.3 2.8 1.9 1.3 0.9 Exports, goods and services -25.2 9.2 9.2 2.6 2.2 3.4 Imports, goods and services -15.5 7.7 3.1 2.0 1.4 1.2 Real GDP growth, at constant factor prices -8.4 5.3 8.9 4.3 4.1 3.9 Agriculture -12.5 3.1 3.5 3.1 2.9 2.7 Industry 0.6 2.5 3.7 3.3 3.1 3.0 Services -10.0 6.0 10.3 4.5 4.3 4.1 Inflation (consumer price index) 1.2 9.8 2.6 0.9 1.4 2.0 Current account balance (% of GDP) -14.0 -11.0 -7.6 -9.5 -10.1 -10.8 Net foreign direct investment inflow (% of GDP) 11.4 12.4 14.2 12.6 13.2 17.5 Fiscal balance (% of GDP) -18.2 -6.4 -1.6 -3.0 -2.4 -1.4 Revenues (% of GDP) 35.2 36.1 33.7 35.8 36.3 35.9 Debt (% of GDP) 91.9 81.3 69.9 68.3 66.8 64.7 Primary balance (% of GDP) -15.2 -3.2 0.7 -0.4 0.2 1.0 a,b International poverty rate ($2.15 in 2017 PPP) 0.6 0.5 0.5 0.4 0.4 0.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 1.4 1.2 1.0 1.0 1.0 0.9 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 7.3 6.8 5.9 5.6 5.6 5.2 GHG emissions growth (mtCO2e) -17.3 16.8 17.4 3.2 2.5 3.6 Energy related GHG emissions (% of total) 76.0 79.0 81.7 81.9 82.0 82.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-HBS. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2018) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 75 Oct 23 and fiscal overspend. GDP growth was estimated at 3.6 percent in 2022, only SIERRA LEONE Key conditions and marginally lower than the post-pandem- ic rebound in 2021 (4.1 percent). This challenges higher-than-expected growth was driven by robust agriculture, gains in iron-ore Table 1 2022 Economicdevelopmenthasbeenconstrained mining, and government spending, al- Population, million 8.6 by concurrent shocks and periods of weak though the latter invoked higher in- GDP, current US$ billion 3.9 economic management. Growth has been flation and fiscal deterioration. Prelimi- GDP per capita, current US$ 457.4 slower and more volatile during the past nary 2023 data indicates that the growth a 26.1 International poverty rate ($2.15) decade than before. Economic activities have momentum may have stalled as persis- a 64.3 remained concentrated in low-value-added tent inflationary pressures have eroded Lower middle-income poverty rate ($3.65) a 89.9 agriculture, mining, and informal services, household consumption. Upper middle-income poverty rate ($6.85) Gini index a 35.7 reflecting policy and institutional weakness- Inflationary pressures have persisted School enrollment, primary (% gross) b 156.4 es in creating an enabling business environ- amidst a combination of global shocks, b 60.1 mentandtheprevalenceofweakaccountabil- and policy slippages. Headline inflation Life expectancy at birth, years ity and vulnerability to exogenous shocks. averaged 27 percent while the Leone Total GHG emissions (mtCO2e) 9.7 TheCOVID-19pandemicandspilloversfrom depreciated by over 40 percent during Source: WDI, Macro Poverty Outlook, and official data. the Russian invasion of Ukraine have exacer- 2022 on the back of higher import prices a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). bated economic deterioration, with GDP and monetization of the fiscal deficit. growthslowingduring2020-2022tolessthan These pressures have persisted in 2023, 1/3rdofpre-pandemicaverage(2017-2019). with inflation rising to a 26-year high Macroeconomic management remains chal- of 44.9 percent (y-o-y) in July (the third lenging. Fiscal and debt pressures have sig- highest in Sub-Saharan Africa) and the The economy has been set back by a nificantly intensified, while inflation has Leone depreciating further by 15 per- combination of exogenous shocks and soared, driven by global supply shocks, cent year-to-date. Food inflation rose to policy slippages. Loose monetary and fis- and exchange rate depreciation. A rise in 60 percent y-o-y in July 2023. The Bank cal policies have aggravated the impact cost of living combined with weak growth of Sierra Leone has raised rates since threatens to increase poverty. Higher the start of 2022 by 500bps to 19.25 per- of exogenous shocks, resulting in soar- prices have squeezed household budgets, cent, but monetary policy effectiveness ing inflation, exchange rate pressures, and poverty, food insecurity have wors- was limited by shallow financial mar- and a rapid debt buildup. Record infla- ened (affecting 57 percent of the popula- kets and fiscal dominance. tion has precipitated a cost-of-living cri- tion), affecting social and political stability. The fiscal position has worsened and sis and intensified food insecurity. Look- risks to debt sustainability have inten- sified. The fiscal deficit widened to 9.6 ing ahead, a sustained growth momen- percent of GDP in 2022 – 2pp high- tum and a credible commitment to fiscal Recent developments er than in 2021 – driven largely by discipline will be crucial for restoring higher-than-budgeted expenditures at macroeconomic and social stability. Economic growth surprised on the upside 28.9 percent of GDP (7.7pp above tar- in 2022 due to strong mining production get). Revenues came in slightly lower FIGURE 1 Sierra Leone / Real GDP growth and FIGURE 2 Sierra Leone / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 40 100 2.0 30 90 20 80 1.5 70 10 60 0 50 1.0 -10 40 -20 30 0.5 -30 20 -40 10 2015 2017 2019 2021 2023 2025 0 0.0 Gov. cons. Exports GFCF 2011 2013 2015 2017 2019 2021 2023 2025 Inventories Private cons. Imports International poverty rate Lower middle-income pov. rate Statistical disc. GDP Upper middle-income pov. rate Real GDP pc Sources: Statistics Sierra Leone and World Bank. Source: World Bank. Notes: see Table 2. MPO 76 Oct 23 than expected (1.1pp below target). The were insufficient, and as the BSL inter- Maintaining fiscal discipline will be cru- excess deficit was financed domestical- vened to contain currency depreciation. cial in restoring macroeconomic stability ly, aided by BSL interventions in the Although international poverty (US$2.15/ and is contingent on the government’s secondary market. By end-2022, public person/day 2017 PPP) rates have declined adherence to its stated reforms, including debt rose to 96 percent of GDP (from since 2020, it remains higher than the pre- (i) sharp expenditure consolidation, fol- 85 percent in 2021) and risks to debt pandemic levels. The international poverty lowed by continued revenue mobilization sustainability had considerably intensi- is projected at 25 percent in 2023, nearly efforts, and (ii) gradual reduction in net fied. External debt, mainly owed to mul- the same level as 2019, due largely to the credit to government. tilaterals, constituted 2/3rd of the to- cumulative effects of economic contraction Poverty is expected to decrease gradually tal; while the remaining is high-inter- in 2020, followed by rising inflation, partic- as households regain their purchasing est, short-term domestic debt. In early ularly food inflation which disproportion- power, to 23.9 percent in 2025 (US$2.15/ 2023, the government began tightening ately affects the poor. person/day). The economy’s outlook is its policy stance to restore macro sta- tied to a limited number of exports, bility – this included expenditure re- mostly minerals. However, the mining straint and the enactment of a revised sector is capital intensive and has a lim- Finance Act to improve revenue collec- Outlook ited impact on poverty reduction which tions. These efforts facilitated the com- requires higher agricultural productivity, pletion of a delayed IMF-ECF program Growth is projected to decelerate to 3.1 infrastructure development, and human review by its Board in June 2023. percent in 2023 against a backdrop of capital investments. The trade balance has improved marginally high inflation and fiscal consolidation, This outlook is subject to several downside due to stronger exports. Exports grew by 50 before converging to its long-term aver- risks. Recent fiscal slippages have raised percent during 2022 – and further by 19 per- age of 4-4.5 percent in the medium-term. concerns about budget credibility and cent y-o-y during thefirst halfof 2023–large- The projected recovery will be supported macro stability. Risks to debt sustainability lyduetoiron-ore.Thecurrentaccountdeficit by mining and agricultural growth, and will remain elevated until fiscal balances narrowed slightly to 8.5 percent of GDP in the gradual restoration of macro stability improve further, and the reliance on ex- 2022, despite higher imports prices. Howev- with a more supportive fiscal stance. In- pensive domestic borrowings is addressed. er, gross reserves declined to 4 months of im- flation will be influenced by global com- Severe climate vulnerabilities and inflation ports in 2022 (from 6 in 2021) and further to 3 modity prices and is expected to moder- could increase food insecurity and social months by August 2023 as capital inflows ate only to 14.3 percent by 2025. tensions and affect reform appetite. TABLE 2 Sierra Leone / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -2.0 4.1 3.5 3.1 3.7 4.3 Private consumption 5.4 36.7 -1.5 6.2 6.0 5.8 Government consumption 2.7 0.6 13.7 5.5 5.2 7.4 Gross fixed capital investment -9.6 -30.0 -3.3 2.2 8.6 5.2 Exports, goods and services -9.8 1.9 5.0 15.0 18.0 12.0 Imports, goods and services 7.5 46.6 -0.3 11.9 12.0 9.9 Real GDP growth, at constant factor prices -2.0 4.0 3.6 3.1 3.7 4.3 Agriculture 1.6 2.5 3.0 2.7 3.2 3.3 Industry -7.1 17.4 8.2 5.0 6.0 6.6 Services -5.8 2.8 3.3 3.2 3.7 5.0 Inflation (consumer price index) 13.5 11.9 27.0 35.0 19.8 14.3 Current account balance (% of GDP) -6.8 -8.7 -8.5 -7.2 -6.6 -5.9 Net foreign direct investment inflow (% of GDP) 3.3 8.5 8.5 6.4 5.6 4.1 Fiscal balance (% of GDP) -6.7 -7.6 -9.6 -5.9 -3.8 -4.3 Revenues (% of GDP) 19.0 21.1 19.6 19.9 22.4 22.6 Debt (% of GDP) 78.0 84.7 96.3 88.0 79.0 77.3 Primary balance (% of GDP) -3.7 -4.2 -6.2 -1.4 1.7 1.7 a,b International poverty rate ($2.15 in 2017 PPP) 26.4 25.9 25.4 25.0 24.5 23.9 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 64.6 64.2 63.7 63.4 62.9 62.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 90.1 89.9 89.7 89.6 89.3 89.1 GHG emissions growth (mtCO2e) -1.4 0.8 3.2 2.4 2.9 3.3 Energy related GHG emissions (% of total) 9.1 9.1 8.7 8.4 8.1 7.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2011-SLIHS and 2018-SLIHS. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projection using point-to-point elasticity (2011-2018) with pass-through = 0.4 based on GDP per capita in constant LCU. MPO 77 Oct 23 Currently, the government has limited fiscal space to respond to shocks and SOMALIA Key conditions and development priorities, including taking over the provision of security services challenges as the withdrawal of the African Union Peacekeeping Mission (ATMIS) continues Table 1 2022 Somalia continues to contend with increas- through 2024. The country therefore a 15.6 Population, million ingly frequent shocks in the context of needs to continue strengthening its b 10.4 GDP, current US$ billion widespread fragility, conflict, and vio- macroeconomic stability, raise domestic GDP per capita, current US$ 667.3 lence. Recurrent climate-related shocks revenues, prioritize public expenditures c 35.2 Gini index such as cycles of droughts, floods, locusts’ to promote economic growth and pover- c 25.0 infestation, higher international commod- ty reduction, and ensure that debt levels School enrollment, primary (% net) d 55.3 ity prices, as well as increased insecurity remain sustainable. Life expectancy at birth, years Total GHG emissions (mtCO2e) 42.4 and conflict have interrupted the country’s growth trajectory and slowed the transi- Source: WDI, Macro Poverty Outlook, and official data. a/ Estimates based on 2013 population estimates by UNF- tion from fragility. Real GDP growth av- PA and assume an average annual population growth of 2.8%. eraged only 2 percent per year in 2018–22, Recent developments b/ Somalia released new GDP series (2017-22) in June while real GDP per capita growth aver- 2023, rebasing the old series. aged -0.8 percent per year. Repeated The economy is expected to record GDP c/ Somalia Integrated Household Budget Survey 2022 shocks have eroded households’ asset base growth of 3.1 percent (see Table 2) as the (SNBS, 2023). d/ Most recent WDI value (2021). and purchasing power, increasing the risk country emerges from the severe 2020/23 of more people falling into poverty. Labor drought. The April–June Gu rainfall sea- force participation rates are exceptionally son is boosting agricultural production, low with large gender gaps. Only one- reducing food insecurity, and supporting The economy is expected to record a third of men and 12 percent of women par- private consumption, the main driver of modest recovery due to improved agri- ticipate in the labor market. Accelerating growth. Sustained growth in remittances culture conditions and easing inflation. the momentum in building institutions and private sector credit contributed to Real GDP growth is projected at 3.1 and developing resilience is fundamental strengthening of construction, real estate, percent in 2023, picking up after a pro- for growth, poverty reduction, and transi- and investment. Though improving, net tion from fragility. exports continue to be a drag on growth longed severe drought and high com- Somalia is anticipated to reach the Com- because the economy remains heavily im- modity prices. Better rains are boosting pletion Point of the Heavily Indebted port-dependent. Moreover, livestock pro- agriculture production and private con- Poor Countries (HIPC) initiative by the duction, the main source of export earn- sumption. Food inflation slowed to 3.6 end of 2023. Somalia will then receive ings, will remain constrained as it will full and irrevocable debt relief. To avoid take longer for pastoralists to rebuild percent in January-July 2023 from a falling back into debt distress once the their herds, especially in the worst double-digit rate a year ago. Neverthe- country is again able to borrow to finance drought-affected areas. The trade deficit, less, poverty remains high and wide- development needs, the government will estimated at 58 percent of GDP in 2023, spread, estimated at 73 percent in 2023. need to rely solely on concessional fi- will continue to be financed by official nance and carefully manage public debt. grants and remittances. FIGURE 1 Somalia / Federal government of Somalia tax FIGURE 2 Somalia / Actual and projected poverty rates and revenue and compensation of employees real GDP per capita US$ Millions Poverty rate (%) Real GDP per capita (constant LCU) 300 100 380 90 375 250 80 370 70 200 365 60 360 150 50 355 40 100 350 30 20 345 50 340 10 0 335 0 2017 2019 2021 2023 2025 2017 2018 2019 2020 2021 2022 International poverty rate Lower middle-income pov. rate Tax revenue Compensation of employees Real GDP pc Sources: Somalia Authorities and World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 78 Oct 23 Price growth moderated in 2023, follow- grants. To improve fiscal sustainability ing high spikes in 2022. Overall inflation and maintain prudent fiscal policy, the has eased to 6 percent in July 2023 (y-o- government will need to fast-track the Outlook y) compared to 6.7 percent in July 2022, numerous efforts underway to increase driven by declining food prices. The on- domestic revenue as well as constrain Medium-term recovery is projected to be set of a favorable 2023 Gu harvest season its wage bill and its reliance on external modest as risks remain significant. Real has resulted in continued easing of local donor funds. GDP growth is projected to expand to 3.5 staple food prices. Food inflation aver- Poverty remains high. Projections based percent in 2024 and 3.8 percent in 2025, aged 3.6 percent in the first seven months on GDP per capita growth suggest pover- slightly outpacing the estimated population of 2023, compared to 13.9 percent during ty has increased from 71 percent in 2017 growth of 2.8 percent. Economic reforms the same period in 2022. Similarly, global to 73.7 in 2022, based on the 2017 poverty and post-HIPC investor confidence should fuel and wheat prices have declined from line. According to the 2022 Integrated attract FDI and encourage increased broad- their peaks in 2022. They declined by 27 Household Budget Survey, poverty rates based private sector activity, which will percent and 20 percent in February - July are larger among the nomadic popula- gradually boost the low domestic produc- 2023 respectively, compared to the same tion, however, due to the country’s high tive capacity. The growth projections are al- period in 2022. urbanization, the majority of the poor are so anchored on a gradual recovery of the The fiscal situation remains challenging. in urban areas. While the international agriculture sector and continued easing of While domestic revenue mobilization has community has provided support in the the global commodity prices. Nonetheless, improved over time, it remains low. In form of food assistance, an expansion of the outlook is subject to significant risks in- the first half of 2023, overall domestic social safety net programs, and support cluding climatic shocks, security threats, revenue collection reached 1.2 percent of to informal settlers in urban areas, peo- and global economic shocks. GDP, compared to 1.1 percent a year ple remain vulnerable to falling below The poverty rate is projected to remain at ago. The Federal Government of Somalia the poverty line. In a context of increas- around 73 percent between 2023 and 2025. (FGS) is constrained to finance its wage ing global shocks, there are competing Accelerating the pace of poverty reduction bill and transfers to Federal Member demands for limited ODA, underscoring will require policy interventions and public States (FMS). In 2022, domestic revenue the importance of Somalia strengthening investments that raise productivity, provided for only 77 percent of spending resilience through advancing reforms to strengthen resilience, create jobs, and ex- on FGS wage bill and intergovernmental support growth, food security, and the pand pro-poor programs that focus on transfers, the rest was covered by external provision of basic services. women and youth. TABLE 2 Somalia / Macro poverty outlook indicators (percent of GDP unless indicated otherwise) a 2020 2021 2022e 2023f 2024f 2025f Real GDP growth, at constant market prices -2.6 3.3 2.4 3.1 3.5 3.8 CPI Inflation, annual percentage change 4.3 4.6 6.8 4.2 3.8 3.6 Current Account Balance -11.1 -9.7 -15.2 -12.8 -11.3 -11.8 Trade balance -50.4 -50.9 -61.2 -58.5 -56.5 -57.8 Private remittances 17.4 21.5 20.6 21.6 22.2 23.1 Official grants 22.8 20.7 25.9 24.6 23.3 23.2 b Fiscal Balance 0.3 -0.8 -0.1 -0.2 -1.2 -1.4 Domestic revenue 2.3 2.3 2.5 2.5 2.7 3.0 External grants 3.2 1.5 4.4 3.6 2.6 2.0 Total expenditure 5.2 4.7 7.0 6.3 6.5 6.4 Compensation of employees 2.5 2.5 2.5 2.5 2.4 2.4 External debt 42.5 35.6 31.3 4.9 6.1 7.2 c,d International poverty rate ($2.15 in 2017 PPP) 73.1 73.3 73.7 73.4 73.2 72.9 c,d Lower middle-income poverty rate ($3.65 in 2017 PPP) 91.4 91.4 91.6 91.5 91.4 91.2 GHG emissions growth (mtCO2e) -0.2 0.0 0.0 0.0 0.0 0.0 Energy related GHG emissions (percent of total) 1.6 1.6 1.6 1.6 1.7 1.7 Sources: Federal Government of Somalia, IMF, and World Bank staff estimates. Emissions data sourced from CAIT and OECD. Notes: e = estimate; f = forecast. a/ GDP baseline estimates 2020-22 are by Somalia National Bureau of Statistics (SNBS, June 2023). b/ Federal Government of Somalia (FGS). c/ Calculations based on Takamatsu et al. (2022) “Rapid Consumption Method and Poverty and Inequality Estimation in Somalia Revisited.” Actual data: 2017. Nowcast: 2020–22. Forecasts are from 2023–25. d/ Projection using neutral distribution (2017) with pass-through = 1 (High) based on GDP per capita in constant LCU. MPO 79 Oct 23 government has begun to act, but reforms need to be bolder and implemented faster. SOUTH AFRICA Key conditions and Raising productivity will require investing in public infrastructure and human capital, challenges promoting innovation, and strengthening institutions to restore private sector confi- Table 1 2022 South Africa is stuck in a trajectory of low dence. Given the limited fiscal space, im- Population, million 59.9 growth, high unemployment, high poverty, proving the efficiency of public spending is GDP, current US$ billion 405.3 and high inequality, driven by a lack of also critical. GDP per capita, current US$ 6766.5 structural reforms and inefficient invest- a 20.5 International poverty rate ($2.15) ment in and management of public infra- a 40.0 structure. In the past two years, rolling Lower middle-income poverty rate ($3.65) Upper middle-income poverty rate ($6.85) a 61.6 scheduled power cuts (loadshedding) in- Recent developments Gini index a 63.0 tensified exponentially, and to date in 2023, School enrollment, primary (% gross) b 97.4 they already exceed the level reached in GDP growth declined to 1.9 percent in b 62.3 2022. The overall cost of loadshedding is es- 2022 from 4.7 percent in 2021, and to 0.9 Life expectancy at birth, years timated at between 6 percent and 15 percent percent in 2023H1. On the spending side, Total GHG emissions (mtCO2e) 586.4 of GDP. Growing maintenance problems household consumption continued to be Source: WDI, Macro Poverty Outlook, and official data. and infrastructure theft have also taken a toll the main growth driver, but its support a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2020); Life expectancy on port and rail performance, affecting is fading. It increased by 0.7 percent an- (2021). transport corridors and creating bottlenecks nually over the first half of 2023 against for trade. This weak growth is insufficient to 2.5 percent in 2022. On the production generate jobs to reduce unemployment, side, services sectors have been the main poverty, and inequality, which remains drivers of growth over 2023H1. Mining South Africa’s economy is slowing among the highest in the world. and manufacturing have been particular- Macroeconomic policies are relatively ly affected by loadshedding. The unem- sharply, hampered by the acute energy sound. Fiscal policy has been prudent de- ployment rate remains extremely high at crisis, transport bottlenecks, and other spite spending pressures, and monetary 32.6 percent in June 2023 (42.1 percent structural constraints. Real GDP growth policy has tightened in response to rising when including discouraged job seekers). is projected at 0.5 percent in 2023 and inflation. The fiscal deficit declined from The labor absorption rate is low due to 9.9 percent of GDP in FY2020/21 to 4.2 per- the weak economy. Based on the upper- around 1.5 percent over the medium cent of GDP in FY2022/23. The central bank middle-income poverty line, the poverty term. Inflation is declining thanks to low- gradually increased the policy rate from rate was estimated at 62.6 percent in 2022, er commodity prices and monetary policy 3.5 percent in October 2021 to 8.25 percent with about 1.5 million more people living tightening. Job creation is anticipated to in May 2023. in poverty compared to 2019. Inflation is remain weak, constraining poverty reduc- South Africa needs to grow faster to escape decreasing but remains above the central the middle-income trap; reduce unemploy- bank’s 3-6 percent target range, averaging tion. Fiscal policy remains prudent but 6.6 percent in 2023H1. High fuel and food ment, poverty, and inequality; and preserve spending pressures are elevated, especial- long-term fiscal sustainability. Confronted inflation has hit low-income households ly ahead of general elections next year. with the emergency of the energy crisis, the the hardest. FIGURE 1 South Africa / Public debt dynamics are FIGURE 2 South Africa / Actual and projected poverty rates unfavorable and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 20 70 82000 Projections 60 80000 15 50 78000 10 40 76000 30 74000 5 20 72000 0 10 70000 0 68000 -5 2008 2010 2012 2014 2016 2018 2020 2022 2024 2000 2005 2010 2015 2020 2025 International poverty rate Lower middle-income pov. rate Implicit average interest rate Nominal GDP growth Upper middle-income pov. rate Real GDP pc Sources: National Treasury, IMF WEO, and World Bank. Source: World Bank. Notes: see Table 2. MPO 80 Oct 23 The global environment has become less around 1.5 percent over the medium commodity prices. The deficit is pro- supportive and domestic factors have also term as reforms in the energy sector jected to reach 5.9 percent of GDP contributed to the weakening of South are anticipated to support a reduction in FY2023/24 and to improve to 4.5 Africa’s external sector. Global risk aversion in loadshedding and a pick-up in ac- percent of GDP in FY2026/27, after hasresultedinranddepreciationandportfo- tivity. However, the slow pace of other the end of the Eskom deal. The lio outflows, reinforced by the greylisting of structural reforms will continue to public debt-to-GDP ratio is projected the country by the Financial Action Task limit South Africa’s growth potential. to increase, reaching 72.3 percent in Force in February 2023. South Africa’s terms Inflation is projected to decrease pro- FY2023/24 and 76.3 percent in of trade deteriorated by 15.3 percent be- gressively, from 6 percent in 2023 to FY2025/26. tween 2021Q2 (historical high) and 2023Q2. 4.5 percent by 2025. The unemploy- Risks are significant. Externally, South This, combined with domestic floods and ment rate is projected to remain above Africa is exposed to portfolio flows rever- strikes at the ports, led to a continued reduc- 32 percent throughout the projection sals and increases in global interest rates. tion in the trade surplus and a return to cur- period and the poverty rate to decline Higher energy prices could affect domestic rent account deficits of 0.5 percent of GDP in only slightly to 62.5 percent by 2025. inflation, complicating monetary policy in 2022 and 1.6 percent of GDP in 2023H1, fi- Lower commodity prices and trans- a context of weak domestic demand. The nanced by net financial inflows. Internation- port bottlenecks are expected to con- country is also vulnerable to climate al reserves increased by nearly $1 billion tinue to constrain the external sector, shocks. Domestically, South Africa is vul- over 2023H1, to US$61.6 billion at the end of leading to persistent current account nerable to a slowdown in structural re- June. On the fiscal side, tax collection over deficits slightly above 2 percent of forms ahead of next year’s elections. Fiscal April-July 2023 has been significantly weak- GDP over the medium-term. These risks are high, with spending pressures on erthanovertheprevioustwoyears. deficits are expected to be financed public sector wages, social and state- by net financial inflows. owned enterprise transfers, and rising The government is expected to con- debt-service payments. Improving prima- tinue restraining expenditure growth ry balances is critical to ensure debt sus- Outlook to reduce fiscal deficits, whose trajec- tainability in a context of unfavorable debt tory will be impacted by the debt- dynamics, as economic growth is projected GDP growth is projected at 0.5 percent relief arrangement with Eskom and to be lower than the average interest rate in 2023 and is expected to stabilize at lower revenue because of weaker on public debt. TABLE 2 South Africa / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -6.0 4.7 1.9 0.5 1.5 1.6 Private consumption -6.1 5.8 2.5 0.7 1.9 1.5 Government consumption 0.9 0.5 1.0 2.1 0.5 0.9 Gross fixed capital investment -14.6 0.6 4.8 5.3 4.8 4.2 Exports, goods and services -12.0 9.1 7.4 3.2 3.0 3.0 Imports, goods and services -17.6 9.6 14.9 6.0 4.5 3.5 Real GDP growth, at constant factor prices -5.5 4.4 1.9 0.5 1.5 1.6 Agriculture 17.8 7.4 0.9 0.9 2.0 2.0 Industry -12.1 6.2 -2.5 -1.6 0.5 1.1 Services -4.1 3.8 3.4 1.1 1.8 1.7 Inflation (consumer price index) 3.3 4.5 6.9 6.0 4.9 4.5 Current account balance (% of GDP) 1.9 3.7 -0.5 -2.0 -2.1 -2.2 Net foreign direct investment inflow (% of GDP) 1.5 9.7 1.6 0.9 1.2 1.2 a Fiscal Balance (% of GDP) -9.9 -4.6 -4.2 -5.9 -5.5 -6.0 Revenues (% of GDP) 25.1 27.8 28.5 27.7 27.5 27.5 Debt (% of GDP) 70.1 67.9 71.2 72.3 73.8 76.3 Primary balance (% of GDP) -5.7 -0.4 0.5 -0.9 -0.5 -0.8 b,c International poverty rate ($2.15 in 2017 PPP) 22.6 21.7 21.5 21.6 21.5 21.4 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 42.7 41.4 41.1 41.3 41.1 41.0 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 63.6 62.8 62.6 62.7 62.6 62.5 GHG emissions growth (mtCO2e) -2.5 3.2 3.7 -2.6 0.8 1.5 Energy related GHG emissions (% of total) 77.7 78.3 78.8 78.3 78.2 78.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ The Eskom debt-relief arrangement is reported above the line, in expenditures. b/ Calculations based on 2014-LCS. Actual data: 2014. Nowcast: 2015-2022. Forecasts are from 2023 to 2025. c/ Projection using neutral distribution (2014) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 81 Oct 23 the border since April 2023, of which 91 percent are South Sudanese returnees. SOUTH SUDAN Key conditions and External risks stem from adverse global oil and food price developments; acute challenges macroeconomic risks will materialize if oil pipeline routes through Sudan are Table 1 2022 A decade after independence, South Su- disrupted by the conflict there. Imple- Population, million 11.4 dan’s development prospects remain con- menting the 2018 peace deal is essential GDP, current US$ billion 5.2 strained by fragility amid localized/inter- for domestic peace and the resumption GDP per capita, current US$ 457.9 communal conflict. A 2018 peace agree- of growth. Macroeconomic, governance, a 67.3 International poverty rate ($2.15) ment ended five years of civil war; how- and transparency reforms need to be ur- a 86.5 ever, the transition period needed for its gently implemented to ensure scarce re- Lower middle-income poverty rate ($3.65) a 96.6 full implementation has been extended un- sources are spent on development needs Upper middle-income poverty rate ($6.85) Gini index a 44.1 til 2025. The country is vulnerable to cli- and to facilitate a sustainable and inclu- School enrollment, primary (% gross) b 73.0 mate change and external shocks. Oil ac- sive economic recovery. Reforms and in- b 55.0 counts for nearly all exports and around vestments are especially critical in agri- Life expectancy at birth, years 90 percent of government revenues. A culture, which supports livelihoods for 80 Total GHG emissions (mtCO2e) 60.6 modest economic recovery in 2019 was percent of the population; these will help Source: WDI, Macro Poverty Outlook, and official data. upended by historic floods and the to support diversification away from the a/ Most recent value (2016), 2017 PPPs. b/ WDI for School enrollment (2015); Life expectancy COVID-19 pandemic. oil sector, create jobs, and build resilience (2021). Since 2021, reforms initiated under an to climate change. IMF staff-monitored program have helped improve macroeconomic and price stability. Higher oil prices following Falling oil production will drag on the war in Ukraine have supported for- Recent developments eign exchange buffers and fiscal rev- growth for a fourth consecutive year, al- enues, although expenditures have also Economic activity remained weak in beit at a lessening pace. Climate and ex- increased. Poverty remains dire, with 7 FY2022/23 due to a fourth consecutive year ternal shocks, declining official develop- in 10 people living in extreme poverty. of flooding and reduced agricultural ment assistance, coupled with structural Some 8.9 million people, comprising 78 yields, flare-ups of violence, and higher percent of the population, face severe food inflation due to the war in Ukraine challenges related to weak governance, in- food insecurity, which is made worse by and lingering impacts of the COVID-19 adequate service delivery, and ongoing lo- higher global food prices and domestic pandemic. Oil production fell by 8.8 per- calized conflict, contributed to high levels floods. In addition, 2.2 million people are cent in FY2022/23 due to floods and low in- of food insecurity and widespread extreme internally displaced (55 percent of whom vestments in oil fields. These dynamics re- poverty. The conflict in Sudan poses acute are women and girls), and 2.3 million re- duced households’ purchasing power and main refugees in neighboring countries. worsened food insecurity. GDP is estimat- downside risks to South Sudan’s macroeco- ed to have contracted by 0.4 percent in FY South Sudan is receiving returnees and nomic stability amid limited fiscal re- refugees displaced by the conflict in Su- 2022/23, following a 2.3 percent decline the sources and pressing humanitarian needs. dan. About 140,000 people have crossed previous year. FIGURE 1 South Sudan / Exchange rate developments FIGURE 2 South Sudan / Actual and projected poverty rates and real GDP per capita SSP/USD Spread, percent Poverty rate (%) Real GDP per capita (constant FDJ) 1200 300 120 3500 1000 250 100 3000 2500 800 200 80 2000 600 150 60 1500 400 100 40 1000 20 500 200 50 0 0 0 0 2009 2011 2013 2015 2017 2019 2021 2023 2025 Oct-20 Apr-21 Oct-21 Apr-22 Oct-22 Apr-23 International poverty rate Lower middle-income pov. rate Spread (rhs) Official XR (lhs) Parallel XR (lhs) Upper middle-income pov. rate Real GDP pc Sources: Bank of South Sudan and World Bank. Source: World Bank. Notes: see Table 2. MPO 82 Oct 23 After briefly turning negative at end-2022, overdrafts at the central bank and use of Over the medium term, growth should rise inflation averaged 18 percent between oil advances to finance the budget. Public to above 2 percent as oil output recovers January and July 2023 due to the weak- financial management reforms to strength- and non-oil activity improves, supported ening currency. Despite the onset of the en expenditure controls and cash manage- by higher government outlays on critical conflict in Sudan and drawdowns on for- ment have been initiated, including an in- public investments, health, and education, eign exchange reserves at the central tegrated financial management system. and moderating inflation. This outlook is bank, the premium over the official ex- But there is limited transparency on oil predicated on prudent monetary and fiscal change rate has remained narrow (below revenues, including servicing of non-con- policies that anchor macroeconomic stabil- 1 percent), indicating improved open cessional external debt. South Sudan re- ity; progress on governance, transparency, market operations under the term deposit mains at high risk of debt distress for both and structural reforms; and steady imple- facility, newly introduced instrument by external and domestic debt. mentation of the peace deal. The pressure the central bank, and regulatory tighten- Despite increased oil receipts and weaker on the current account balance is expected ing on parallel market operators. demand for capital imports, the current ac- to increase due to higher debt-service Notwithstanding higher oil revenues, fis- count balance widened in line with rising obligations, a decline in oil prices, and a cal pressures proved greater than antici- food import costs, increased repatriation of decline in international aid. pated in FY2021/22. Expenses exceeded investor profits, and continued transfers to Poverty is tenacious expected to remain planned outlays by 68 percent, causing the Sudan as part of the transitional financial stagnant at around 70 percent in the government to revert to oil advances and arrangement under the peace deal. medium term as real growth prospects monetary financing of the fiscal deficit in are limited. Addressing this reinforces mid-2022. Higher oil prices, and revenue the urgency of fiscal and PFM reforms and customs administration reforms lifted that generate budgetary resources to in- overall revenues by 83 percent in real Outlook crease social expenditures. While efforts terms. The FY2023/24 draft budget envis- to modernize tax administration using ages increases in capital expenditures, a Growth is expected to remain negative in digital solutions and expand the tax base 130 percent increase in public sector FY2023/24, with oil production projected will help, fiscal pressures will remain salaries to protect against the impacts of to drop by 7 percent. Nonetheless, higher substantial given sizable debt-service inflation, and rising transfers to regions, government current spending and ex- obligations, a reduction in legacy arrears, which will further widen the fiscal deficit panding domestic credit should support a and increasing social and humanitarian and may require the government to either recovery in the non-oil sector, with farm expenditures. It is thus also vital to accumulate salary arrears or deficit mone- output also expected to improve as floods strengthen the management and trans- tization. Data for FY23Q1 show continued eventually recede. parency of oil revenues. TABLE 2 South Sudan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 9.5 -5.1 -2.3 -0.4 -0.2 2.1 Real GDP growth, at constant factor prices 9.5 -5.1 -2.3 -0.4 -0.2 2.1 Agriculture 6.0 -4.0 -1.8 -1.4 2.8 2.8 Industry 27.5 -2.3 -4.8 -5.4 -4.1 0.5 Services -9.6 -9.7 1.7 7.7 4.5 4.0 Inflation (consumer price index) 33.3 43.1 22.0 18.0 16.1 8.5 Current account balance (% of GDP) -20.3 -5.5 -1.5 1.9 1.9 1.8 Net foreign direct investment inflow (% of GDP) -0.4 0.9 1.0 -0.3 -0.6 -0.9 Fiscal balance (% of GDP) -9.8 -6.8 -6.1 -4.1 -4.6 -4.9 Revenues (% of GDP) 29.5 30.9 30.1 31.2 30.5 30.2 Debt (% of GDP) 40.7 57.6 59.5 52.3 53.2 55.9 Primary balance (% of GDP) -7.8 -4.4 -4.0 -2.8 -3.5 -3.5 a,b International poverty rate ($2.15 in 2017 PPP) 65.3 67.5 68.8 69.5 69.3 69.0 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 84.7 86.6 87.6 88.0 87.9 87.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 96.1 96.7 97.1 97.2 97.2 97.1 GHG emissions growth (mtCO2e) -0.2 0.6 0.1 0.0 0.1 0.4 Energy related GHG emissions (% of total) 3.0 2.9 2.9 2.9 3.0 3.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2016-HFS-W3. Actual data: 2016. Nowcast: 2017-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2016) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 83 Oct 23 1 in 10 people in Sudan) are facing emer- gency levels close to famine. SUDAN Key conditions and The broad destruction of the economic base will set the country back several challenges decades. The erosion of state capacity to deliver basic services is expected to pro- Table 1 2022 Entering the April 2023 conflict, the econo- long reconstruction efforts and recovery Population, million 46.9 my was already weak, having suffered five from the conflict when it ends. The cost of GDP, current US$ billion 51.7 consecutive years of contraction. Attempts the conflict to the economy is more starkly GDP per capita, current US$ 1102.2 in 2019 to shift course via a brief transition evident in the cumulative loss in GDP and a 15.3 International poverty rate ($2.15) to a reform-minded civilian government, GDP per capita. a 49.7 re-engagement with the international com- Lower middle-income poverty rate ($3.65) a 86.2 munity, and the launch of the Heavily In- Upper middle-income poverty rate ($6.85) Gini index a 34.2 debted Poor Country debt relief process, School enrollment, primary (% gross) b 79.0 were derailed by a military takeover in Recent developments b 65.3 2021. The loss of an estimated US$2 billion Life expectancy at birth, years in annual foreign inflows, along with slow- GDP fell by an estimated 1 percent in 2022. Total GHG emissions (mtCO2e) 126.0 downs in reforms and foreign investments, The conflict has triggered a further col- Source: WDI, Macro Poverty Outlook, and official data. further depressed growth. Additional tax lapse in activity, including wholesale/retail a/ Most recent value (2014), 2017 PPPs. b/ WDI for School enrollment (2018); Life expectancy hikes, as the government attempted to sales, restaurants, financial and ICT ser- (2021). compensate for forgone revenues, further vices, and damaged education and health depressed private sector activity. facilities. Prior to April 2023, cereal pro- In 2022, there was a fresh effort to tran- duction was improving due to better sition to civilian administration: a frame- weather and a shift to less resource-inten- Broad destruction of the economic base due work political agreement was signed in sive crops. Net exports, investment, and December 2022, with elections planned for revenues were negligible prior to the out- to the conflict has set the country back sev- two years later. However, mounting ten- break of fighting in April 2023, but have eral decades. GDP is expected to contract by sions between the Sudanese Armed Forces since collapsed, while agricultural output 12 percent in 2023, driven by substantial and the Rapid Support Forces delayed the and exports (gold, sesame, gum Arabic, socioeconomic and infrastructure damage return to a civilian-led transitional govern- and livestock) have been severely affected. ment. The conflict that erupted in April Rising displacement and the devastation and lower consumption. This would result 2023 destroyed the industrial base, halted of the marketed surplus/incomes of agri- in a deterioration of households’ welfare as services, and led to the erosion of state ca- cultural households have weighed on con- the extreme poverty rate is projected to in- pacity amid high and rising levels of dis- sumption, which comprises roughly 94 crease to 35.7 percent in 2024. Alongside a placement and food insecurity. As of Au- percent of GDP. collapse in government revenues, signifi- gust 15, more than 4mn people have been Fiscal pressures, already significant in displaced inside and outside the country. recent years, have increased, while the cant currency pressure and supply-side ability to deliver basic services has Per the UN, conflict-induced food scarcity disruptions are expected to cause a return to has plunged 20.3mn people into severe been severely disrupted. Tax revenues triple-digit inflation. acute hunger, of which 6.3mn (more than were expected to contribute 68 percent to FIGURE 1 Sudan / Real GDP growth and sectoral FIGURE 2 Sudan / Actual and projected poverty rates and contributions to real GDP growth real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 2 100 800 0 90 700 80 -2 600 70 60 500 -4 50 400 -6 40 300 -8 30 Agriculture 200 Industry 20 -10 100 Services 10 Gross value added at basic prices 0 0 -12 2009 2011 2013 2015 2017 2019 2021 2023 2025 -14 International poverty rate Lower middle-income pov. rate 2018 2019 2020 2021 2022 2023e 2024f 2025f Upper middle-income pov. rate Real GDP pc Sources: National Bureau of Statistics and World Bank staff calculations. Source: World Bank. Notes: see Table 2. MPO 84 Oct 23 total revenues, but are now expected to fall Brazilian sugar, which is routed through and businesses adjust, a modest 0.6 per- to extremely low levels, with implications West African ports. As new trade routes cent decline is expected in 2024 and a slow for non-military expenditures. Sudan faces are established, Port Sudan could lose its recovery thereafter, amid limited external a dire economic situation, with rapid cur- regional importance, with negative long- and domestic resources to support recon- rency depreciation as Sudan’s central bank term consequences for the country. struction. Agriculture will remain a main- is forced to monetize a mounting govern- stay for livelihoods, and rising agricultural ment deficit, supply disruptions, and food output and exports of livestock, as well as shortages contributing to hyperinflation. mining and services should gradually sup- Foreign reserves were already below one Outlook port activity and incomes in coming years. month’s of import coverage at end-2022, The fiscal deficit is projected to narrow and the state remains unable to access ex- The conflict is expected to significantly af- over the medium term, reflecting modest ternal financing due to its default status. fect the coming agricultural growing sea- recovery in tax revenue collections; how- Although official poverty statistics are not son, in turn worsening an already dire ever, continued monetization should keep available after 2014, the percentage of the food security situation, with the number of inflation high. The current account deficit population living on less than US 2.15 per people in need of humanitarian food assis- is expected to widen modestly in the medi- day (2017 PPP) is estimated to have in- tance estimated at 25 million out of 42 mil- um term and average 7.5 percent of GDP creased from 20.4 percent in 2018 to 35 per- lion population, according to the UN. over 2023-25, reflecting Sudan’s high im- cent in 2023. The protracted economy and The outlook remains highly uncertain; port requirements due to the war and a the ongoing conflict contributed to an es- predicated on a gradual cessation of con- partial recovery of exports. timated 15 percentage-point increase in flict over the coming year, it remains sub- Extreme poverty is expected to worsen with extreme poverty. ject to large downside risks of prolonged the massive destruction of infrastructure Sudan’s closest neighbors are shifting to conflict and tensions. Given conflict-relat- and limited access to essential services. Pro- alternative trade routes. Last year, Sudan ed economic losses and destruction of in- jections suggest that extreme poverty will imported almost 1.8 million tons of mainly frastructure, a 12 percent GDP contraction steadily increase to 36 percent by 2025. A Indian sugar, with much of it then going is anticipated in 2023 (this follows a cumu- quick end to the conflict and a collaborative to Chad and the Central African Republic. lative 11.3 percent decline since 2018). As reconstruction effort are needed to reverse Those countries are now importing economic activity stabilizes and households the trend of poverty in Sudan. TABLE 2 Sudan / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -3.6 -1.9 -1.0 -12.0 -0.6 0.2 Private consumption -3.4 -0.9 -0.8 -10.6 -0.2 1.1 Government consumption -8.8 -9.6 1.9 -36.5 1.1 1.6 Gross fixed capital investment -2.0 -2.1 1.2 -20.0 1.3 2.5 Exports, goods and services 5.2 8.0 12.0 -32.0 6.0 9.0 Imports, goods and services -9.0 -0.5 8.7 -36.0 11.0 19.0 Real GDP growth, at constant factor prices -3.6 -1.9 -1.0 -12.0 -0.6 0.1 Agriculture -2.5 -0.6 1.0 -7.9 0.9 1.1 Industry -5.7 -0.7 -0.7 -11.6 -0.4 1.0 Services -3.0 -3.9 -3.0 -16.0 -2.3 -1.6 Inflation (consumer price index) 163.3 359.7 164.2 230.0 95.0 65.0 Current account balance (% of GDP) -21.6 -7.3 -6.0 -0.6 -7.2 -7.8 Net foreign direct investment inflow (% of GDP) -2.7 -1.6 -1.3 -0.6 -0.5 -0.4 Fiscal balance (% of GDP) -5.9 -0.3 -1.7 -3.5 -3.0 -2.6 Revenues (% of GDP) 4.8 10.5 10.0 5.1 6.0 6.8 a Debt (% of GDP) 281.4 215.6 183.6 167.3 157.9 149.5 Primary balance (% of GDP) -5.9 -0.3 -1.4 -3.5 -2.9 -2.5 b,c International poverty rate ($2.15 in 2017 PPP) 27.3 30.6 33.3 35.0 35.7 36.0 b,c Lower middle-income poverty rate ($3.65 in 2017 PPP) 64.4 67.6 69.9 71.3 72.0 72.4 b,c Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.9 92.9 93.6 93.8 94.0 94.0 GHG emissions growth (mtCO2e) -0.1 -0.3 -0.4 0.1 0.5 0.8 Energy related GHG emissions (% of total) 16.4 16.3 16.0 15.7 15.7 15.8 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Debt projections do not include any restructuring achieved during the HIPC process. b/ Calculations based on 2014-NBHS. Actual data: 2014. Nowcast: 2015-2022. Forecasts are from 2023 to 2025. c/ Projection using neutral distribution (2014) with pass-through = 1 (High (1)) based on GDP per capita in constant LCU. MPO 85 Oct 23 by facilitating private sector investment through regulatory environment stream- TANZANIA Key conditions and lining will be essential. Moreover, helping women access economic opportunities and challenges assets such as land remains critical. Table 1 2022 Tanzania has adequate opportunities to ac- Population, million 65.6 celerate its transition to a successful mid- GDP, current US$ billion 75.5 dle-income status. With relatively limited Recent developments GDP per capita, current US$ 1151.4 impact of external shocks, including a 44.9 International poverty rate ($2.15) Covid-19 pandemic and the war in Following the COVID-19 pandemic and a 74.3 Ukraine, and moderate risk of debt dis- facing the headwind of the war in Lower middle-income poverty rate ($3.65) a 92.3 tress, the country continues to hold suffi- Ukraine and its global economic impact, Upper middle-income poverty rate ($6.85) Gini index a 40.5 cient fiscal space to implement its devel- Tanzania’s economic growth rate rose to School enrollment, primary (% gross) b 97.2 opment programs. Although official gross 4.6 percent in 2022, up from 4.3 percent b 66.2 reserves have declined, they remain ade- in 2021. This moderate rebound was dri- Life expectancy at birth, years quate. To lay the foundation for robust, ven by the services sector led by trade, Total GHG emissions (mtCO2e) 159.8 inclusive, and sustainable long-term transportation, tourism, and financial ser- Source: WDI, Macro Poverty Outlook, and official data. growth, the government should seize the vices which accounted for half of GDP a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). opportunity to implement more ambi- growth. High-frequency indicators in- tious human capital investments and cluding cement production, electricity structural reforms to improve business generation, and tourist arrivals indicate In2023,Tanzaniahasmaintaineditseco- environment for private investment, in- economic activity remained robust dur- cluding FDI. Tanzania’s private sector has ing the H1 2023. The tightening of liquid- nomicmomentum.High-frequencyindica- been challenged by a costly business reg- ity in the financial system and subsidies torssuggestthatGDPgrowthhasalready ulatory environment, high taxes, weak in- for fuel and fertilizer helped to contain reacheditspre-pandemiclevels,5.1percent frastructure, and inadequate skills. inflationary pressures. Headline inflation in2023(annualestimate). In the medium- To reduce high and persistent rates of stood at 3.3 percent in July 2023, well be- poverty in the country, significant increase low Tanzania’s neighbors. term, with transformative reforms aimed at in public spending on social services and Despite a robust growth in exports, the improving business environment, boosting infrastructure is required, especially in stronger growth of imports pushed up by private sector investment, and creating rural areas. Priority reforms should aim to domestic demand compounded with ris- jobs, a 6 percent growth rate can be reached. strengthen the macroeconomic stability ing international commodity prices Risks to the country’s macroeconomic out- (including exchange rate), efficiency of widened the current-account deficit to 5.6 public investment, debt management, and percent of GDP in 2022. The Bank of Tanza- look include the incomplete implementa- domestic revenue mobilization. To en- nia has relied on foreign exchange sales in tion of these reforms, global economic slow- hance the impact of growth on poverty re- response to the balance of payment pres- down, protracted war in Ukraine, and in- duction, investing in human capital, rais- sure. As a result, official gross foreign re- creased commodity price volatilities. ing smallholder agricultural productivity, serve fell to US$5.3 billion (covering 4.8 and supporting the creation of good jobs months of imports) by end of June 2023 FIGURE 1 Tanzania / Real GDP growth and sectoral FIGURE 2 Tanzania / Actual and projected poverty rates contributions to real GDP growth and real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant million LCU) 7 120 2.5 6 100 2.0 5 80 4 1.5 60 3 1.0 2 40 1 0.5 20 0 2018 2019 2020 2021 2022e 2023p 2024p 2025p 0 0.0 Agriculture Industry 2007 2009 2011 2013 2015 2017 2019 2021 2023 2025 Services Net Taxes on Production International poverty rate Lower middle-income pov. rate GDP at Constant Prices Upper middle-income pov. rate Real GDP pc Source: World Bank staff estimates and projections (2018-2025). Source: World Bank. Notes: see Table 2. MPO 86 Oct 23 from US$6.4 billion (6.6 months of im- country's rapid population growth, the ab- ceiling posed by the convergence criterion ports) at the end of 2021. Although the solute number of individuals living in ex- of the East African Community, as im- Tanzanian shilling remained relatively sta- treme poverty is expected to rise from 26 proved business environment strengthens ble against the US dollar in 2022, in 2023 million in 2018 to over 30 million by 2025. domestic revenue mobilization and public pressure on the shilling has increased and At the lower middle-income poverty line, expenditures stabilize. The narrowing fis- there are signs of emergence of parallel ex- the count is likely to increase from 44 mil- cal deficit is expected to be financed by change market. lion in 2018 to 52 million by 2025. both external and domestic loans. Despite broadly stable public revenue col- Tanzania’s macroeconomic outlook face lection, an increase in overall expendi- downside risks, which could suppress tures widened fiscal deficit from 3.6 per- GDP growth by 1-2 percentage points if cent of GDP in FY2021/22 to 4.4 percent Outlook one of those risks materialize. A global in FY2022/23. Domestic borrowing, main- slowdown, protracted war in Ukraine, and ly from bank and non-bank sources, cov- GDP is projected to grow at 5.1 percent in increased commodity price volatilities are ered almost 60 percent of the fiscal deficit. 2023 and 6.1 percent by 2025, close to its among major downside external risks. Do- According to the latest Debt Sustainabil- long-run potential, supported by increas- mestic risks include slow or incomplete ity Analysis (DSA) Tanzania’s Public and ing domestic demand and exports as re- implementation of structural reforms par- Publicly Guaranteed debt stock stood at forms to improve business climate are im- ticularly related to key issues such as pri- 43.8 percent of GDP by end-June 2022, plemented successfully. The current ac- vate sector and gender as well as climate compared to 41.3 percent by end-June count deficit is projected to narrow to 5.1 change effects on the agriculture and 2021. The DSA shows Tanzania’s risk of percent of GDP in 2023 as exports are ex- tourism sectors. debt distress remains moderate. pected to grow faster than imports, partly The poverty rate will likely follow a consis- The rate of poverty reduction, which no- due to a combination of easing commodity tent downward trend. Projections suggest tably decelerated in the 2010s, is expected prices and strong rebound in tourism. The a decline of 1.3 percentage points, from to continue its slow pace into the 2020s. In current account deficit is expected to be 43.4 percent in 2023 to 42.1 percent in 2025. 2022, extreme poverty was at 44 percent, financed by external loans and increasing This trajectory is underpinned by robust and it's projected to decline marginally to FDI. The fiscal deficit is projected to de- growth prospects, that will likely propel 43 percent in 2023 and 2024, further drop- cline further to about 2 percent of GDP in the country's GDP growth to pre-pan- ping to 42 percent in 2025. Considering the 2024/25, well below the 3 percent of GDP demic levels by 2025. TABLE 2 Tanzania / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 2.0 4.3 4.6 5.1 5.5 6.1 Private consumption 0.9 2.3 4.8 2.2 3.3 3.3 Government consumption 7.4 9.0 8.4 10.7 6.2 11.3 Gross fixed capital investment 2.4 7.8 9.3 5.3 5.4 5.3 Exports, goods and services -8.6 5.2 10.2 13.8 10.4 10.2 Imports, goods and services -7.6 9.6 23.7 6.8 4.2 3.6 Real GDP growth, at constant factor prices 2.0 4.3 4.6 5.1 5.5 6.1 Agriculture 3.1 3.7 3.3 3.6 3.8 4.1 Industry 2.5 4.1 4.3 4.8 5.6 6.2 Services 0.9 4.8 5.6 6.3 6.4 7.2 Inflation (consumer price index) 3.3 3.7 4.3 4.2 4.1 3.9 Current account balance (% of GDP) -2.5 -3.2 -5.6 -5.1 -4.4 -3.5 Net foreign direct investment inflow (% of GDP) 1.4 1.6 1.8 2.1 2.6 2.9 Fiscal balance (% of GDP) -2.9 -3.8 -3.5 -4.0 -3.4 -2.9 Revenues (% of GDP) 14.3 14.5 15.6 15.9 16.4 16.9 Debt (% of GDP) 39.3 42.0 42.2 43.2 42.7 42.2 Primary balance (% of GDP) -1.3 -2.1 -1.8 -2.3 -1.8 -1.3 a,b International poverty rate ($2.15 in 2017 PPP) 44.6 44.3 44.0 43.5 43.0 42.4 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 74.1 73.9 73.6 73.3 72.9 72.4 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.9 91.7 91.4 90.9 90.5 89.9 GHG emissions growth (mtCO2e) 1.9 -0.4 1.5 2.3 1.4 1.5 Energy related GHG emissions (% of total) 11.0 9.3 9.4 10.2 10.1 10.1 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2013- and 2018-HBS. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on GDP per capita in constant LCU. MPO 87 Oct 23 year and additional spending cuts consid- ered for the revised 2023 budget are ex- TOGO Key conditions and pected to narrow the fiscal deficit to 5.8 percent of GDP, down from 8.3 percent in challenges 2022. The dampening effect of fiscal con- solidation measures on economic activity Table 1 2022 Since the COVID-19 pandemic in 2020, To- should be partially offset by a recovery in Population, million 8.8 go has faced significant headwinds rang- consumer spending supported by abating GDP, current US$ billion 8.2 ing from the fallout from Russia’s invasion food and energy price inflation, while pri- GDP per capita, current US$ 930.5 of Ukraine on energy and food prices, to vate investment is bolstered by improving a 28.4 International poverty rate ($2.15) slowing external demand, tighter financ- business sentiment and ongoing infra- a 56.9 ing conditions and regional instability. A structure projects. On the external side, Lower middle-income poverty rate ($3.65) a 84.0 sharp increase in public spending helped the trade deficit has been narrowing as Upper middle-income poverty rate ($6.85) Gini index a 42.5 stabilize growth in the face of these shocks export revenues outpaced imports so far School enrollment, primary (% gross) b 124.2 but vulnerable populations have been ad- this year, but the current account deficit is b 61.6 versely impacted by the rising cost of liv- still expected to widen somewhat to reach Life expectancy at birth, years ing and fiscal space has been depleted. 3.5 percent of GDP in 2023. At the sec- Total GHG emissions (mtCO2e) 9.9 Large fiscal financing needs amid tight- toral level, industrial activity has shown Source: WDI, Macro Poverty Outlook, and official data. ening borrowing conditions have encour- signs of recovery from a weak start of a/ Most recent value (2018), 2017 PPPs. b/ Most recent WDI value (2021). aged authorities to frontload consolida- the year, with positive contributions from tion measures to bring the deficit back to the extractive, power, and manufacturing 3 percent of GDP by 2025, while at the sectors. Regarding agriculture, meteoro- same time implementing an emergency logical conditions have been conducive program to address growing fragility to a relatively favorable crop harvest for Growth in Togo should benefit from risks in the Northern Savanes region. Re- the 2023/24 season. Real GDP per capita strengthening consumer spending and building fiscal space while supporting gains estimated at 2.8 percent in 2023, private investment in 2023 and 2024 priority investments and social spending combined with consumer price inflation but is still projected to soften somewhat are among the most pressing policy chal- moderating from 7.6 percent in 2022 to lenges facing the country. 5.8 percent in 2023 should help the ex- to 5.2 percent reflecting the impact of treme poverty rate (US$2.15/day) to de- fiscal consolidation measures, tighter fi- crease to 27.6 percent this year, its first nancing conditions, and soft external decline since the onset of the COVID-19 demand. It should accelerate again in Recent developments pandemic in 2000. 2025, supported by a more favorable To counter inflationary pressures across Growth remained robust in 2023, at an esti- WAEMU countries, the Central Bank of international backdrop. Real income mated 5.2 percent, but moderated from 5.8 West African States (BCEAO) has raised gains combined with moderating infla- percent in 2022 as the government shifted policy interest rates by a cumulative 125 tion should enable the poverty rate to from an expansionary fiscal policy stance basis points since mid-2022 but the mon- decrease to 24.8 percent by 2025. to a more restrictive one. Slow execution etary policy stance remains broadly ac- of planned public investment so far this commodative, while inflation is still above FIGURE 1 Togo / Real GDP growth FIGURE 2 Togo / Actual and projected poverty rates and real GDP per capita Percent Poverty rate (%) Real GDP per capita (constant LCU) 8 100 700000 90 6 600000 80 4 70 500000 2 60 400000 50 0 300000 40 -2 30 200000 -4 20 100000 10 -6 0 0 2001 2004 2007 2010 2013 2016 2019 2022 2025 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 GDP growth 2001-07 avg 2008-16 avg International poverty rate Lower middle-income pov. rate 2017-19 avg 2020-22 avg 2023-25 avg Upper middle-income pov. rate Real GDP pc Source: World Bank. Source: World Bank. Notes: see Table 2. MPO 88 Oct 23 target and foreign exchange reserves have fiscal deficit is predicted to narrow to 3 rollover needs from domestic sovereign been on a downward trend. percent of GDP by 2025, and the current debt while growing regional insecurity account deficit to 2.7 percent of GDP. could dampen economic prospects by re- Under a realistic reform scenario, poten- ducing market access to important trad- tial growth in the short to medium term ing partners. Under an alternative sce- Outlook could average 5.5 percent, while more nario of persistent headwinds reflected in substantial gains in private capital spend- lower export growth (-2 percentage points Growth in Togo is projected to stabilize ing, agricultural productivity, female la- below baseline projections in 2023-25), at 5.2 percent in 2024, as additional fiscal bor force participation, and human cap- higher domestic inflation (+1 percentage consolidation measures are counterbal- ital could lift it to 7 percent under the point), and tighter financing conditions anced by a further acceleration in con- best-case scenario. The poverty rate is on regional debt markets (+150 basis sumer spending and private investment. projected to decline to 24.8 percent in points), growth would be expected to The former will benefit from receding in- 2025, a substantial drop from an estimat- slow down to an average of 4.2 percent flationary pressures while the latter will ed 28.4 percent in 2022. over the period 2023-25 (-1.2 percentage be boosted by the Adétikope Industrial Uncertainty related to the evolution of point below baseline projections) while Park development and ongoing reforms global demand, energy, food prices, fi- the budget deficit would stay above 4.5 in the agriculture, logistics, and trade nancing conditions, security risks, and cli- percent of GDP until 2025. In this sce- sectors. Export growth should remain mate change imply that the balance of nario, the public debt-to-GDP ratio would subdued in 2024 as key trading partners risks to the outlook remains tilted to the only return below the estimated risk face mounting economic challenges, before downside. In particular, a sharper dete- threshold for Togo by 2028 but the overall recovering in 2025, in line with project- rioration in regional debt markets could assessment regarding debt sustainability ed improvements in global demand. The lead to financing risks given the high risks would not be fundamentally altered. TABLE 2 Togo / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 2.0 6.0 5.8 5.2 5.2 5.8 Private consumption -14.3 9.9 1.3 5.0 5.2 5.5 Government consumption 1.8 0.2 8.8 6.6 -5.9 2.1 Gross fixed capital investment 36.6 -0.2 26.4 5.5 12.2 9.0 Exports, goods and services 6.5 5.3 -1.1 4.2 4.3 6.8 Imports, goods and services 1.6 6.9 5.1 3.8 4.9 6.3 Real GDP growth, at constant factor prices 2.2 5.3 6.2 5.1 5.2 5.8 Agriculture 3.3 3.4 5.0 4.6 5.0 5.2 Industry 4.0 5.7 7.3 7.0 6.3 6.7 Services 1.1 5.9 6.2 4.4 4.9 5.7 Inflation (consumer price index) 1.8 4.5 7.5 5.8 3.8 3.0 Current account balance (% of GDP) -0.3 -0.9 -3.0 -3.5 -3.4 -2.7 Net foreign direct investment inflow (% of GDP) 0.7 0.3 0.3 0.4 0.4 0.4 Fiscal balance (% of GDP) -7.0 -4.7 -8.3 -5.8 -4.1 -3.0 Revenues (% of GDP) 16.6 17.1 17.6 17.2 16.5 16.2 Debt (% of GDP) 60.1 63.0 65.8 66.3 65.9 65.0 Primary balance (% of GDP) -4.7 -2.5 -5.9 -3.4 -1.7 -0.7 a,b International poverty rate ($2.15 in 2017 PPP) 28.2 28.4 28.4 27.6 26.2 24.8 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 56.4 56.5 56.4 55.2 53.9 52.0 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 83.5 83.3 83.1 82.4 81.6 80.5 GHG emissions growth (mtCO2e) 1.8 6.4 5.4 2.9 4.0 4.5 Energy related GHG emissions (% of total) 22.9 25.7 26.9 26.4 26.3 26.5 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2018-EHCVM. Actual data: 2018. Nowcast: 2019-2022. Forecasts are from 2023 to 2025. b/ Projections using microsimulation methodology. MPO 89 Oct 23 reduce trade cost and reduce ad hoc tariff increases. Finally, adopting climate-smart UGANDA Key conditions and agriculture methods and improving adop- tive capabilities would build resilience to challenges climate change. Table 1 2022 Increased shocks and less momentum be- Population, million 47.2 hind policy reform create challenges for GDP, current US$ billion 38.8 sustaining economic growth and reducing Recent developments GDP per capita, current US$ 822.2 poverty in Uganda. Rapid population a 42.2 International poverty rate ($2.15) growth has kept a large share of the popu- Real GDP growth accelerated to 5.3 percent a 71.9 lation below the poverty line, while human in FY2023, despite multiple shocks and Lower middle-income poverty rate ($3.65) a 91.1 capital and infrastructure deficits have tighter financial conditions. Economic Upper middle-income poverty rate ($6.85) Gini index a 42.7 limited the country’s growth potential and growth was buoyed by the industrial and School enrollment, primary (% gross) b 102.7 contain improvements in social indicators. services sectors, which grew by 3.9 and 6.2 b 62.7 Further, almost one million working age percent respectively. In addition, the agri- Life expectancy at birth, years Ugandans enter the labor market every culture sector improved to 5.0 percent de- Total GHG emissions (mtCO2e) 63.6 year. Majority of them are still employed spite unfavorable weather conditions in the Source: WDI, Macro Poverty Outlook, and official data. in the agriculture sector which is prone to first quarter of the fiscal year. Private con- a/ Most recent value (2019), 2017 PPPs. b/ WDI for School enrollment (2017); Life expectancy natural disasters that climate change is sumption increased, while public invest- (2021). making more frequent and impact- ment was scaled back as fiscal space nar- ful—and adapting to which is hampered rowed. Higher capital imports widened the by low adaptive capacity. current account deficit to 8.7 percent of GDP To promote economic growth over the in FY2023 from 7.9 percent in FY2022. Im- Uganda’s economy is rebounding, bene- medium-term Uganda needs to pursue ports increased due primarily to oil project structural reforms to alleviate critical con- related investments. fiting from improvements in all three straints. First, the country needs to shift to- The Bank of Uganda has maintained a tight sectors that allowed for an economic wards more private investment by reduc- monetary policy stance to keep inflation un- growth of 5.3 percent in FY2023 and ing the cost of doing business and foster- der control. For FY2023, inflation averaged likely a reduction in poverty. Fiscal per- ing access to finance. Second, the country 8.8 percent, this reflects five months of needs to enhance debt sustainability and steady increase in prices which peaked at formance is improving as the govern- improve budget efficiency by increasing 10.7 percent in October 2022 driven by high ment continues to embark on fiscal con- revenue collection, cutting tax expendi- energy and food prices. In February 2023 in- solidation by reducing expenditures and tures, and prioritizing social spending. flation began to decline reaching 4.9 percent bolstering revenues. Medium-term Third, the government needs to adopt a by June 2023 driven by declining energy growth prospects appear favorable due to more open and transparent trade regime, prices, improved global supply chains and invest in transport infrastructure to sup- tight monetary policy. Based on the consis- recovery in tourism, although consider- tent decline in the inflation rate, the Bank of port regional trade and benefit from the able uncertainty around the start of oil African Continental Free Trade Area Uganda reduced its policy rate by 50 basis production remains. (AFCFTA), simplify customs procedures to points in August 2023, to 9.5 percent. FIGURE 1 Uganda / Fiscal adjustment FIGURE 2 Uganda / Actual and projected poverty rates and real private consumption per capita Percent of GDP Percent of GDP Poverty rate (%) Real private consumption per capita (constant million LCU) 16 60 100 2.5 14 90 50 12 80 2.0 40 70 10 60 1.5 8 30 50 6 40 1.0 20 4 30 10 20 0.5 2 10 0 0 2020 2021 2022 2023 2024f 2025f 0 0.0 2009 2011 2013 2015 2017 2019 2021 2023 2025 Public debt to GDP (rhs) Primary fiscal deficit (lhs) International poverty rate Lower middle-income pov. rate Tax (lhs) Upper middle-income pov. rate Real priv. cons. pc Source: Ministry of Finance, Planning and Economic Development. Source: World Bank. Notes: see Table 2. MPO 90 Oct 23 The overall fiscal deficit declined to 5.1 events during next 12 months and nega- Accelerated growth is expected to re- from 7.4 percent of GDP between FY2022 tive expectations were higher among the duce poverty (measured at the $2.15/ and FY2023, reflecting a reduction in re- poorest households. day international poverty line) from 41.7 current and development expenditure as percent in 2023 to 40.7 percent by 2025. well as increases in domestic revenue and But given that households have limited grants. Recurrent spending declined by 0.6 adaptive capacity, the pace of poverty percentage points due primarily to a re- Outlook reduction will ultimately depend on duction in spending on goods and ser- how food access and affordability vices. Development spending declined by In the medium-term, real growth is expect- evolve, and on the incidence of weather 0.8 percent, as the government cut back ed to accelerate beyond 6 percent, if not de- and other shocks. on public investment spending. Tax rev- railed by a global slowdown, disruptions to The government aims to narrow the fis- enue and grants increased by 0.5 percent- global finances and weather shocks. The re- cal deficit to 3.4 percent of GDP in age points each. The increase in revenue covery in the medium-term will be driven by 2024–25 through more efficient spending was driven by an increase in import duty. a recovery in tourism, and the developments and implementation of the Domestic The fiscal deficit was financed by domestic in the oil sector that is attracting foreign and Revenue Mobilization Strategy (DRMS) and external borrowing. Uganda’s public domestic private investment in related in- . The government plans to reduce non- debt continues to be sustainable in the frastructure ahead of the start of oil produc- priority capital expenditures while medium term due to the implementation tion in 2025. Economic growth will also be maintaining the share of social spend- of fiscal consolidation. driven by increase private consumption, as ing. The government’s domestic revenue Consistent with accelerated economic inflationary pressures continues to abate. mobilization strategy which includes ra- growth, more respondents shared posi- Inflation is projected to decline from tionalization of exemptions, and revenue tive perceptions on current and future FY2024 onwards reaching the Bank of administration modernization to im- household and country economic wellbe- Uganda’s medium-term target of 5 per- prove compliance is expected to yield ing according to the most recent round of cent, after averaging at 8.9 percent in approximately 0.6 and 0.5 percent of the phone survey from February/March FY2023. This reflects the impact of more GDP in FY2024 and FY2025, respective- 2023. Nevertheless, about 34 percent of favorable weather conditions on domestic ly. Continued fiscal consolidation will households were moderately food inse- harvests, the softening of global commod- modestly reduce debt to around 47 per- cure and seven percent were severe food ity prices and easing of global demand- cent of GDP by 2025, keep debt service insecure. About half of respondents were supply imbalances, and the effects of mon- manageable, and reduce crowding out also certain to experience extreme weather etary and fiscal policy tightening. private sector investment. TABLE 2 Uganda / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices 3.0 3.4 4.7 5.3 6.0 6.6 Private consumption 2.0 4.2 3.4 4.4 5.6 5.8 Government consumption 7.9 6.1 -17.4 5.1 5.0 5.3 Gross fixed capital investment -0.1 5.1 20.1 5.5 8.2 9.3 Exports, goods and services -1.2 2.6 -18.6 7.0 7.8 8.7 Imports, goods and services -5.4 8.6 -8.9 3.2 8.6 8.8 Real GDP growth, at constant factor prices 3.0 3.4 4.7 5.3 6.0 6.6 Agriculture 4.6 3.8 4.4 5.0 5.1 5.3 Industry 3.1 3.4 5.4 3.9 5.6 6.5 Services 2.2 3.3 4.4 6.3 6.8 7.3 Inflation (consumer price index) 2.3 2.5 3.7 8.8 7.2 5.0 Current account balance (% of GDP) -6.7 -10.2 -7.9 -7.2 -7.9 -10.4 Net foreign direct investment inflow (% of GDP) 2.6 2.1 3.1 5.9 8.7 10.9 Fiscal balance (% of GDP) -7.1 -9.5 -7.4 -5.0 -3.4 -3.4 Revenues (% of GDP) 13.1 14.7 14.2 15.0 15.4 15.9 Debt (% of GDP) 40.4 49.6 50.7 48.3 47.4 46.3 Primary balance (% of GDP) -4.8 -6.8 -4.6 -2.0 -0.1 -1.4 a,b International poverty rate ($2.15 in 2017 PPP) 42.5 42.3 42.2 41.9 41.3 40.7 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 72.2 72.0 71.9 71.7 71.2 70.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.3 91.2 91.1 90.8 90.2 89.5 GHG emissions growth (mtCO2e) 1.3 2.7 3.4 3.6 3.8 3.9 Energy related GHG emissions (% of total) 18.4 18.4 18.6 18.8 19.2 19.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2009-UNHS, 2012-UNHS, and 2019-UNHS. Actual data: 2019. Nowcast: 2020-2022. Forecasts are from 2023 to 2025. b/ Projection using point to point elasticity at regional level with pass-through = 0.7 based on private consumption per capita in constant LCU. MPO 91 Oct 23 widespread and is predominantly rural, estimated at 60.8 percent, of which 80 per- ZAMBIA Key conditions and cent are rural poor. Inequality is among the highest in Sub-Saharan Africa, as evi- challenges denced by a high Gini coefficient of 0.56 in 2015, the most recent data available. Table 1 2022 Zambia is in debt distress and requires A youthful population offers an opportu- Population, million 20.0 debt restructuring. A decade of unsustain- nity for Zambia to harness a sizeable de- GDP, current US$ billion 29.0 able macroeconomic policies and falling mographic dividend if it can create more GDP per capita, current US$ 1449.2 copper prices caused external debt to jump and better jobs for new labor force en- a 60.8 International poverty rate ($2.15) from 6.7 percent of GDP in 2011 to 66.4 trants. Available estimates suggest that a 78.0 percent in 2019. The COVID-19 pandemic 300,000 new jobs must be created annually. Lower middle-income poverty rate ($3.65) a 91.0 exacerbated these vulnerabilities, leading However, generating jobs will remain a Upper middle-income poverty rate ($6.85) Gini index a 55.9 to a default on Eurobond payments in challenge as the potential for the private School enrollment, primary (% gross) b 98.7 2020. In early 2021, Zambia requested debt sector to drive job growth and lead eco- b 61.2 treatment under the G20 Common Frame- nomic transformation is hampered by reg- Life expectancy at birth, years work. Its official creditors reached an ulatory bottlenecks, large infrastructure Total GHG emissions (mtCO2e) 94.6 agreement on key parameters of debt relief deficits, and the high cost of finance. The Source: WDI, Macro Poverty Outlook, and official data. in June 2023 and are now finalizing the government’s current capacity to finance a/ Most recent value (2015), 2017 PPPs. b/ WDI for School enrollment (2017); Life expectancy memorandum of understanding. Once for- development is significantly constrained. (2021). malized, the agreement will reduce the net Completing debt treatments would give present value of Zambia’s US$ 6.3 billion ex- Zambia breathing space to restore macro- ternal bilateral debt by 40 percent. It should economic stability and debt sustainability, After two years of solid growth, the Zam- pave the way for completing negotiations supporting the ambitious reform program bian economy moderated in 2023 as mut- with private creditors on comparable terms. and accelerating more diversified and in- Despite this challenging environment, clusive economic growth. ed copper prices and legacy operational Zambia’s economy has recovered from the challenges constrained copper production, pandemic-induced recession thanks to the and power outages hit early in the year. new administration’s bold macroeconomic Growth is expected to accelerate in and structural reforms. Still, multiple Recent developments shocks, including global commodity prices 2024-25, averaging 4.7 percent as mining and adverse weather, have negatively af- In H1 2023, economic growth slowed as picks up and induces services activity. fected fiscal and external sector balances as muted copper prices and unresolved man- Completing debt treatment would help re- the country remains dependent on mining agement challenges at Mopani and Konko- store macroeconomic and debt sustain- and agriculture. Weak links between the la Copper Mines (KCM) continued to con- ability, supporting the Government’s am- capital-intensive mining sector and other strain copper production and, with low sectors of the economy, coupled with low water levels at the Kariba dam, power out- bitious reform program and accelerating ages hit the economy. Q1 GDP grew by productivity in labor-intensive agriculture, more diversified and inclusive growth. limit opportunities for inclusive and sus- only 2.3 percent year-on-year, down from tainable development. Poverty remains 7.9 percent in Q1 2022, reflecting declines FIGURE 1 Zambia / Real GDP growth and contributions to FIGURE 2 Zambia / Actual and projected poverty rates and real GDP growth real GDP per capita Percent, percentage points Poverty rate (%) Real GDP per capita (constant FDJ) 10 100 9000 8 90 8000 80 7000 6 70 6000 4 60 5000 2 50 4000 0 40 3000 30 -2 2000 20 -4 10 1000 -6 0 0 2020Q1 2020Q3 2021Q1 2021Q3 2022Q1 2022Q3 2023Q1 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 International poverty rate Lower middle-income pov. rate Agriculture Industry Mining Services GDP Upper middle-income pov. rate Real GDP pc Source: World Bank estimates. Source: World Bank. Notes: see Table 2. MPO 92 Oct 23 in agriculture, mining, electricity, and the revenue as mineral production struggled, mining. This favorable outlook relies on wholesale and retail trade sectors. . The grants were 50 percent above target, reflect- greater private investment as sustained Stanbic Bank Purchasing Managers’ Index ing greater support from development part- primary surpluses reduce the state’s com- suggests that private sector activity re- ners. Total expenditure remained below petition with the private sector for do- mained subdued, with the uncertainty sur- budget as spending on the farmer input sup- mestic credit. It also depends on the au- rounding debt restructuring hindering port program was cut, and planned local de- thorities maximizing concessional financ- business confidence. In the year to June, cop- velopment spending was delayed. Despite ing and leveraging public-private part- per earnings declined by 22.6 percent, while significant overruns on roads, the authori- nerships as an alternative source of fi- imports rose by 23.1 percent. As a result, the ties benefitted from lower-than-expected nancing to promote investment in various merchandise trade surplus narrowed to US$ debt repayments related to the debt service sectors, including mining, agriculture, 0.2 billion from US$ 1.7 billion in H1 2022, standstill and a hefty dividend from BoZ. tourism, and digitalization. While robust weakening the current account surplus. In- social spending is expected to improve ternational reserves declined from covering household welfare, under current growth 3.8 months of imports at the end of Decem- projections, poverty reduction will re- ber 2022 to 3.3 months in March 2023. Outlook main slow and gradually approach pre- The average exchange rate depreciated by pandemic levels by 2025. 16.6 percent between H1 2023 and H2 2022 The Zambian economy is expected to grow, Downside risks for Zambia’s economic because of reduced inflows from mining driven by robust copper production, with outlook are considerable. Copper revenues and portfolio capital outflows amid the un- real GDP projected to average 4.7 percent may remain constrained because of lower certainty surrounding the conclusion of ex- annually in 2024-25. This outlook assumes ore grades, delayed investments in the sec- ternal debt restructuring. Inflationary pres- firmer global copper demand and produc- tor, or weakening copper prices owing to sures intensified in H1 2023, stemming tion ramping up at KCM after the govern- subdued global growth and a further slow- largely from exchange rate pass-through of ment returned control of the mine to Vedan- down in the Chinese economy, a central the weakening currency. . In August, BoZ ta Resources following four years of disput- market for Zambia’s copper exports. The raised its policy rate by 50 basis points to ed liquidation. Reaching a final agreement effects of climate change pose a risk to food 10 percent after inflation spiked to two dig- with creditors on debt restructuring will sta- security and hydropower generation. its, well above the 6-8 percent target band. bilize the exchange rate. This stability and There could be additional inflationary High inflation is hampering the recovery ongoing business regulatory reforms are ex- pressures from a depreciating Kwacha in living standards which remains slow pected to attract more FDI. With the recent (due to elevated import demand and for- and uneven since 2020. overhaul of the mining fiscal regime, eign debt service) or climate-driven food Fiscal balances have remained within bud- seeking to raise copper production from shortages. Finally, a prolonged war in get in H1 2023, evidencing the robust fiscal 800,000 tons to 3 million tons, additional Ukraine could pressure fertilizer and food consolidation that started in 2022. While fis- mining investments will stimulate more prices, increasing inflation and spending cal revenues softened due to a shortfall in tax vigorous activity in services that support on agricultural inputs. TABLE 2 Zambia / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -2.8 4.6 4.7 2.7 4.6 4.8 Private consumption 3.1 3.1 3.7 2.5 4.0 4.5 Government consumption 10.8 5.6 -3.4 15.5 4.6 3.2 Gross fixed capital investment -29.7 8.3 8.7 2.1 8.5 8.7 Exports, goods and services 21.8 4.6 5.0 2.8 3.0 3.2 Imports, goods and services 10.6 2.5 4.0 4.5 3.9 4.3 Real GDP growth, at constant factor prices -2.2 4.7 4.8 2.5 4.7 4.9 Agriculture 17.2 6.9 -2.4 3.0 1.0 2.0 Industry 1.3 4.2 -2.1 1.0 3.0 2.5 Services -6.1 4.6 9.7 3.3 6.0 6.4 Inflation (consumer price index) 15.7 22.3 10.7 11.1 10.1 7.2 Current account balance (% of GDP) 10.6 9.7 3.6 3.8 6.8 8.2 Net foreign direct investment inflow (% of GDP) 1.0 -1.9 1.1 2.1 2.8 3.6 Revenues (% of GDP) 20.4 22.6 20.5 21.1 21.8 21.6 Primary balance (% of GDP) -7.9 -2.0 -1.6 0.2 1.2 2.0 a,b International poverty rate ($2.15 in 2017 PPP) 62.4 62.2 61.8 61.6 61.0 60.5 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 79.2 79.0 78.6 78.5 78.2 77.7 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 91.7 91.7 91.4 91.3 91.1 90.9 GHG emissions growth (mtCO2e) 1.0 1.7 0.9 0.9 1.1 1.3 Energy related GHG emissions (% of total) 8.2 8.8 8.8 9.1 9.6 10.2 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2015-LCMS-VII. Actual data: 2015. Nowcast: 2016-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2015) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 93 Oct 23 Poverty has been elevated on account of macroeconomic instability, poor job cre- ZIMBABWE Key conditions and ation in the productive sectors, weather and global health shocks, and weak social challenges protection systems. Extreme poverty rate has declined from its 2020 peak but re- Table 1 2022 Exchange rate and inflationary pressures mains high against the background of Population, million 16.3 continue to constrain Zimbabwe’s full cyclical agricultural production and ele- GDP, current US$ billion 31.1 growth potential. Since 2016, reforms to vated food prices. GDP per capita, current US$ 1902.6 maintain the local currency have been as- a 39.8 International poverty rate ($2.15) sociated with periodic macroeconomic in- a 64.5 stability- high inflation and exchange rate Lower middle-income poverty rate ($3.65) Upper middle-income poverty rate ($6.85) a 85.0 depreciation that distorted economic activ- Recent developments Gini index a 50.3 ity. This has affected both domestic and School enrollment, primary (% gross) b 96.1 foreign investment which remain far be- Real GDP growth remained high at 6.5 b 59.3 low regional peers. With waning economic percent in 2022 from 8.5 percent in 2021 Life expectancy at birth, years and employment activity in the formal sec- driven by a significant revision in agricul- Total GHG emissions (mtCO2e) 119.3 tor, informality has grown in recent years. tural production. Earlier projections had Source: WDI, Macro Poverty Outlook, and official data. High unsustainable debt and arrears to in- anticipated agriculture output to contract a/ Most recent value (2019), 2017 PPPs. b/ Most recent WDI value (2021). ternational financial institutions (IFIs) con- by 14 percent, but growth in maize and tinue to limit the fiscal space and growth wheat production saw agriculture output potential. External debt rose from 40 to 70 revised upward to 6.2 percent in 2022. percent of GDP between 2018 and 2022. During the first half of 2023, exchange rate The government ceased servicing external and inflationary pressures intensified, Real GDP growth was high at 6.5 percent debt in 2000, and arrears have since risen with manufacturing, construction, electric- in 2022, largely driven by the agricultur- to 37 percent of GDP (US$6.7 billion) as of ity supply and accommodation, and food al sector, yet other sectors were con- December 2022. The country resumed to- service activities contracting in 2023Q1. strained by price and exchange rate insta- ken payments to multilateral creditors in The unemployment rate increased on 2021, and initiated an arrears clearance di- quarter-on-quarter basis from 19.3 percent bility. Annual inflation returned to alogue process in 2022, as a signal for reen- in 2023Q1 to 19.7 percent in 2023Q2. triple-digit levels in 2022 and remained gagement commitment. The government Inflation reached hyperinflation levels in high in the first half of 2023, driven by has accumulated two types of legacy debt June 2023, but declined thereafter, as au- both monetary expansion and external since 2021: (i) US$1.6 billion compensation thorities implemented various measures shocks. Poverty levels declined moderate- for a 2019 imposition of exchange rate re- to curb currency depreciation. After de- strictions that blocked external payments preciating sharply from the turn of 2022 ly. Economic growth is projected to slow to to foreign suppliers and investors to May 2023, the parallel market ex- 4.5 percent in 2023 and to remain under 5 (“blocked funds”), and(ii) US$3.5 agreed change rate started to appreciate in June, percent in the medium term, reflecting as compensation to former farm owners falling to below 35 percent in July 2023, global shocks and structural bottlenecks. who lost land and assets during the from over 100 percent in May 2023, part- post-2000 land reform. ly reflecting the impact of tight monetary FIGURE 1 Zimbabwe / Exchange rates FIGURE 2 Zimbabwe / Actual and projected poverty rates and real GDP per capita ZWL$/US$ Poverty rate (%) Real GDP per capita (constant LCU) 9000 100 16000 8000 90 14000 7000 80 12000 6000 70 60 10000 5000 4000 50 8000 40 6000 3000 30 2000 4000 20 1000 2000 10 0 0 0 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 2011 2013 2015 2017 2019 2021 2023 2025 Auction market exchange rate Parallel market exchange rate International poverty rate Lower middle-income pov. rate Interbank market exchange rate Upper middle-income pov. rate Real GDP pc Sources: Zimstat and World Bank staff estimates. Source: World Bank. Notes: see Table 2. MPO 94 Oct 23 policy and slowing of quasi-fiscal activi- during the first half of 2023 compared to The fiscal balance is projected to turn into ties. This dampened month-on-month in- the same period last year, reflecting a de- deficit in 2023 on a high wage bill, high flation from 74.5 percent in June 2023 to cline in mineral exports and increase in im- interest payments from QFOs, and the -15.3 percent in July 2023. Notwithstand- ports. Remittances from non-governmen- resumption of spending after elections. ing, Zimbabwe dollar denominated prices tal organization contracted by 10.5 percent. Moreover, the government is expected to remain elevated, eroding the purchasing resume paying its contractors and sup- power, and putting many goods and ser- pliers after elections. Interest payments vices out of reach of most households. from servicing QFOs debts are project- The fiscal balance continued to be in sur- Outlook ed to significantly increase, posing liquid- plus during the first half of 2023, as gov- ity risks, amid limited access to conces- ernment slowed spending to contain in- Real GDP growth is projected to slow sional financing. Fiscal deficit is projected flation and exchange rate pressures. High to 4.5 percent in 2023, constrained by to reach 3.2 percent of GDP in 2023, be- inflation contributed to higher revenue global headwinds, structural bottlenecks, fore slowing to under 2.0 percent in 2024 while the government restrained the im- and price and exchange rate instability. and 2025. The current account surplus is plementation of capital projects. How- Growth in 2023 will be driven mostly expected to continue shrinking, reflecting ever, recurrent spending pressures in- by agriculture and services, particularly an increase in imports and a slowdown in creased ahead of national elections, as tourism. Manufacturing and mining sec- remittance inflows. the government increased civil servants’ tor growth are projected to slow in 2023, The poverty rate is expected to decline salaries sharply, both in foreign and local partly affected by electricity shortage, in- modestly in the medium term along with currency. The government transferred all flation, and exchange rate pressures. the projected increase in GDP per capita. quasi-fiscal operations (QFOs) from the Downside risks to the outlook could in- However, structural changes are necessary Central Bank to the Treasury, and this clude policy slippages after elections, a to accelerate poverty reduction and break will increase interest payment during the weak global environment for growth, its dependence on weather cycles. Improv- second half of 2023. volatile commodity prices, and climate ing labor productivity through an increase The current account surplus narrowed change. Inflationary pressures are expect- in agricultural productivity, structural during the first half of 2023 as the ed to slow, but inflation will remain in transformation, and capital deepening, as widening of the trade deficit outpaced triple-digits in 2023, before returning to well as instituting a robust social protec- the growth of remittances. The merchan- double digits in 2024 and 2025, as ex- tion system are the key structural priorities dise trade deficit increased by 19 percent change rate pressures are contained. to reduce poverty and vulnerability. TABLE 2 Zimbabwe / Macro poverty outlook indicators (annual percent change unless indicated otherwise) 2020 2021 2022 2023e 2024f 2025f Real GDP growth, at constant market prices -7.8 8.5 6.5 4.5 3.9 4.1 Private consumption -2.3 1.5 4.9 3.0 4.0 4.8 Government consumption -23.8 142.1 31.3 26.8 3.5 1.7 Gross fixed capital investment -18.2 12.8 22.3 -21.6 0.9 0.8 Exports, goods and services -48.9 47.0 43.9 3.0 1.5 3.4 Imports, goods and services -44.1 61.5 54.6 2.0 1.1 2.5 Real GDP growth, at constant factor prices -7.7 8.4 6.4 4.5 3.9 4.1 Agriculture 4.1 17.5 6.2 6.3 0.9 3.0 Industry -8.2 6.4 5.5 2.9 4.5 4.2 Services -9.6 7.7 7.0 4.9 4.2 4.3 Inflation (consumer price index) 557.2 98.5 193.4 305.0 45.1 15.9 Current account balance (% of GDP) 2.9 1.0 1.0 0.8 0.5 0.4 Net foreign direct investment inflow (% of GDP) 0.7 0.7 1.0 1.4 1.5 0.5 Fiscal balance (% of GDP) 1.5 -2.0 0.1 -3.2 -1.6 -1.2 Revenues (% of GDP) 13.3 15.3 16.4 18.7 18.9 19.5 Debt (% of GDP) 51.2 58.4 99.6 130.8 111.1 123.7 Primary balance (% of GDP) 1.6 -1.9 0.2 -2.3 -0.3 0.0 a,b International poverty rate ($2.15 in 2017 PPP) 43.9 41.4 39.6 38.7 37.8 36.9 a,b Lower middle-income poverty rate ($3.65 in 2017 PPP) 68.1 65.8 64.2 63.4 62.8 61.5 a,b Upper middle-income poverty rate ($6.85 in 2017 PPP) 86.9 85.6 85.0 84.6 84.3 83.9 GHG emissions growth (mtCO2e) -1.4 1.2 1.4 0.5 1.0 1.6 Energy related GHG emissions (% of total) 11.3 12.5 13.2 14.4 15.4 16.6 Source: World Bank, Poverty & Equity and Macroeconomics, Trade & Investment Global Practices. Emissions data sourced from CAIT and OECD. Notes: e = estimate, f = forecast. a/ Calculations based on 2019-PICES. Actual data: 2019. Nowcast: 2020-2022. Forecasts are from 2023 to 2025. b/ Projection using neutral distribution (2019) with pass-through = 0.87 (Med (0.87)) based on GDP per capita in constant LCU. MPO 95 Oct 23 Macro Poverty Outlook 10 / 2023