African Development Bank shed light on the economic trajectory of West African nations for 2023

In a comprehensive economic analysis released on Wednesday, the African Development Bank (AfDB) shed light on the economic trajectory of West African nations for 2023.

Titled “Mobilising Private Sector Financing for Climate and Green Growth in West Africa,” the report unveiled intriguing insights into the region’s economic performance and prospects.

The study encompassed 15 West African countries, including Benin, Burkina Faso, Cape Verde, Côte d’Ivoire, The Gambia, and Ghana, among others. According to the report, West Africa’s average Gross Domestic Product (GDP) witnessed a deceleration, dwindling from 4.4% in 2021 to 3.8% in 2022. This deceleration signified a slowing recovery from the economic downturn of 2020.

The report attributed this slowdown to a series of cascading shocks, including the resurgence of COVID-19 in China, a vital trade partner for the region. Additionally, Russia’s incursion into Ukraine sent ripples through the region, inducing inflationary pressures on essential commodities like food, fuel, and fertilizers.

Amidst these challenges, the report painted a cautiously optimistic outlook. West Africa’s GDP growth is projected to regain momentum, slightly picking up to 3.9% in 2023 and further climbing to 4.2% in 2024. However, the report underscored that realizing a transition to green growth would demand substantial resources.

Emphasizing the importance of embracing sustainable and green growth, the report highlighted the potential inherent in West Africa’s path toward green industrialization. It detailed how climate change, depletion of natural resources, poverty, and limited employment opportunities could be addressed through the lens of green growth.

Professor Kevin Urama, AfDB’s Chief Economist, addressed the challenges affecting Africa’s financial landscape. Rising interest rates, driven by factors such as climate change impacts, inflation, and disruptions in supply chains, have exacerbated debt service payments for African countries. Urama stressed the need for greater efforts to mobilize domestic resources and private sector financing, especially for climate and green growth transitions.

Urama also drew attention to the significant climate financing gap faced by Africa. Despite the continent requiring an estimated $235-250 billion annually through 2030 to meet its climate goals, it received only $29.5 billion between 2019 and 2020. Private sector financing for climate adaptation and mitigation in Africa remains relatively low, at around $4.2 billion from 2019-2020.

Highlighting the potential of Africa’s natural capital, estimated at approximately $6.2 trillion in 2018, Urama suggested that optimizing these resources could accelerate green development transitions. He noted that poor valuation, degradation, and illicit capital flows were hindering the continent from fully harnessing its natural wealth.

Meanwhile, Guy-Blaise Nkamleu, AfDB’s lead economist, stressed the importance of deploying innovative instruments and mechanisms to attract private sector financing for climate change and green growth. He further highlighted that Guinea-Bissau, Mali, Liberia, and Niger are among the most vulnerable countries globally to climate change and environmental hazards.

As West Africa navigates these economic complexities, the report’s insights serve as a clarion call for sustainable strategies and collaborative efforts to propel the region towards a greener and more resilient future.