A DRC Investment Outlook for 2023

A DRC Investment Outlook for 2023

Real gross domestic product (GDP) in Africa rebounded strongly in 2021, growing by 6.9 percent. This rebound was supported by recovery in global demand, higher oil prices ben- efiting oil-exporting economies, easing of COVID-19 restrictions in most countries, and asso- ciated growth in domestic consumption and investment. Africa’s real GDP growth is, however, projected to decelerate to 4.1 percent in 2022, reflecting ebbing of base effects and uncertain- ties related to the persistence of the COVID-19 pandemic and the impact of the Russia–Ukraine conflict.

Growth varies widely across countries and regions. Economic growth in 2021 was high- est in North Africa (11.7 percent) and East Africa (4.8 percent). In 2022, growth is expected to decelerate to 4.5 percent in North Africa and to stabilize at 4.7 percent in East Africa. Average growth in 2021 in west Africa was 4.3 percent and is projected to remain strong at 4.1 percent in 2022. Growth in Central Africa is projected to rise to 4.6 percent in 2022, from 3.4 percent in 2021. Southern Africa’s estimated growth of 4.2 percent represented the largest recovery, from a contraction of 6.0 percent, underpinned by strong recovery in Botswana (12.5 percent), Mauritius (4.0 percent), and South Africa (4.9 percent). Growth in the region is projected to decelerate to 2.5 percent in 2022 as the effects of large fiscal stimuli peter out.

Africa’s growth outlook is highly uncertain, with risks tilting to the downside. The spillover effects from the Russia–Ukraine conflict and related sanctions on Russia may cause a larger decline in global output than currently projected. A combination of low COVID-19 vaccination rollout and emergence of new COVID-19 variants may force countries to retain some restric- tions. Other downside factors include heightened debt vulnerabilities, tight global financial con- ditions as inflationary pressures rise, the effect of the Russia–Ukraine conflict and related sanc- tions on Russia, climate and environmental risks, and other sociopolitical and security issues. Upside factors include faster vaccination rollout, a comprehensive resolution of debt problems, and policies to accelerate structural transformation and build economic resilience.

Macroeconomic fundamentals have generally improved, but considerable challenges remain in the medium term, due largely to persistence of the pandemic effects and vol- atility induced by the impact of the Russia–Ukraine conflict. The average fiscal deficit in Africa is projected to narrow to 4.0 percent of GDP in 2022, from 5.1 percent in 2021, reflect- ing scaling-down of COVID-19-related interventions and relative strengthening of domestic

revenues. However, rising commodity prices trig- gered by the Russia–Ukraine conflict represent a major headwind for the fiscal situation in the short to medium term, especially for economies depen- dent on imports of energy and food commodities. The average current account deficit is projected to be 2.0 percent of GDP in 2022, down from 2.4 per- cent in 2021, underpinned by expected narrowing of the trade deficit and current transfers. Exchange rate fluctuations fell in most countries in 2021, sup- ported by improved foreign exchange inflows. The outlook for exchange rates in 2022 and beyond depends on developments in international finan- cial markets, especially on the back of the Russia–Ukraine conflict and normalization of monetary policy in advanced economies. Average inflation is projected to accelerate to 13.5 percent in 2022 from 13.0 percent in 2021, fueled by a sharp rise in commodity prices, especially energy and food, due to escalation of the Russia–Ukraine conflict.