The International Monetary Fund (IMF) has forecast shifts in Africa’s economic ranking, indicating that South Africa is set to briefly overtake Nigeria and Egypt as the continent’s largest economy next year.
This change is attributed to a combination of factors, including a decline in Nigeria’s oil production and the depreciation of its currency, the Naira. According to IMF’s World Economic Outlook, South Africa’s GDP is expected to reach US dollars 401 billion (Ksh60.23 trillion) in 2024, ahead of Nigeria’s at US dollars395 billion (Ksh59.32 trillion) and Egypt’s at US dollars358 billion (Ksh53.77 trillion).
However, this shift is anticipated to be temporary, with Nigeria likely to regain its top position the following year, while South Africa is expected to slip to third place behind Egypt by 2026. Nigeria’s economic performance has been adversely affected by falling oil production, inflation, and a devalued currency.
In response, Nigeria has implemented policy reforms to address these economic challenges, which are expected to result in a 3.1% GDP growth in 2024, up from 2.9% in 2023.
Bloomberg economist Yvonne Mhango suggests that South Africa’s expected brief ascendancy as Africa’s largest economy in 2024 is primarily due to the depreciation of Nigeria and Egypt’s GDP in dollar terms according to People Daily.
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In Egypt, multiple currency devaluations have been carried out this year due to a shortage of foreign exchange, leading to a significant depreciation of the Egyptian pound against the US dollar. To address these challenges, the government secured a US dollar 3 billion (Ksh450.6 billion) IMF package, which encourages a more flexible currency exchange rate.
However, the scheduled IMF reviews for Egypt in March and September have been postponed, leaving potential financial assistance and investments contingent on successful evaluations.
South Africa’s economy is projected to grow by 0.9% in 2023 and 1.8% in 2024, with the possibility of faster growth between 2.5% and 3% if logistical issues, electricity problems, and other reforms are effectively addressed.
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To attain the projected GDP growth, Nigeria must take measures to restore oil production, address security concerns, and enhance the power sector. In both countries, infrastructure challenges and power outages continue to impede economic growth.
