The latest report by the World Economic Forum Global Competitiveness Index (GCI) indicates that the Southern African Development Community (SADC) improved slightly in terms of general competitiveness.
The GCI measures the competitiveness of an economy by considering all factors from basic factors that enable it to be competitive to factors that make it efficient and innovative.
According to the World Economic Forum GCI, five SADC Member States improved in the GCI ranking, namely Angola, Malawi, Namibia, South Africa, and Zimbabwe. Namibia and South Africa demonstrated exceptional improvements by moving up six and seven positions from 100 to 94 and 67 to 60 respectively. Mauritius, South Africa, Botswana and Seychelles remained the most competitive and top-ranked Member States in the Region.
Presentations on SADC Member States economic performances made during the SADC-International Cooperating Partners (ICP) Dialogue Platform Meeting on 25th November 2022 showed that the Russia/Ukraine war has adversely affected the Region via significantly high import bills from increases in prices of oil, fertilizers and grain.
The Region is faced with food insecurity due to erratic rainfall in 2021/22 summer agricultural season and the war has exacerbated the situation. The war has resulted in a shortage of grain resulting in increased grain prices. The disruption of oil and gas production due to the war resulted in significant increase in energy prices.
Projections for 2022 indicate that the regional economic prospects are being weighed down by global developments that include monetary policy responses to elevated inflation, tightening financial conditions, the war in Ukraine, and the lingering adverse impact of COVID-19 and supply chain disruptions. The regional economic growth is therefore estimated to slow down to 3.9% in 2022 from 4.9% in 2021.
Annual inflation rate in the SADC Region is projected to increase to 28.2% in 2022 from 14.4% in 2021, the fiscal position for Member States is projected to slightly deteriorate to 4.5% of Gross Domestic Product (GDP) in 2022 from 4.3% of GDP in 2021, while public debt as a percentage of GDP averaged is forecasted to reach 60.5% in 2022, from 61.2% in 2021.
The SADC-ICP Dialogue Platform Meeting noted that the COVID-19 pandemic emerged at a time when the SADC Region had not fully recovered from the 2008 global financial crisis recession. This undermined the progress that Member States had made towards converging under the SADC Macroeconomic Convergence (MEC) programme.
In addition, the Region has also experienced several extreme climatic and weather events such as droughts, cyclones and floods that further weakened the economies of Member States, therefore, derailing the MEC programme. The global growth is estimated to slow down from an estimated 6% in 2021 to 3.2% in 2022 and 2.7% in 2023. The Regional average economic growth is estimated at 4.9% in 2021 from a contraction of 4.6% in 2020 and an increase of 1.7% in 2019. Three Member States (Botswana, Seychelles and Zimbabwe) met the regional target of 7% in 2021.
The meeting further noted that regional economic growth is estimated to slow down to 3.9% in 2022 weighed down by global developments in the face of fragile recovery after the 2020 recession. In 2022, only Seychelles is expected to achieve the MEC economic growth target of 7%.
Inflationary pressures were moderate during 2021 benefiting from weak consumer demand and low oil prices dampened by movement restrictions globally to curb the spread of COVID-19. However, the lifting up of travel restrictions in the second half of 2021 led to the restoration of significant economic activity resulting in an increase in demand for commodities. The rising commodities prices especially the oil price and persistent disruptions of the global supply chains led to a surge in inflationary pressures in the last quarter of 2021.
The regional external sector has remained relatively stable because Member States that rely heavily on commodity exports benefited from firm international commodity prices. Member States' external sector showed resilience during the outbreak of the pandemic largely due to the quick restoration of economic activity and recovery of China, a major destination of SADC exports.
In addition, the global Special Drawing Rights (SDRs) disbursement by the IMF enhanced the stability of the external sector by bolstering the foreign reserves of Member States. The regional average of current account deficit as a percentage of GDP marginally widened from 4.1% in 2019 to 4.3% in 2020 and 5.0% in 2021. The regional average current account deficit is forecasted to widen to 6.5% of GDP in 2022 largely due to elevated global energy and food prices.
