the 2023 African Economic Outlook: Mobilizing Private Sector Financing for Climate and Green Growth in Africa

The African Economic Outlook 2023 is being published as African countries are dealing with multiple shocks, including the effects of the COVID-19 pandemic, disruptions to global supply chains due to Russia’s prolonged invasion of Ukraine and a tightening of global financing conditions.

These shocks have reduced the continent’s real GDP growth from 4.8 percent in 2021 to 3.8 percent in 2022. However, African economies remain resilient, with average growth projected to stabilize at 4.1 percent in 2023–24.

The growth outlook is subject to significant downside risks, including i) subdued global growth weighing on Africa’s exports, persistence of tight global financial conditions exacerbating debt servicing costs; ii) significant losses and damages due to frequent extreme weather events exacerbating fiscal pressures; iii) the prolongation of Russia’s invasion of Ukraine, which is increasing global uncertainty; and iv) persistent disruptions to global supply chains. Other factors include elevated geopolitical risks due to upcoming national elections in some countries.

The African Economic Outlook 2023 underscores the urgency to fast-track climate action and green transitions to drive the continent’s inclusive and sustainable development. The Bank’s new research, based on African countries’ latest submitted Nationally Determined Contributions (NDCs), estimates that private sector financing will need to grow annually by 36 percent until 2030 to close the continent's climate finance gap, evaluated on average at $213.4 billion per year.

This will be important to address the continent’s climate financing needs, estimated at as much as $2.8 trillion over 2020-2030, or $250 billion annually. Unlocking private climate financing will require addressing both demand- and supply-side barriers while developing innovative financing instruments to tap into the continent’s enormous investment opportunities in climate and green growth.

The report also highlights the important role of Africa’s huge natural capital, valued at $6.2 trillion in 2018, in bridging the prevailing climate finance gap and promoting green growth transitions. Through sustainable management, Africa's abundant natural capital can be transformed into financial assets to complement financing for climate adaptation and mitigation, as well as into investments that support green growth transitions.

This will require the deployment of appropriate policies and instruments, including fiscal instruments, to better understand the true value of Africa’s natural capital and strengthen local content and value addition. It will also build institutional capacity to address gaps in governance that have prevented the continent from realizing the full potential of its natural endowments and create regional value chains and markets to benefit from cross-regional synergies.