Global growth slowed to 2.9% in 2022 as soaring inflation, energy and value chain disruptions, and significant monetary tightening weighed on economic activity.
Inflationary pressures eased towards the end of the year, especially due to the normalization of commodity prices, but global inflation remains high, exceeding central bank targets in almost all inflation target countries.
The rapid implementation of monetary tightening has helped ease inflationary pressures while contributing to a significant deterioration in global financial conditions.
The failures of Credit Suisse and two regional US banks have exposed growing vulnerabilities in the global financial system, undermining investor confidence and posing further risks to the US and eurozone economies.
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Several emerging market and developing economies have seen widespread capital outflows and rising sovereign borrowing costs, with worsening fiscal conditions in countries with lower credit ratings.
Global growth is expected to bottom out at 1.7% in 2023 and rise moderately to 2.7% in 2024, reflecting the ongoing tightening of monetary policy and deteriorating financial conditions.
Global commodity prices are expected to moderate in 2023 and remain largely stable in 2024. Commodity prices fell 14% in his first quarter of 2023, about 30% below the June 2022 historical high.
Nevertheless, prices for all major commodity groups and about four-fifths of individual commodities are still above the 2015-2019 average level. Brent oil prices have fallen 35% from their peak in June 2022, but are still well above their pre-pandemic averages.
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Oil prices are expected to average US$84 per barrel in 2023, largely reflecting slowing growth prospects in advanced economies. Agricultural commodity prices have fallen for much of 2022 after peaking in early 2022, aided by improved supply conditions.
Global food prices are expected to continue falling in 2023. Still, those prices are above pre-pandemic levels, and the inflation-adjusted food price index is expected to be the second highest since 1975. Coffee and tea prices fell. throughout 2022.
Despite declining global prices for agricultural commodities, global domestic food price inflation remains at historic highs due to slow transmission of global to regional prices and a stronger US dollar. stays at the same level.
Economic growth in sub-Saharan Africa continues to slow. Economic activity in sub-Saharan Africa is estimated to slow from 4.1% in 2021 to 3.6% in 2022.
However, this is 0.3 points higher than the forecast for October 2022, supported by soaring commodity prices and strong domestic demand. Despite the multifaceted challenges, the East African Community’s economy has shown resilience.
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Ethiopia and Uganda maintain a strong growth recovery, with real GDP growth estimated at around 6% in FY2023 and projected to exceed 6% in FY2024.
The Tanzanian economy is projected to expand by 4.6% in 2022 from 4.3% in 2021 and grow by 5.1% in 2023.
A weak global economy with high inflation and challenging global and domestic financial conditions continues to weigh on economic activity in the region, with sub-Saharan Africa’s growth projected to grow further at 3.1%, 0.00% in 2023. It is expected to slow to 4%. It is a percentage point lower than at the last Kenya Economic Update.
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