JUBA, December 6, 2023 – The World Bank's latest South Sudan Economic Monitor (SSEM) reveals that South Sudan's economy experienced stagnation in fiscal year 2023 (FY23) due to the lingering impacts of flooding on oil production. The SSEM report emphasizes the importance of investing in human capital development as a foundation for economic growth, particularly in light of the low literacy rate in South Sudan.
The SSEM estimates that South Sudan’s economy contracted by 0.4 percent in FY23, less than the negative 2.3 percent growth outturn in FY22. Despite slower global growth and the lingering effects of recent catastrophic floods on domestic oil production, economic activity in South Sudan was supported by a stronger private sector, a return to relative peace, and increased government spending.
“The 2018 peace agreement, as well as macroeconomic, governance, and exchange rate reforms initiated since 2021 with the support of development partners, have helped to improve macroeconomic stability and curb hyperinflation. The subsequent economic recovery was disrupted by overlapping external shocks (COVID-19, war in Ukraine) and unprecedented flooding that affected both agricultural and oil production and added to pressing humanitarian needs,” said Honorable Benjamin Ayali Koyongwa, Undersecretary for Planning, Ministry of Finance and Planning.
According to the SSEM, growth is projected to gradually rebound and reach over 2 percent in the medium term. This outlook is primarily due to an estimated 3 percent decline in oil sector growth in FY24, followed by a gradual stabilization and recovery as oil production and value-added investments gradually resume. Growth in the non-oil sector is expected to remain relatively resilient at around 6 percent in FY24, supported by higher government wage outlays, expanding domestic credit, and moderate inflation. Farm output is also expected to improve as floods recede. Inflation is expected to be below 10 percent in the medium term as monetary policy remains tight.
“The gains in macroeconomic stability and the relative return to peace have had a positive impact on activities in the non-oil sector. This is a significant development as South Sudan, being a young country, relies on the non-oil sector to provide jobs and incomes for the majority of its population. Thus, diversifying towards the non-oil sector, improving productivity, and achieving higher growth in a sustainable and inclusive manner is critical, even more so because of the underlying challenges of fragility in the country,” said Firas Raad, Country Manager, World Bank South Sudan.
In addition to reporting on recent economic developments and assessing the macro-fiscal outlook, this edition of the SSEM emphasizes the importance of investing in human capital as a foundation for economic growth and development. The report argues that more progress in improving the coverage and quality of education, health, and social protection sectors in South Sudan will help lift the country out of its chronic state of fragility. It recommends that South Sudan places education, health, and social protection at the heart of its development priorities over the next decade. The report also highlights that learning poverty is driven by demand and supply side factors, and addressing both requires a comprehensive and multisectoral approach. Increasing financing for education, improving teachers’ training, and combining social safety net programs with educational programs are critical to addressing learning poverty in South Sudan.
“With an illiteracy rate of 70 percent and around 60 percent of school-aged children being out of school, South Sudan needs to make a serious turnaround in its human capital outcomes. It also has one of the highest maternal mortality ratios in the world. Investing in the health and wealth of human beings, as captured in the title of the SSEM, is a fundamental element of the country’s longer-term growth, development, and prosperity,” said Tehmina Khan, Lead Economist, World Bank South Sudan.
The SSEM is an annual analysis of economic developments, economic prospects, and policy priorities in South Sudan. It also shines a spotlight on a special topic that is relevant for the country’s development. The publication draws on available data reported by the Government of the Republic of South Sudan and additional information collected as part of the World Bank Group’s regular economic monitoring and policy dialogue.