The World Bank, on Wednesday said Economic growth in Sub-Saharan Africa was beginning to rebound in 2017 after registering the worst decline in more than two decades in 2016, though the region remains fragile.
But amid these recovery signs, the World bank has cut the region’s growth forecast to 2.6 percent in 2017, lower than the January projection of 2.9 percent, which it blamed on weak expansion in the three largest economies, including Nigeria, South Africa, and Angola.
“However, the recovery remains weak, with growth expected to rise only slightly above population growth, a pace that hampers efforts to boost employment and reduce poverty,” the bank said in its mailed Africa’s Pulse report released in Abuja, which also coincided with the ongoing spring meetings of the International Monetary Fund (IMF) and World Bank.
The region’s three largest economies — Angola, Nigeria, and South Africa — are projected to post only a modest rebound in growth following a sharp slowdown in 2016. Growth in investments will recover only gradually amid tight foreign-exchange liquidity conditions in major oil exporters and low investor confidence in South Africa.
“Nigeria, South Africa, and Angola, the continent’s largest economies, are seeing a rebound from the sharp slowdown in 2016, but the recovery has been slow due to insufficient adjustment to low commodity prices and policy uncertainty. Furthermore, several oil exporters in the Central African Economic and Monetary Community (CEMAC) are facing economic difficulties, the bank stated in the new Africa’s Pulse, a bi-annual analysis of the state of African economies conducted by the bank.
The latest data reveal that seven countries (Côte d’Ivoire, Ethiopia, Kenya, Mali, Rwanda, Senegal, and Tanzania) continue to exhibit economic resilience, supported by domestic demand, posting annual growth rates above 5.4 percent in 2015-2017. These countries house nearly 27 percent of the region’s population and account for 13 percent of the region’s total GDP.
The World Bank is optimistic that improving global economic outlook should support the recovery in the region.
World Bank’s Africa’s Pulse notes that the continent’s aggregate growth is expected to rise to 3.2 percent in 2018 and 3.5 percent in 2019, reflecting a recovery in the largest economies.
“It will remain subdued for oil exporters, while metal exporters are projected to see a moderate uptick. GDP growth in countries whose economies depend less on extractive commodities should remain robust, underpinned by infrastructure investments, resilient services sectors, and the recovery of agricultural production. This is especially the case for Ethiopia, Senegal, and Tanzania,” the report further notes.
A stronger-than-expected tightening of global financing conditions, weaker improvements in commodity prices, and a rise in protectionist sentiment represent downside external risks to the outlook. On the domestic front, risks to the current recovery stem from an inadequate pace of reforms, rising security threats, and political volatility ahead of elections in some countries.
“As countries move towards fiscal adjustment, we need to protect the right conditions for investment so that Sub-Saharan African countries achieve a more robust recovery,” says Albert G. Zeufack, World Bank Chief Economist for the Africa Region. “We need to implement reforms that increase the productivity of African workers and create a stable macroeconomic environment. Better and more productive jobs are instrumental to tackling poverty on the continent.”
The environment of weak economic growth comes at a time when the continent is in dire need of necessary reforms to boost investment and tackle poverty. Countries also have to undertake much-needed development spending while avoiding increasing debt to unsustainable levels.
The world recommends that in this type of environment, fostering public and private investment, notably in infrastructure, is a priority.
The region experienced a slowdown in investment growth from nearly 8 percent in 2014 to 0.6 percent in 2015. The Africa’s Pulse report dedicates a special section to analyzing the region’s infrastructure performance across sectors, revealing dramatic improvements in quantity and quality of telecommunications contrasted by persistent lags in electricity generation and access.
“With poverty rates still high, regaining the growth momentum is imperative,” says Punam Chuhan-Pole, World Bank Lead Economist and the author of the report. “Growth needs to be more inclusive and will involve tackling the slowdown in investment and the high trade logistics that stand in the way of competitiveness.”
Overall, the World Bank calls for the urgent implementation of reforms to improve institutions that foster private sector growth, develop local capital markets, improve infrastructure, and strengthen domestic resource mobilization.