Growth in Sub-Saharan Africa is slower than expected according to the October 2018 issue of Africa’s Pulse – a bi-annual analysis of the state of African economies by the World Bank.
The latest edition chronicles key developments in African economies. For example, the average growth in the region is estimated at 2.7% in 2018 which represents a slight increase from 2.3% in 2017.
The report also notes that the African region’s recovery from a slowdown in 2015-2016 is in progress but at a slower pace and more investments in non-resource sectors, jobs, efficient firms and workers are needed.
According to Albert Zeufack, World Bank Chief Economist for Africa, “The region’s economic recovery is in progress but at a slower pace than expected. To accelerate and sustain an inclusive growth momentum, policymakers must continue to focus on investments that foster human capital, reduce resource misallocation and boost productivity. Policymakers in the region must equip themselves to manage new risks arising from changes in the composition of capital flows and debt.”
He said, “Slow growth is partially a reflection of a less favourable external environment for the region. Global trade and industrial activity lost momentum, as metals and agricultural prices fell due to concerns about trade tariffs and weakening demand prospects.
While oil prices are likely to on an upward trend in 2019, metals prices may remain subdued amid muted demand, particularly in China. Financial market pressures intensified in some emerging markets and concern about their dollar-denominated debt has risen amid a stronger US dollar.”
The slow pace of growth in SSA can be attributed to the ‘sluggish expansion’ the region’s three largest economies; Nigeria, South Africa and Angola.
With regards to Nigeria and Angola, low oil production offset higher oil prices which caused slow growth in their economies as these economies are heavily hinged on oil production as main drivers of the economy.
In South Africa, the slow pace of growth can be attributed to weak household consumption which was compounded by a contraction in agriculture. The region, however, with the exclusion of the three major economies mentioned above, had steady growth.
Countries such as Cote d’Ivoire, Kenya and Rwanda experienced good economic activity bolstered by a number of factors such as agricultural production and public investment.
African economies despite gaining some good grounds in economic activity albeit the slowdown will have to contend with their increasing public debt.
The report notes that vulnerability to weaker currencies and rising interest rates associated with the changing composition of debt may put the region’s public debt sustainability further at risk. Other risks such as conflicts and weather shocks also remain.
To ensure growth in the region is put on a sustainable and steady trajectory, the report notes that policies and reforms should be put in place to strengthen resilience to risks and raise medium-term potential growth.