Sub-Saharan Africa 2017 Growth to accelerate by 2.9 Percent, World Bank Says

LAGOS (Capital Markets in Africa) – Growth in Sub-Saharan Africa is estimated to have decelerated to 1.5 percent in 2016, the lowest level in over two decades, as commodity exporters adjust to low commodity prices. Regional GDP per capita contracted by 1.1 percent.

South Africa and oil exporters account for most of the slowdown, while activity in non-resource intensive countries—agricultural exporters and commodity importers—generally remained robust. Commodity prices are expected to stabilize, but stay well below their levels of 2011, and fiscal adjustment needs remain large. Growth in the region is forecast to rebound to 2.9 percent in 2017, and rise above 3.5 percent by 2018, as policies in oil exporters continue to adjust.

Growth rates will continue to vary widely across the region, with Growth in South Africa and oil exporters is expected to be weaker, while growth in economies that are not natural-resource intensive should remain robust. In South Africa, inflationary pressures and high unemployment will weigh on consumer spending and the country is expected to edge up to a 1.1 percent pace in 2017 and 1.8 percent in 2018 and 2019.

In Nigeria, ongoing exchange rate adjustment, coupled with the gradual improvement in oil prices, will provide a modest boost to domestic revenues. This, in turn, should help the federal and state governments meet some of their financial obligations, including the clearance of salary arrears. As a result, Nigeria is forecast to rebound from recession and grow at a 1 percent pace in 2017 and 2.5 percent in 2018. For Angola, high inflation and tight policy will continue to weigh on domestic demand, so the economy is projected to expand at a 1.2 percent pace in 2017 and 0.9 in 2018.

Meanwhile, stable currencies, lower inflation, and improved agricultural production should support robust consumer spending in agricultural exporters and commodity importers. For instance, in Ghana, improving fiscal and external positions should help boost investor confidence, as a consequent, Ghanaian economy to expand by 7.5 percent and 8.4 percent in 2017 and 2018 respectively. Large infrastructure development programs will continue to support robust growth in in agricultural exporters (Côte d’Ivoire, Ethiopia, Kenya, Rwanda, Senegal, and Tanzania). To finance these programs, their governments continue to draw on public-private partnerships (Côte d’Ivoire, Rwanda), donor aid (Rwanda), and Chinese entities (Ethiopia, Tanzania). However, political fragility will exert a drag on growth in countries such as Burundi and The Gambia.

Risks to the outlook are tilted to the downside. They include heightened policy uncertainty in the United States and Europe, slower improvements in commodity prices, and tighter global financing conditions would put more strain on fiscal and current account balances, forcing deeper expenditure cuts that could weaken the recovery and infrastructure investment that is vital for long-term growth. Domestically, policy makers may not enact the reforms needed to rebuild fiscal buffers. Addressing fiscal vulnerabilities, and bolstering per capita growth remain key policy challenges across the region. In some countries, however, political pressures may prompt the adoption of haphazard populist policies, or lead to protracted legal and political stress, hampering fiscal adjustment. In others, a further deterioration of security conditions could put additional strains on public finances.