World Bank lowers 2016 growth projections for Sub-Saharan Africa

13Apr 2016
The Guardian Reporter
The Guardian
World Bank lowers 2016 growth projections for Sub-Saharan Africa

World Bank on Monday lowered its 2016 sub-Saharan African growth forecast to 3.3% from a previous forecast of 4.4% in October, citing plunging global commodity prices.

Former President Jakaya Kikwete (right) holding talks with World Bank Vice President for Africa Region, Mukhtar Diop

The bank said the commodity price rout, particularly for oil which fell 67% from June 2014 to December 2015, as well as weak global growth were behind the region's lacklustre performance.

"Overall, growth is projected to pick up in 2017-2018 to 4.5%," the World Bank said in a statement.
It said a projected uptick in economic activity next year would be driven by economic powerhouses South Africa, Nigeria and Angola as commodity prices stabilise.

Nigeria and Angola are the continent's top two crude oil exporters whose economies have suffered as a result of sharply lower crude prices, while South Africa was also hit by lower platinum, iron ore and coal prices.

"There were some bright spots where growth continued to be robust such as in Cote d'Ivoire, which saw a favourable policy environment and rising investment, as well as oil importers such as Kenya, Rwanda and Tanzania," the World Bank said.

In its latest Africa’s Pulse analysis, the bank said the 2016 growth forecast remains subdued due also to weak global growth, especially in emerging market economies.

In several instances, the adverse impact of lower commodity prices was compounded by domestic conditions such as electricity shortages, policy uncertainty, drought, and security threats, which stymied growth, the Africa’s Pulse analysis noted.

It however pointed out that despite the gloom, there were some bright spots where growth continued to be robust such as in Côte d’Ivoire, which saw a favorable policy environment and rising investment, as well as oil importers such as Kenya, Rwanda, and Tanzania.

“The external environment confronting the region is expected to remain difficult. In a number of countries, policy buffers are weaker, constraining these countries’ policy response.

Delays in implementing adjustments to the drop in revenues from commodity exports and worsening drought conditions present risks to Africa’s growth prospects,” the report noted. ”As countries adjust to a more challenging global environment, stronger efforts to increase domestic resource mobilization will be needed.

With the trend of falling commodity prices, particularly oil and gas, it is time to accelerate all reforms that will unleash the growth potential of Africa and provide affordable electricity for the African people,” says Makhtar Diop, World Bank Vice President for Africa.

Several countries are expected to see moderate growth. Among frontier markets, growth is expected to edge up in Ghana, driven by improving investor sentiment, the launch of new oilfields, and the easing of the electricity crisis.

In Kenya, growth is expected to remain robust, supported by private consumption and public infrastructure investment.
As Africa undergoes rapid urban growth, there is a window of opportunity to harness the potential of cities as engines of economic growth.

The rapid decline in oil and commodity prices has adversely affected resource-rich countries and signaled an urgent need for economic diversification in Africa. Urbanization and well managed cities provide a major opportunity to offer a springboard for diversification.

“To ensure growth and social development, cities need to become less costly for firms and more appealing to investors,” says Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa and the report’s author.

“They must also become kinder to residents, offering services, amenities. All of this will require reforming urban land markets and urban regulations and coordinating early infrastructure investment,” Pole noted.

Commodity price drops have lowered Africa’s terms of trade in 2016 by an estimated 16 percent, with commodity exporters seeing large terms-of-trade losses.

Across the region in 2016, the impact of this shock is expected to lower economic activity by 0.5 percent from the baseline, and to weaken the current account and fiscal balance by about 4 and 2 percentage points below the baseline, respectively.

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