Economic Growth in Africa is on the Upswing Following a Sharp Slowdown
Economic Growth in Africa is on the Upswing Following a Sharp Slowdown
Source :
19-Apr-2017
Economic growth in Sub-Saharan Africa is rebounding in 2017 after
registering the worst decline in more than two decades in 2016, according to
the new Africa’s Pulse, a bi-annual analysis of the state of
African economies conducted by the World Bank.
The region is showing signs of recovery, and regional growth is projected
to reach 2.6% in 2017. 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.
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 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% in 2015-2017. These countries house nearly 27% of the region’s population
and account for 13% of the region’s total GDP.
The global economic outlook is improving and should support the recovery in
the region. Africa’s Pulse notes that the continent’s aggregate
growth is expected to rise to 3.2% in 2018 and 3.5% 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.
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.
In this environment, fostering public and private investment, notably in
infrastructure, is a priority. The region experienced a slowdown in investment
growth from nearly 8% in 2014 to 0.6% 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 report 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.