Sub-Saharan African economies are still recovering from the slowdown in 2015-16, but growth is slower than expected amid mounting global trade risks and weakening demand for the region’s products, a new study has found.
The average growth rate in the region is estimated at 2.7% in 2018, which represents a slight increase from 2.3% in 2017, according to a bi-annual analysis of the state of African economies by the World Bank.
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“The region’s economic recovery is in progress but at a slower pace than expected,” said Albert Zeufack, World Bank chief economist for Africa. “To accelerate and sustain an inclusive growth momentum, policy makers 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.”
Slow growth is partially a reflection of a less favourable external environment for the region, the report explains. Global trade and industrial activity lost momentum, as metals and agricultural prices fell due to concerns about trade tariffs and weakening demand prospects. Financial market pressures also intensified in some emerging markets and concern about their dollar-denominated debt has risen amid a stronger US dollar.
Sub-Saharan Africa is becoming a key sourcing region for clothing and textiles, particularly countries such as Ethiopia, Mauritius, Madagascar, and South Africa. The region benefits from the African Growth and Opportunity Act (AGOA) with the US. The country has been looking to strengthen its bilateral trade relationships with sub-Saharan Africa, where the majority of all US apparel imports are from Kenya, Lesotho, Mauritius and Madagascar.
According to the World Bank, the slower pace of recovery in Sub-Saharan Africa (0.4 percentage points lower than the April forecast) is explained by the sluggish expansion in the region’s three largest economies, Nigeria, Angola, and South Africa. Lower oil production in Angola and Nigeria offset higher oil prices, and in South Africa, weak household consumption growth was compounded by a contraction in agriculture.
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By GlobalDataPublic debt remained high and continues to rise in some countries, the report found. 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 domestic risks include fiscal slippage, conflicts, and weather shocks. Consequently, policies and reforms are needed that can strengthen resilience to risks and raise medium-term potential growth.
