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Sub-Saharan Africa

Economic growth picked up in Sub-Saharan Africa in 2013, supported by strong domestic demand, notably resource-based investments. Real GDP for the region grew an estimated 4.7 percent; excluding South Africa, its largest economy, growth was higher at 6 percent. Foreign direct investments continued to flow in the region, not only in the oil, gas and mining sectors but also in non-extractive industries. Net FDI flows were an estimated $43 billion in 2013, up from $37 billion in 2012. In many countries, governments launched large investment programs to alleviate infrastructure bottlenecks and increase export capacity. Gross fixed capital formation grew an estimated 7.3 percent in 2013. Inflation decelerated in many countries, owing to lower food prices and prudent monetary policy; and the low inflation, combined with an estimated 6.2 percent increase in remittances, helped boost private consumption. Nevertheless, poverty and unemployment remain high in many countries in the region.

Fiscal balances deteriorated further in 2013, especially among oil exporters who faced falling output and lower oil prices. Partly as a result, public debt has risen from 29 percent of GDP in 2008 to an estimated 34 percent of GDP in 2013.   Debt ratios in some countries have risen sharply, raising the specter of debt sustainability going forward. The strong investment spending in the region exacerbated current account deficits, which widened further in 2013. In most countries, fiscal consolidation is needed not only to create fiscal space for development spending but also to start rebuilding fiscal buffers to minimize exposure to external headwinds.

Robust domestic demand is expected to continue to support growth in the medium term, despite tighter global financial conditions to which countries in the region are relatively insensitive. Regional GDP is projected to strengthen to 5.3 percent in 2014, rising to 5.4 percent in 2015 and reaching 5.5 percent in 2016. Net FDI inflows are expected to remain resilient, averaging $44.3 billion in 2014-16; and inflation is expected to continue its downward trend as food and energy prices remain low, which combined with steadily rising remittances should stimulate household consumption and permit a continued rapid expansion of domestic demand. A modest fiscal consolidation is projected to start in 2014; but fiscal deficits will remain elevated as governments maintain their investment programs while revenue stays low. Reflecting still strong domestic demand, current account deficits are projected to widen in 2014-15, before narrowing in 2016 as import growth decelerates and export capacity strengthens.

The main risks to this outlook stem from external as well as domestic factors. Slower growth in emerging markets and a weaker recovery in developed economies could affect the region’s growth prospects through a protracted decline in commodity prices and lower FDI flows. Simulation results of commodity price shocks indicate that growth in the region would slow but not collapse. Countries that depend on mineral exports would, however, see real GDP growth and current account balances deteriorate significantly.  The U.S. Federal Reserve taper of asset purchases is not expected to have a major impact on countries in the region owing to their limited integration in global financial markets. However, South Africa, which has strong links with global financial markets, remains particularly vulnerable to capital outflows given its reliance on portfolio inflows to finance its current account deficits. Frontier market countries that have seen  significant portfolio inflows in local securities markets would also be affected by the reversal of capital flows; and countries that are planning to tap the international bond markets are likely to face higher coupon rates. Domestic risks relate to adverse weather shocks which could affect local harvests and raise food prices; political instability, which could deter investment; security problems in Nigeria driven by  unrest in the north, which could have adverse spillovers in neighboring countries, and pirate attacks along the gulf of Guinea, which could raise shipment costs and disrupt trade in the subregion.

Sub-Saharan Africa regional forecast
(annual percent change unless indicated otherwise)

Source: World Bank
Notes: e = estimate, f = forecast
* Unless otherwise indicated, regional aggregates are computed for low and middle-income countries in the region and do not include any of the region's high-income countries.
a. Growth rates over intervals are compound weighted averages; average growth contributions, ratios and deflators are calculated as simple averages of the annual weighted averages for the region.
b. GDP at market prices and expenditure components are measured in constant 2010 U.S. dollars.
c. Sub-region aggregate excludes Liberia, Chad, Somalia and São Tomé and Principe. Data limitations prevent the forecasting of GDP components or Balance of Payments details for these countries.
d. Exports and imports of goods and non-factor services (GNFS).
e. Oil Exporters: Angola, Cote d Ivoire, Cameroon, Congo, Rep., Gabon, Nigeria, Sudan, Chad, Congo, Dem. Rep.
f. CFA Countries: Benin, Burkina Faso, Central African Republic, Cote d'Ivoire, Cameroon, Congo, Rep., Gabon, Equatorial Guinea, Mali, Niger, Senegal, Chad, Togo.

Sub-Saharan Africa country forecasts
(annual percent change unless indicated otherwise)

Source: World Bank
Notes: e = estimate, f = forecast
World Bank forecasts are frequently updated based on new information and changing (global) circumstances. Consequently, projections presented here may differ from those contained in other Bank documents, even if basic assessments of countries’ prospects do not significantly differ at any given moment in time.
Liberia, Somalia, Sao Tome and Principe are not forecast owing to data limitations.
* Published forecasts are for only low and middle-income countries in the region, hence no high-income countries are included.
a. GDP growth rates over intervals are compound average; current account balance shares are simple averages over the period.
b. GDP measured in constant 2010 U.S. dollars.

Sub-Saharan Africa net capital flows
US$ billions

Source: World Bank.
Note: e = estimate; f = forecast

See the regional audio slideshow by the author.