The global economic expansion is set to accelerate, but downside risks persist. Economic activity was robust in much of Sub-Saharan Africa in 2013, supported by strong investment demand and robust private consumption.
The region’s growth prospects remain favorable despite emerging challenges, such as weaker commodity prices and tighter global financial conditions. During the period from 1995 to 2013, the region performed strongly, with an average annual GDP growth rate of 4.5%. Growth was broad based, but the drivers of growth varied across countries. Different growth patterns will determine the resilience of growth prospects to changing global conditions.
Foreign direct investment (FDI) continued to flow to the region, not only in the oil, gas and mining sectors but also in non-extractive industries. Net FDI inflows were an estimated $43 billion in 2013, up from $37 billion in 2012. In many countries, governments launched ambitious investment programs to alleviate infrastructure bottlenecks and increase export capacity, and a number of them issued Eurobonds to finance these expenditures. Gross fixed investments grew an estimated 7.3 percent in 2013, reaching 23.5 percent GDP. Inflation decelerated in many countries, owing to lower food prices and prudent monetary policy; and the low inflation, coupled with an estimated 6.2 percent increase in remittances, supported private consumption. Nevertheless, poverty and unemployment remains high in many countries in the region.
Across the region, governments have stepped up investment spending. Public investment in most countries in the region—for example, Ethiopia, Ghana, Namibia, Niger, Nigeria, South Africa, Tanzania, Uganda, and Zambia—continues to be geared toward the provision of basic infrastructure, such as power generation, roads and port facilities, which remain critical to improving competitiveness in the region.
However within this impressive economic expansion, there are variations in economic performance across country groups. Within the “resource-rich” country group, the gap in growth between oil and nonoil countries has narrowed. At the same time, several countries within the “non-resource rich” county group have achieved sustained high growth rates for over a decade, such as Ethiopia, Mozambique and Rwanda. South Africa is one of a few countries where growth is lagging behind the levels achieved before the global crisis began.
Poverty in Sub-Saharan Africa has also declined. An estimated 58 percent of people in the region were living on less than US$1.25-day around the turn of the millennium. By 2010, the poverty headcount ratio declined by almost 10 percentage points to an estimated 48.5 percent.