Sub-Saharan Africa’s growth is projected to slow down in 2015 to below the 4.4 percent annual average growth rate of the past two decades. Slower expansion of economic activity largely reflects the fall in oil prices, and other commodities, on the region’s economies, even though net oil importers would see gains. Commodity prices and foreign investment are expected to provide less economic support; subdued demand and economic activity in emerging markets will weigh on the region’s growth as well.
The diversity in growth patterns matches the diversity of the continent’s countries. Prospects of oil exporters, such as Nigeria and Angola, are being negatively affected by weaker global prices of their main commodity. Although continued expansion of non-oil sectors, particularly services, in Nigeria is expected to lift growth in 2016 and beyond. Among frontier market countries, growth is expected to increase in Kenya, propelled by higher public investment and the recovery of tourism. In Ghana high interest rates and inflation are expected to weigh on consumer and investor sentiment slowing economic activity. South Africa is expected to register slow but steady growth, helped in part by gradually increasing net exports, and reforms to alleviate bottlenecks in the energy sector.
Growth will remain strong in most low-income countries, owing to infrastructure investment and agriculture expansion, although lower commodity prices will dampen activity in countries that export metals and other key commodities. Excluding South Africa, the average growth for the rest of the region was around 5.5 percent. However, extreme poverty remains high across the region. Foreign Direct Investments fell in 2014, reflecting slower growth in emerging markets and declining commodity prices. Several countries including Cote d’Ivoire, Kenya and Senegal, were able to tap international bond markets to finance infrastructure projects.
Fiscal deficits for the region narrowed as several countries took measures in 2014 to control their spending. At the same time, however, the fiscal position deteriorated in many countries. The cause in certain countries (e.g. Kenya and Mozambique) was the result of rising wages. In others (e.g. Mali, Niger, and Uganda), it was due to higher spending on public investment. Elsewhere, higher deficits reflected declining revenues, notably among oil-exporting countries which suffered lower production and oil prices (e.g. Angola). The region’s debt ratio remained moderate thanks to robust growth and concessional interest rates. However, in a few countries, debt increased significantly in 2014, especially in Ghana, Niger, Mozambique and Senegal.
Falling prices for oil, metals, and agricultural commodities weighed on the region’s exports. In contrast, spurred by infrastructure projects, import demand remained strong. As a result, several countries continued to have substantial twin fiscal and current account deficits. Inflation edged up in the first half of 2014, due in part to higher food prices, but remained low in most countries.
The risks to the region’s outlook stem from both domestic and external factors. The Ebola outbreak in West Africa is slowing but effectively being contained, but fears remain that it could spread more widely than assumed in the baseline, denting confidence and causing severe disruptions to cross-border trade and supply chains in the region. In various countries, government budgets are under increased pressure from urgent demands for increased spending. Conflicts in South Sudan and Central Africa Republic, and security concerns in northern Nigeria, northern Cameroon and southern Niger could deteriorate further with harmful regional spillovers. A sudden increase in volatility in international financial markets, and lower commodity prices are among the major risks to the region’s outlook.
Last Updated: Apr 01, 2015