Sub-Saharan Africa’s growth is projected at an average of 4.2 percent in 2015 down from 4.6 percent in 2014. The 0.4 percentage point fall is due to the reassessment of prospects in Angola, Nigeria, and South Africa.
However, despite the slowdown of Africa’s biggest economies, the Gross Domestic Product (GDP) in the region is expected to pick up to an average of 4.6 percent and 5.0 percent in 2016 and 2017 respectively. This increase will be driven by domestic demand, supported by continuing infrastructure investment and private consumption fueled by lower oil prices. External demand is also expected to support growth, because of stronger prospects in high-income economies.
Consumption dynamics will differ for oil exporters and importers. Private consumption growth is expected to slow in the oil exporters as cuts to subsidies to alleviate pressure on the budget result in higher fuel costs. Purchasing power is also expected to decline due to currency weakness, which would push up the cost of imports in local currency.
By contrast, lower fuel prices are expected to contribute to lower inflation in the oil importers, which should help boost consumers’ purchasing power and support domestic demand. The price level impact of currency depreciation could, however, offset some of these effects.
Remittance inflows to the region are also projected to slow down in 2015, reflecting in part the appreciation of the U.S. dollar, before picking up gradually in 2016–17. China’s investment slowdown, and low commodity prices, suggests that Foreign Direct Investment (FDI) flows may not provide much support to growth.
The fiscal policy stance is expected to remain tight throughout 2015 in oil-exporting countries. The revised budgets in Angola and Nigeria indicate that while capital expenditures will bear the burden of expenditure measures, recurrent expenditures will also be reduced. Despite these adjustments, fiscal deficits in these countries are likely to remain high because of low revenues. Fiscal deficits are also expected to remain elevated in oil-importing countries, as spending on goods and services and wages continues to expand.
The risks to the region’s outlook remain tilted to the downside. On the domestic front, political factors associated with elections in a number of countries, and insurgencies, including terrorism, in others, are key risks for the region in 2015.
Weak health systems remain a concern. The Ebola crisis sheds light on the need for better, well-financed and more resilient health systems across the continent, to contain risks of communicable diseases such as malaria, tuberculosis and HIV/AIDS. Expanding quality basic health services remains a key priority.
On the external front, a sharper-than-expected slowdown in China, a further decline in oil prices, a stalling of the recovery in Europe, or a sudden deterioration in global liquidity conditions are the main risks.
Last Updated: Sep 10, 2015