October 9, 2019

World Bank cuts sub-Saharan Africa’s 2019, 2020 growth forecast

The World Bank on Wednesday cut its economic growth forecast for sub-Saharan Africa for 2019 to 2021 by 0.2 percentage points from its earlier projection, citing a slowdown in fixed investment and policy uncertainty in the global economy.

World Bank

World Bank

The bank said the region’s economy was expected to grow 2.6 per cent this year, from a 2.8 per cent projection in April.

It said growth would rise to 3.1 per cent in 2020 and 3.2 per cent in 2021.

“In spite of some improvements, the external environment is expected to remain difficult and uncertain for the region,” the bank said in its October Africa’s Pulse report.

China and the U.S., the world’s leading economies, this year imposed new tariffs on each other’s goods as part of a long-running dispute over Beijing’s trading practices, which Washington says are unfair.

Those tensions, plus softening global growth and falling commodity prices, compounded by the slow pace of reforms in African countries, “are weighing on activity across the region”, the bank said.

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On the continent, drought, security threats, increases in the cost of public borrowing and private investment are also slowing growth.

Nigeria, South Africa and Angola, which make up about 60 per cent of sub-Saharan Africa’s annual economic output, are all facing various impediments, the bank said.

Nigeria’s economy is expected to grow 2.0 per cent this year, compared with the previous forecast of 2.1 per cent in April and to expand 2.1 per cent in 2020 and 2021.

However, 0.1 and 0.3 percentage points lower than the April forecasts, respectively.

“The medium-term growth outlook continues to be constrained by a weak macroeconomic policy environment and slow policy implementation,” the bank said.

The bank cited multiple exchange rates, foreign exchange restrictions, high inflation, and low non-oil revenues among other obstacles.

South Africa’s economy will expand 0.8 per cent this year, from a 1.3 per cent forecast in April, and growth will rise to 1.0 per cent in 2020 from the bank’s April forecast of 1.7 per cent, the bank said.

It said that it made the cuts in its forecasts for South Africa due to the sharp slowdown in GDP growth in the first quarter of this year, low investor sentiment, and persistent policy uncertainty.

This including whether a solution could be found for state power firm Eskom.

The bank said Angola’s economy will grow 0.7 per cent this year, from a World Bank projection of 1.0 per cent in April.

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The rest of Sub-Saharan Africa excluding Nigeria, South Africa and Angola is expected to grow 4.0 per cent this year from the World Bank’s 4.4 per cent projection in April.

Other projections are 4.7 per cent next year and 4.8 per cent in 2021 in line with its April forecasts.

The bank said the proportion of African countries determined to be in debt distress or in high risk of external debt distress had doubled, but the pace of deterioration had reduced. (Reuters/NAN)