Africa: Global Economic Prospects - Sub-Saharan Africa Slow Growth, Policy Challenges

The economic recovery in Sub-Saharan Africa lost momentum, with growth in 2019 estimated to have moderated to 2.4%, the World Bank has said in its latest Global Economic Prospects outlook for 2020 and beyond. According to the Bank, intensifying global headwinds such as decelerating activity in major trading partners, elevated policy uncertainty, and falling commodity prices, have been compounded by domestic fragilities in several countries.

In Angola, Nigeria, and South Africa -- the three largest economies in the region -- growth was subdued in 2019, remaining well below historical averages and contracting for a fifth consecutive year on a per capita basis.

Beyond the large economies, growth deteriorated in several industrial commodity exporters in 2019 as weaker prices and softer demand dampened activity in extractives sectors, such as in the Democratic Republic of Congo, Liberia, and Namibia. Growth accelerated in some countries as investments in new oil and mining capacity boosted activity, such as in Ghana, Guinea, and Mauritania. Among exporters of agricultural commodities, growth rates have been more robust, notwithstanding some mild slowdowns.

Outlook: Regional growth is expected to pick up to 2.9% in 2020, assuming investor confidence improves in some large economies, energy bottlenecks ease, a pickup in oil production contributes to recovery in oil exporters and robust growth continues among agricultural commodity exporters. The forecast is weaker than previously expected reflecting softer demand from key trading partners, lower commodity prices, and adverse domestic developments in several countries.

In South Africa, growth is expected to edge up to 0.9%, assuming the new administration's reform agenda gathers pace, policy uncertainty wanes, and investment gradually recovers. Increasingly binding infrastructure constraints -- notably in electricity supply -- are expected to inhibit domestic growth, while export momentum will be hindered by weak external demand. Growth in Nigeria is expected to edge up to 2.1%. The macroeconomic framework -- characterized by multiple exchange rates, foreign exchange restrictions, high persistent inflation, and a central bank targeting manifold objectives -- is not conducive to confidence.

Growth in Angola is anticipated to accelerate to 1.5%, assuming that ongoing reforms provide greater macroeconomic stability, improve the business environment, and bolster private investment. In the West African Economic and Monetary Union, growth is expected to hold steady at 6.4%.

Among the region's exporters of agricultural commodities, sustained strong public infrastructure spending, combined with increased private sector activity in Madagascar, Rwanda, Uganda, or continued reforms to raise

the productivity and competitiveness of export-oriented sectors, such as in Burkina Faso and Côte d'Ivoire, will continue to support output. In Kenya, growth is seen edging up to 6%.

Risks: A sharper-than-expected deceleration in major trading partners such as China, the Euro Area, or the United States, would substantially lower export revenues and investment. A faster-than-expected slowdown in China would cause a sharp fall in commodity prices and, given Sub-Saharan Africa's heavy reliance on extractive sectors for export and fiscal revenues, weigh heavily on regional activity.

A broad-based rise in government debt has led to sharp increases in interest burdens, crowding out non-interest expenditure and raising concerns about debt sustainability. Insecurity, conflicts, and insurgencies--

particularly in the Sahel--would weigh on economic activity and food security in several economies. Extreme weather events are becoming more frequent as the climate changes, posing a significant downside risk to activity due to the disproportionate role played by agriculture in many economies in the region.

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