The World Bank has projected that Sub-Saharan Africa would record modest economic growth recovery of 2.4 percent in 2017 after the region grew by just 1.3 percent in 2016. In its new Africa’s Pulse, a bi-annual analysis of the state of African economies, the World Bank, however, warns that the pace of the recovery remains sluggish and will be insufficient to lift per capita income in 2017.
Albert Zeufack, World Bank Chief Economist for Africa, said most countries do not have significant wiggle room when it comes to having enough fiscal space to cope with economic volatility. “It is imperative that countries adopt appropriate fiscal policies and structural measures now to strengthen economic resilience, boost productivity, increase investment, and promote economic diversification,” Zeufack said in the report released in Nairobi. The World Bank said the economic rebound is led by the region’s largest economies.
In the second quarter of this year, Nigeria pulled out of a five-quarter recession and South Africa emerged from two consecutive quarters of negative growth. The Pulse says improving global conditions, including rising energy and metals prices and increased capital inflows, have helped support the recovery in regional growth. “Growth continues to be multispeed across the region. In non-resource intensive countries such as Ethiopia and Senegal, growth remains broadly stable supported by infrastructure investments and increased crop production,” says the report.
The Africa’s Pulse notes that headline inflation slowed across the region in 2017 amid stable exchange rates and slowing food price inflation due to higher food production. It says fiscal deficits have narrowed, but continue to be high, as fiscal adjustment measures remain partial. “As a result, government debt remains elevated. Across the region, additional efforts are needed to address revenue shortfalls and contain spending to improve fiscal balances.” The World Bank said Sub-Saharan Africa is projected to see a moderate increase in economic activity, with growth rising to 3.2 per cent in 2018 and 3.5 per cent in 2019 as commodity prices firm and domestic demand gradually gains ground, helped by slowing inflation and monetary policy easing. However, growth prospects will remain weak in the Central African Economic and Monetary Community (CEMAC) countries as they struggle to adjust to low oil prices. The report says economic expansion in West African Economic and Monetary Union countries is expected to proceed at a strong pace on the back of solid public investment growth, led by Cote d’Ivoire and Senegal.
“The outlook for the region remains challenging as economic growth remains well below the pre-crisis average,” said Punam Chuhan-Pole, World Bank Lead Economist and lead author of the report. “Moreover, the moderate pace of growth will only yield slow gains in per capita income that will not be enough to harness broad-based prosperity and accelerate poverty reduction.” According to the report, growth is forecast to firm in Tanzania on a rebound in investment growth and recover in Kenya, as inflation eases. Ethiopia, the report says, is likely to remain the fastest-growing economy in the region, although public investment is expected to slow down.
Analysis shows that rising capital accumulation has been accompanied by falling efficiency of investment spending in countries where economic growth has been less resilient to exogenous shocks. This suggests that the inefficiency of investment, which reflects insufficient skills and other capabilities for the adoption of new technologies, distortive policies, and resource misallocation, among other things, will need to be reduced if countries are to capture fully the benefits of higher investment. The report says investing in the foundational skills of children, youth, and adults is the most effective strategy to enhance productivity growth, inclusion, and adaptability simultaneously.
“Thus, all countries should prioritise building universal foundational skills for the workers of today and tomorrow,” says the report, which also notes that as African countries seek new drivers of sustained inclusive growth, attention to skills building is growing.