World Bank projects drop in economic growth rates in Sub-Saharan Africa

World Bank Chief Economist for Africa, Francisco Ferreira.

World Bank Chief Economist for Africa, Francisco Ferreira.

18 April 2015, Monrovia – The World Bank on Monday projected a drop in the economic growth rate of Sub-Saharan Africa from 4.5 percent in 2014 to 4.0 percent in 2015 with even slower rates for Liberia with 3.0 and -0.2 for Sierra Leone and Guinea.

The bank’s Chief Economist for Africa, Francisco Ferreira, made the disclosure during a live video conference to inaugurate ‘Africa Pulse’, a World Bank Group analysis on issues shaping Africa’s economic prospects. The conference was also monitored in Liberia at their World Bank Congo Town office.

According to him, the downturn largely reflects the fall in the prices of oil and other commodities.

“The 2015 forecast is below the 4.4 per cent average annual growth rate of the past two decades and well short of Africa’s peak growth rates of 6.4 per cent in 2002 to 2008.

“Excluding South Africa, the average growth forecast for the rest of Sub-Saharan Africa is around 4.7 per cent”, Ferreira said.

He indicated that an average decline, in terms of trade for Africa is about 18 percent; a development he said would lead to losses in purchasing power for the region.

“The decline in oil and commodity prices was among the challenges undermining the developmental gains made in the Sub-Saharan African,” Mr. Ferreira added.

He said the Bank in this year’s annual report on the state of Africa’s economy, “Africa’s Purse” released in Washington on Monday at the start of its 2015 Spring Meetings, blamed the continent’s dependence on primary commodities (iron ore, oil palm and crude oil) and the sharp fall in these commodities.

“The transmission of the commodity price shock through the current account. Thus, sharply lower oil prices will reduce export earnings of oil exporters and put pressure on the current account balance and the exchange rate (by contract, lower oil prices will reduce pressure on the current account of oil importers),” he asserted.

In Mr. Ferreira’s mind, if the nominal exchange rate is allowed to adjust, that is depreciated; it will make other exports more competitive and boost activities in the tradable goods sectors.

He noted that the depreciation of currency, in turn, raises the price of imported goods, pushing up inflation. The implication for second round effects on higher price of imported goods will depend on the stance of monetary policy. Lower oil prices will also reduce fiscal revenues from oil, putting pressure on fiscal balances.”

The report further said that Liberia, Guinea and Sierra Leone stand to lose significant portion gross domestic product (GDP)–Liberia US$180 million, Sierra Leone US$920 million and Guinea US$540 million. It projects via mobile phone surveys significant unemployment in Liberia and small enterprise closures in Sierra Leone.

“As of late March 2015, the cumulative number of cases neared 25,000 and deaths surpassed 10,000. Over the course of 2014, Ebola killed roughly twice as many people as malaria in Guinea, Liberia and Sierra Leone, and it killed about the same number of tuberculosis, even without taking likely undercounting of Ebola deaths into account.

“Furthermore, the economic impact in those countries has been massive. In the second half of 2014, all three countries saw flat or negative income growth. Forecasts for 2015, with ongoing investor aversion, are sobering, with contractions in Guinea and Sierra Leone, and projected growth in Liberia less than half what was predicted before the crisis,” the report adds.

Also speaking at a conference monitored in Liberia via video, one of the co-authors of the report and World Bank Lead Economist for Africa, Punam Chuhan-Pole, said the release on the report further that Ebola-affected countries would find it “difficult moving forward” but said they could make a strong recovery if they carry on structural reforms on their economies–moving from a primary market-based economies to those of diverse economies but investing in secondary commodities as well as reduce barriers to trading in these commodities.

She said beyond macroeconomic policies, there was the need for structural reforms to ignite and sustain productivity growth in all sectors in the region.

Chuhan-Pole, also said the region should focus on policies that would promote growth, adding that the poor should be considered when implementing structural reforms.
*David A. Yates – Liberian Observer

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