06 October 2015, Abuja – The World Bank Monday projected the sub-Saharan Africa including Nigeria to grow at 3.7 per cent in 2015 compared to 4.6 per cent in 2014.
It said the region would continue to grow at a rather slower pace due to a more challenging economic environment, reaching the lowest growth rate since 2009.
However, it further noted that overall growth in the region was projected to pick up to 4.4 per cent in 2016, and 4.8 per cent in 2017. According to its new Africa’s Pulse, the bi-annual analysis of economic trends and the latest data on the continent, which was released yesterday, the 2015 forecast remained below the robust 6.5 per cent growth in GDP which the region sustained in 2003-2008, and drags below the 4.5 per cent growth following the global financial crisis in 2009-2014.
The report pointed out that sharp drops in the price of oil and other commodities had brought on the recent weakness in growth as other external factors such as China’s economic slowdown and tightening global financial conditions weigh on Africa’s economic performance.
It said the problem was further compounded by bottlenecks in electricity supply in many African countries which hampered economic growth in 2015.
World Bank Vice-President for Africa, Makhtar Diop said: “The end of the commodity super-cycle poses an opportunity for African countries to reinvigorate their reform efforts and thereby transform their economies and diversify sources of growth. Implementing the right policies to boost agricultural productivity, and reduce electricity costs while expanding access, will improve competitiveness and support the growth of light manufacturing.”
The report however noted that several countries were continuing to post robust growth. Cote d’Ivoire, Ethiopia, Mozambique, Rwanda and Tanzania were expected to sustain growth at around seven per cent or more per year in 2015-17, spurred by investments in energy and transport, consumer spending and investment in the natural resources sector.
It said growth in sub-Saharan Africa will be repeatedly tested as new shocks occur in the global economic environment, underscoring the need for governments to embark on structural reforms to alleviate domestic impediments to growth, the report notes.
“Investments in new energy capacity, attention to drought and its effects on hydropower, reform of state-owned distribution companies, and renewed focus on encouraging private investment will help build resiliency in the power sector. Governments can boost revenues through taxes and improved tax compliance. Complementing these efforts, governments can improve the efficiency of public expenditures to create fiscal space in their budget,” it added.
It further stated that the overall decline in growth in the region was nuanced while the factors hampering growth vary among countries. It said:”In the region’s commodity exporters-especially oil-producers such as Angola, Republic of Congo, Equatorial Guinea, and Nigeria, as well as producers of minerals and metals such as Botswana and Mauritania, the drop in prices is negatively affecting growth. In Ghana, South Africa, and Zambia, domestic factors such as electricity supply constraints are further stemming growth. In Burundi and South Sudan threats from political instability and social tensions are taking an economic and social toll.”
It added that fiscal deficits across the region were now larger than they were at the onset of the global financial crisis, stressing that rising wage bills and lower revenues, especially among oil-producers, led to a widening of fiscal deficits.
“In some countries, the deficit was driven by large infrastructure expenditures. Reflecting the widening fiscal deficits in the region, government debt continued to rise in many countries. While debt-to-GDP ratios appear to be manageable in most countries, a few countries are seeing a worrisome jump in this ratio.
“The dramatic, ongoing drop in commodity prices has put pressure on rising fiscal deficits, adding to the challenge in countries with depleted policy buffers,” says Punam Chuhan-Pole, Acting Chief Economist, World Bank Africa and the report’s author. “To withstand new shocks, governments in the region should improve the efficiency of public expenditures, such as prioritising key investments, and strengthen tax administration to create fiscal space in their budgets.”
Meanwhile, the bank yesterday tried to explain why Nigeria’s growth figure had not made significantly impact on Nigerians. Speaking in Abuja during a video conferencing to unveil the Africa’s Pulse, World Bank Lead Economist and Programme Leader, Mr. Khwima Nthara said most of the country’s growth had taken place in sectors which were not labour intensive.
He said jobs in the agricultural sector which is more labour intensive and critical to the economy are not lucrative enough to remove people from poverty.
He said:”Growth not happening in labour intensive sectors because it is when people earn income that their poverty can be reduced.” On the other hand, he said the lack of effective public policy initiative to redistribute wealth from other sectors including oil could also account for reasons behind the frustration in GDP growth.
*James Emejo – Thisday